<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 4, 1998
REGISTRATION NO. 333-57747
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------
AMENDMENT NO. 1
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------------
INSURANCE MANAGEMENT SOLUTIONS GROUP, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
FLORIDA 6748 59-3422536
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
</TABLE>
---------------------
360 CENTRAL AVENUE
ST. PETERSBURG, FLORIDA 33701
(813) 803-2040
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
---------------------
C. ANTHONY SEXTON, ESQ.
ASSOCIATE GENERAL COUNSEL
INSURANCE MANAGEMENT SOLUTIONS GROUP, INC.
360 CENTRAL AVENUE
ST. PETERSBURG, FLORIDA 33701
(813) 803-2040
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
---------------------
WITH COPIES TO:
<TABLE>
<S> <C>
G. WILLIAM SPEER, ESQ.
TODD B. PFISTER, ESQ. POWELL, GOLDSTEIN, FRAZER
FOLEY & LARDNER & MURPHY, LLP
100 NORTH TAMPA STREET 191 PEACHTREE STREET, N.E.
SUITE 2700 16TH FLOOR
TAMPA, FLORIDA 33602 ATLANTA, GEORGIA 30303
</TABLE>
---------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon
as practicable after the effective date of this Registration Statement.
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of this prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
---------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933, AS AMENDED OR UNTIL THE REGISTRATION STATEMENT SHALL
BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION
8(A), MAY DETERMINE.
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<PAGE> 2
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED , 1998
PROSPECTUS
SHARES
INSURANCE MANAGEMENT SOLUTIONS GROUP, INC. (LOGO)
COMMON STOCK
------------------------
Of the shares of Common Stock offered hereby,
shares are being issued and sold by Insurance Management
Solutions Group, Inc. ("IMSG" or the "Company") and shares are
being sold by Venture Capital Corporation (the "Selling Shareholder"). The
Company will not receive any proceeds from the sale of Common Stock by the
Selling Shareholder. See "Use of Proceeds" and "Principal and Selling
Shareholders."
Prior to this offering, there has been no public market for the Common
Stock. It is currently estimated that the initial public offering price for the
Common Stock will be between $ and $ per share. See "Underwriting"
for a discussion of the factors to be considered in determining the initial
public offering price.
The Company has applied for inclusion of the Common Stock on the Nasdaq
National Market under the symbol "INMG".
------------------------
SEE "RISK FACTORS" ON PAGES 5 THROUGH 11 FOR A DISCUSSION OF CERTAIN
FACTORS THAT SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
======================================================================================================================
UNDERWRITING PROCEEDS TO
PRICE TO DISCOUNTS AND PROCEEDS TO SELLING
PUBLIC COMMISSIONS(1) COMPANY(2) SHAREHOLDER
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Per Share........................ $ $ $ $
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Total(3)......................... $ $ $ $
======================================================================================================================
</TABLE>
(1) The Company, its principal shareholder Bankers Insurance Group, Inc., and
the Selling Shareholder have agreed to indemnify the Underwriters against
certain liabilities, including liabilities under the Securities Act of 1933,
as amended. See "Underwriting."
(2) Before deducting expenses, estimated at $ , payable by the Company.
(3) The Company and the Selling Shareholder have granted the Underwriters a
30-day option to purchase up to additional shares of Common
Stock on the same terms and conditions set forth above to cover
over-allotments, if any. If the Underwriters exercise the over-allotment
option in full, the total Price to Public will be $ , the total
Underwriting Discounts and Commissions will be $ , the total
Proceeds to Company will be $ and the total Proceeds to the Selling
Shareholder will be $ . See "Underwriting."
------------------------
The shares of Common Stock are offered by the several Underwriters subject
to prior sale, when, as and if delivered to and accepted by them, and subject to
certain other conditions, including the right of the Underwriters to withdraw,
cancel, modify or reject any order in whole or in part. It is expected that
delivery of the shares will be made on or about ,1998, at the
offices of Raymond James & Associates, Inc., St. Petersburg, Florida.
RAYMOND JAMES & ASSOCIATES, INC. LEHMAN BROTHERS
ING BARING FURMAN SELZ
The date of this Prospectus is , 1998.
<PAGE> 3
[COVER FLAP]
<TABLE>
<S> <C> <C> <C> <C>
PROPERTY & CASUALTY FINANCIAL
INSURANCE COMPANIES INSTITUTIONS
INSURANCE
MANAGEMENT
SOLUTIONS
[LOGO] GROUP
[PICTURE [COLLAGE [COLLAGE [COLLAGE
OF OF OF OF
A MAN AND TWO CAR, FLOODED TWO MEN AND A A HAND ON A
WOMEN HOUSE, WOMAN COMPUTER
VIEWING A BURNING HOME WORKING, AND A MOUSE,
COMPUTER AND HAND HOLDING A CLOCK,
SCREEN] A TELEPHONE] A MEASURING AND A
COMPASS, CALENDAR]
ALL OVERLAYING
A CLOCK]
POLICY CLAIMS FLOOD ZONE INFORMATION
ADMINISTRATION ADMINISTRATION DETERMINATIONS TECHNOLOGY
</TABLE>
---------------------
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK,
INCLUDING ENTERING STABILIZING BIDS, EFFECTING SYNDICATE COVERING TRANSACTIONS
OR IMPOSING PENALTY BIDS. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE
"UNDERWRITING."
<PAGE> 4
[INSIDE SPREAD LEFT]
IMSG OFFERS PROPERTY & CASUALTY COMPANIES:
- Reduced overhead
- Cost-effective technology
- Fast, economic expansion of product lines
- Enhanced customer service
- Increased speed of product delivery
- Accounting and regulatory reporting
- Freedom to focus on strategic planning
IMSG OFFERS FINANCIAL INSTITUTIONS:
- Flood zone determinations
- Opportunities to add profit centers in
new lines of business
- A simplified flood compliance regulation
process
- Loan portfolio protection
- Increased speed of product delivery
OTHER POTENTIAL MARKETS INCLUDE:
- General Agencies
- Virtual Insurance Companies
- Governmental Agencies
- Lending Institutions
- Windpools
- Related Affinity Groups
<TABLE>
<S> <C>
INSURANCE
[LOGO] MANAGEMENT
SOLUTIONS
GROUP
</TABLE>
COMPREHENSIVE
OUTSOURCING
SERVICES
FOR
INSURANCE
COMPANIES
&
FINANCIAL
INSTITUTIONS
<PAGE> 5
[INSIDE SPREAD RIGHT]
IMSG: RESOURCES FOR STRATEGIC INSURANCE MANAGEMENT
<TABLE>
<S> <C>
FLOOD, HOMEOWNERS & AUTOMOBILE INSURANCE PROGRAMS
- Comprehensive Policy Administration
- Experienced Claims Administration & Customer Service
- Integrated Technological Systems & Software
- Private Label Insurance Products
[Collage of a flood zone map, a hand - Flood Catastrophe Assistance
holding a measuring compass, a clock, a - Marketing & Advertising Support
car, a burning house, a flooded house, - Agent Training & Educational Courses
and two men and one woman working] - Financial & Statistical Reporting
FLOOD ZONE DETERMINATIONS
- Life-of-Loan Flood Compliance Tracking
- Force-placed Flood Insurance
- Database representing 85% of all U.S. Households
- National Flood Zone Database on CD ROM
</TABLE>
<PAGE> 6
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and financial statements, including the notes thereto, appearing
elsewhere in this Prospectus. As used herein, the "Company" means Insurance
Management Solutions Group, Inc. and its wholly-owned subsidiaries, Insurance
Management Solutions, Inc. and Geotrac of America, Inc. (formerly Bankers Hazard
Determination Services, Inc.) ("Geotrac"), unless the context otherwise
requires. Unless otherwise indicated, the information in this Prospectus (i)
reflects the consummation of the Company's acquisition (the "Geotrac
Acquisition") of Geotrac, Inc. ("Old Geotrac"), including the issuance of
shares of Common Stock pursuant thereto (assuming an initial
public offering price of $ per share), and (ii) assumes that the
Underwriters' over-allotment option will not be exercised. See "Geotrac
Acquisition" and "Underwriting."
THE COMPANY
The Company provides (1) comprehensive policy and claims outsourcing
services to the property and casualty ("P&C") insurance industry, with an
emphasis on providing these services to the flood insurance market, and (2)
flood zone determinations to financial institutions, mortgage lenders and
insurance companies. The Company's outsourcing services, which are offered on
either a bundled or "a la carte" basis, include policy administration, claims
administration and information technology services. The Company processed
approximately 575,000 insurance policies in 1997, including approximately
450,000 flood insurance policies, making it one of the largest providers of
flood insurance outsourcing services in the United States. The Company provides
outsourcing services to its affiliate, Bankers Insurance Group, Inc. (together
with its subsidiaries, "BIG"), Mobile USA Insurance Company, Inc. and AAA Auto
Club South Insurance Company, as well as to insurance companies that offer flood
insurance utilizing BIG as their private label servicing carrier, such as Armed
Forces Insurance Corporation and AMICA Mutual Insurance Company. In conjunction
with BIG, the Company is able to offer insurance companies the ability to create
a turnkey private label flood insurance product. The Company believes this
product is attractive to insurance companies that desire to offer flood
insurance but are not certified by the Federal Emergency Management Agency
("FEMA") to sell and service flood insurance. FEMA estimates that only 25% to
33% of U.S. properties required to be covered by flood insurance are in fact
covered. Accordingly, the Company anticipates continued growth in the demand for
flood insurance and related flood outsourcing and flood zone determination
services over the next several years.
In 1997, the Company processed approximately 1.4 million flood zone
determinations for over 730 customers, including financial institutions such as
SouthTrust Bank, mortgage lenders such as ABN Amro North America, Inc. and
Mortgage Corporation of America, and P&C insurance companies such as Allendale
Mutual Insurance Company and Wausau Underwriters Insurance Company. Flood
insurance is required by federal law in connection with virtually all
residential mortgage loans, including refinancing loans, covering properties
located within federally designated high-risk flood zones. A flood zone
determination is necessary in order to ascertain a property's flood zone
classification. In addition, due to more stringent underwriting criteria, P&C
insurers increasingly require flood zone determinations prior to issuing
commercial property policies. The Company uses its proprietary database,
compiled and digitized from flood maps maintained and distributed by FEMA, to
determine whether a particular property or structure is located within a flood
zone classification that requires flood insurance. The Company estimates that
its electronic database includes over 85% of all U.S. households.
The Company is a 77.6% owned subsidiary of BIG, a holding company chartered
in Florida in 1976. BIG provides multiple lines of P&C insurance, most notably
flood, homeowners and automobile insurance, to individuals and businesses
throughout the United States. From 1993 to 1997, BIG's total written premiums
grew from $113.7 million to $259.0 million, representing annual growth rates of
14.8%, 22.5%, 46.8% and 10.4%, respectively, and a compound annual growth rate
of 22.8%. BIG is the largest underwriter of flood insurance policies through
independent agents (and the second largest overall) in the United States. Upon
completion of this offering, BIG will beneficially own % of the Company's
Common Stock. BIG is the Company's principal customer, accounting for
approximately 56% of the Company's total revenues (on a pro
1
<PAGE> 7
forma basis) and 98% of the Company's outsourcing revenues (on a pro forma
basis) in 1997. See "Risk Factors -- Reliance on Key Customer."
The Company's principal growth strategies include (1) expanding the
Company's flood outsourcing business by (i) marketing flood outsourcing services
to existing carriers certified by FEMA, (ii) offering its outsourcing services
to potential new entrants into the flood insurance market, and (iii) marketing
its ability, in conjunction with BIG, to provide and service a private label
insurance product to insurance companies that desire to offer flood insurance
but are not certified by FEMA to sell and service flood insurance, (2) expanding
the Company's existing relationships with flood insurance outsourcing and flood
zone determination customers to generate additional outsourcing business, (3)
focusing on maximizing the Company's existing economies of scale to provide
customers with more cost-effective services, and continuing to expand such
efficiencies through greater utilization of the Company's existing
infrastructure and databases, (4) expanding the Company's direct sales force and
developing strategic relationships with other service providers, (5) generating
recurring revenues by providing services based on long-term contractual
relationships or based upon events which occur frequently in the course of a
customer's business, and (6) pursuing strategic acquisitions that offer
opportunities to increase market share or expand the Company's menu of
outsourcing services. The principal costs associated with implementing these
growth strategies include (i) compensation and overhead expenses associated with
establishing a direct sales team, (ii) expenses associated with implementing a
marketing program, (iii) incremental depreciation and amortization expense
associated with maintaining technological competency in the Company's principal
business segments and (iv) legal, accounting, due diligence and similar costs
and expenses incurred in connection with prospective acquisitions. See
"Business -- Growth Strategy."
The Company is a holding company that was incorporated in the State of
Florida in December, 1996 by BIG, which contributed to the Company two of its
wholly-owned operating subsidiaries, Insurance Management Solutions, Inc.
("IMS") and Bankers Hazard Determination Services, Inc. ("BHDS"), that were
previously formed in August, 1991 and June, 1988, respectively.
The Company's principal executive offices are located at 360 Central
Avenue, St. Petersburg, Florida 33701, and its telephone number is (813)
803-2040.
THE OFFERING
Common Stock offered by the
Company.................. shares (1)
Common Stock offered by the
Selling Shareholder...... shares (1)
Common Stock to be
outstanding after the
Offering................. shares (1)(2)
Use of Proceeds............ To repay outstanding indebtedness, and for general
corporate purposes, including capital expenditures
for upgraded technology, working capital and
possible acquisitions. See "Use of Proceeds."
Proposed Nasdaq National
Market Symbol............ INMG
- ---------------
(1) Excludes up to shares and shares that may be sold by the
Company and the Selling Shareholder, respectively, pursuant to the
Underwriters' over-allotment option. See "Underwriting."
(2) Excludes (a) shares of Common Stock reserved for issuance under the
Company's Long Term Incentive Plan, pursuant to which options to purchase
shares will be granted immediately upon the completion of this
offering, (b) shares of Common Stock reserved for issuance under the
Company's Non-Employee Directors' Stock Option Plan, and (c) shares
of Common Stock reserved for issuance under the Company's Non-Qualified
Stock Option Plan, pursuant to which options to purchase shares will
be granted immediately upon the completion of this offering. See
"Management -- Long Term Incentive Plan," "-- Non-Employee Directors' Stock
Option Plan" and "-- Non-Qualified Stock Option Plan."
2
<PAGE> 8
SUMMARY HISTORICAL AND PRO FORMA
CONDENSED CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
The historical information presented for the years ended December 31, 1995,
1996 and 1997 was derived from the audited consolidated financial statements of
the Company. The historical information presented as of June 30, 1998 and for
the six months ended June 30, 1997 and 1998 was derived from the unaudited
consolidated financial information of the Company. With respect to the unaudited
financial information, the Company is of the opinion that all material
adjustments, consisting only of normal recurring adjustments, necessary for the
fair presentation of the Company's interim results of operations have been
included. The pro forma condensed consolidated financial data are based on
assumptions and adjustments described in the notes to the pro forma condensed
consolidated financial statements and are not necessarily indicative of the
results of operations that may be achieved in the future. The information set
forth below should be read in conjunction with "Selected Consolidated Financial
Data of the Company," "Management's Discussion and Analysis of Financial
Condition and Results of Operations of the Company," the Company's Consolidated
Financial Statements and the Company's Pro Forma Condensed Consolidated
Financial Statements (unaudited). The results of operations presented below are
not necessarily indicative of the results of operations that may be achieved in
the future.
<TABLE>
<CAPTION>
YEAR ENDED SIX MONTHS ENDED
DECEMBER 31, JUNE 30,
------------------------------------ -----------------------------
PRO PRO
FORMA FORMA
1995 1996 1997 1997(1) 1997 1998 1998(1)
------ ------- ------- ------- ------- ------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Outsourcing services revenues... $3,444 $ 5,125 $29,714 $30,577 $14,276 $17,754 $17,754
Flood zone determination
services revenues............. 5,127 7,705 8,792 22,600 4,341 4,643 13,490
------ ------- ------- ------- ------- ------- -------
Total revenues................ 8,571 12,830 38,506 53,177 18,617 22,397 31,244
Operating expenses.............. 8,083 11,742 32,806 46,242 15,819 19,347 25,626
Operating income................ 488 1,088 5,699 6,935 2,798 3,049 5,618
Net income...................... 254 617 3,410 4,008 1,686 1,957 2,682
Net income per common share.....
Weighted average common shares
outstanding...................
</TABLE>
<TABLE>
<CAPTION>
JUNE 30, 1998
----------------------------------------
PRO FORMA,
ACTUAL PRO FORMA(1) AS ADJUSTED(2)
-------- ------------ --------------
<S> <C> <C> <C>
BALANCE SHEET DATA:
Working capital (deficiency).............................. $(10,322) $(8,534)
Total assets.............................................. 28,514 46,309
Long-term debt, less current portion...................... 1,668 9,844
Notes payable -- affiliates, less current portion......... 218 218
Total shareholders' equity................................ 1,027 6,670
</TABLE>
- ---------------
(1) Unaudited pro forma condensed consolidated financial data as of June 30,
1998 and for the six months ended June 30, 1998 and the year ended December
31, 1997 reflect (i) the Geotrac Acquisition, which was completed in July,
1998, using the purchase method of accounting as if the Geotrac Acquisition
had occurred at June 30, 1998 for the Balance Sheet Data and at January 1,
1997 for the Statement of Operations Data, (ii) the new affiliated service
and administrative agreements that became effective January 1, 1998 as
though the new terms were in existence on January 1, 1997, and (iii) the
purchase of certain fixed assets from affiliated companies used in the
business, which occurred in April, 1998, as if such purchase had occurred at
January 1, 1997 for the Statement of Operations Data. See "Geotrac
3
<PAGE> 9
Acquisition," "Certain Transactions" and the Company's Pro Forma Condensed
Consolidated Financial Statements (unaudited).
(2) Pro forma, as adjusted to reflect (i) the application of the net proceeds to
be received by the Company from the issuance and sale of
shares of Common Stock offered hereby (assuming an initial public offering
price of $ per share), after deducting underwriting discounts and
commissions and estimated offering expenses payable by the Company, and (ii)
settlement or satisfaction of intercompany accounts from funds made
available to BIG by a loan from a subsidiary of the Selling Shareholder,
using a portion of the net proceeds of this offering received by the Selling
Shareholder. See "Use of Proceeds" and "Capitalization."
4
<PAGE> 10
RISK FACTORS
An investment in the shares of Common Stock offered hereby involves a high
degree of risk. Prospective investors should consider carefully the following
risk factors, as well as the other information set forth in this Prospectus, in
evaluating an investment in the Common Stock offered hereby.
This Prospectus contains statements that constitute forward-looking
statements. All statements other than statements of historical facts included in
this Prospectus, including without limitation statements set forth under
"Prospectus Summary," "Risk Factors," "Use of Proceeds," "Management's
Discussion and Analysis of Financial Condition and Results of Operations of the
Company," "Management's Discussion and Analysis of Financial Condition and
Results of Operations of Geotrac" and "Business," regarding the Company's
financial position, business strategy and plans and objectives of management of
the Company for future operations, are forward-looking statements. When used in
this Prospectus, words such as "anticipate," "believe," "estimate," "expect,"
"intend" and similar expressions, as they relate to the Company or its
management, identify forward-looking statements. Such forward-looking statements
are based on the beliefs of the Company's management as well as assumptions made
by and information currently available to the Company's management. Actual
results could differ materially from those contemplated by the forward-looking
statements as a result of certain factors, such as those disclosed under "Risk
Factors," including but not limited to the Company's reliance on a key customer,
dependence on economic and other factors, fluctuations in operating results,
changes in legal and regulatory requirements, integration of the Geotrac
Acquisition, conflicts of interest, and matters set forth elsewhere in this
Prospectus. Such statements reflect the current views of the Company with
respect to future events and are subject to those and other risks, uncertainties
and assumptions relating to the operations, results of operations, growth
strategy and liquidity of the Company. All subsequent written and oral
forward-looking statements attributable to the Company or persons acting on its
behalf are expressly qualified in their entirety by this paragraph.
RELIANCE ON KEY CUSTOMER
The Company derives a substantial portion of its revenues from outsourcing
services provided to its principal shareholder, BIG. For the years ended
December 31, 1995, 1996, 1997 and 1997 (pro forma), revenues from services
provided to BIG accounted for approximately 40%, 37%, 76% and 56%, respectively,
of the Company's total revenues and approximately 100%, 93%, 98% and 98%,
respectively, of the Company's revenues from outsourcing services. The Company
has entered into contracts with BIG pursuant to which it will continue to
provide administrative services to BIG. See "Certain Transactions -- Service
Agreements." The Company's future financial condition and results of operations
will depend to a significant extent upon the commercial success of BIG and its
continued willingness to utilize the Company's services. Any significant
downturn in the business of BIG or its commitment to utilize the Company's
services could have a material adverse effect on the Company's business,
financial condition and results of operations. See "Business -- Customers."
DEPENDENCE ON ECONOMIC AND OTHER FACTORS; FLUCTUATIONS IN QUARTERLY OPERATING
RESULTS
The Company's business is dependent upon various factors, such as general
economic conditions and weather patterns, that are beyond its control. For
example, the demand for flood zone determinations by lenders and their customers
is directly related to the affordability of mortgage financing and refinancing.
Current interest rates are relatively low and therefore conducive to a higher
volume of mortgage lending and flood zone determinations. An increase in
interest rates could have a negative impact on mortgage lending and consequently
also on the level of flood zone determinations requested. Fluctuations in
interest rates will likely produce fluctuations in the Company's quarterly
earnings and operating results. Likewise, natural disasters such as hurricanes,
tornadoes, and floods, all of which are unpredictable, directly impact the
demand for both the Company's outsourcing and flood zone determination services.
5
<PAGE> 11
REGULATORY INVESTIGATIONS
Bankers Insurance Company ("BIC"), a subsidiary of BIG, is currently
subject to an investigation by the Florida Department of Insurance (the "DOI"),
the principal regulator of insurance activities in the State of Florida,
stemming from BIC's use of a private investigator to gather information on a DOI
employee and the private investigator's unauthorized use of illegal wiretaps in
connection therewith. In addition, BIC and certain of its employees (one of whom
is now an officer of IMS and several of whom are now employees of the Company)
have been subpoenaed on behalf of FEMA to produce documentation or testify in
connection with its investigation of, among other things, certain cash
management practices of BIC. In the event either or both of these investigations
or any consequence thereof materially adversely affects the business or
operations of BIC, it could result in the loss or material decrease in the
Company's business from BIC, which would have a material adverse effect on the
Company's business, financial condition and results of operations. See
"Business -- Legal Proceedings."
GOVERNMENT REGULATION
As a provider of policy and claims processing to the flood insurance
industry, the Company is subject to extensive and continuously changing
guidelines of the Federal Insurance Administration. No assurance can be given
with respect to the extent to which the Company may become subject to regulation
in the future, the ability of the Company to comply with any such regulation,
the cost of compliance or an abrupt change in the overall concept or delivery of
the flood insurance product on behalf of the federal government. Moreover, if
the federal government were to curtail the current federal flood program, it
could have a material adverse effect on the Company's business, financial
condition and results of operations. See "Business -- Market Opportunities."
The P&C insurance industry is subject to extensive regulation by state
governments. Because the Company markets and sells its services to P&C insurers,
certain aspects of the Company's business are affected by such regulation. The
Company must continuously update its software to reflect changes in regulations.
In addition, changes in regulations that adversely affect the Company's existing
and potential customers could have a material adverse effect on the Company's
business, financial condition and results of operations. Although the Company's
services are not directly subject to insurance regulations in the states where
the Company currently provides such services, the Company's outsourcing services
may be subject to insurance regulations in states where the Company may do
business in the future. Such regulations could require the Company to obtain a
license as a managing general agent or third-party administrator. Failure to
perform in accordance with state regulations could result in the loss of
significant insurance clients. No assurance can be given with respect to the
extent to which the Company may become subject to regulation in the future, the
ability of the Company to comply with any such regulation, or the cost of
compliance.
INTEGRATION OF RECENT ACQUISITION
On July 31, 1997 the Company acquired a 49% equity interest in Old Geotrac.
In July, 1998, the Company acquired the remaining 51% equity interest in Old
Geotrac. The Company is in the process of consolidating its existing flood zone
determination operations with those of Old Geotrac in an effort to realize
economies of scale. There can be no assurance, however, that the Company will be
able to integrate the operations of Old Geotrac with its own operations, or that
such economies of scale will be realized. The failure to successfully integrate
its own operations with those of Old Geotrac could have a material adverse
effect on the Company's business, financial condition and results of operations.
See "Geotrac Acquisition."
CONTROL BY PRINCIPAL SHAREHOLDER; CONFLICTS OF INTEREST
Prior to this offering, BIG owned approximately 77.6% of the outstanding
shares of Common Stock. After this offering, BIG will own % of the
outstanding shares of Common Stock. As a result, BIG will continue to be able to
elect the Company's directors and determine the outcome of other matters
requiring shareholder approval. BIG's ultimate parent, Bankers International
Financial Corporation, Ltd., is wholly owned by a discretionary charitable
trust. David K. Meehan, the Company's Chairman of the Board, President and Chief
Executive Officer, and Robert M. Menke and Robert G. Menke, directors of the
Company, presently serve on
6
<PAGE> 12
the board of directors of a corporation that possesses discretionary power with
respect to this trust to (i) direct the trustee to appoint the trust fund to
another trust for the benefit of one or more of the beneficiaries of the trust
and (ii) remove the trustee and appoint one or more new trustees. This
corporation possesses the same discretionary powers with respect to a
discretionary charitable trust that wholly owns the Selling Shareholder. See
"Principal and Selling Shareholders."
The ownership by BIG of shares of Common Stock after this offering may
discourage or prevent unsolicited mergers, acquisitions, tender offers, proxy
contests or changes of incumbent management, even when shareholders other than
BIG consider such a transaction or event to be in their best interests.
Accordingly, holders of Common Stock may be deprived of an opportunity to sell
their shares at a premium over the trading price of the shares.
Certain officers and directors of the Company, including David K. Meehan,
the Company's Chairman of the Board, President and Chief Executive Officer, also
serve as officers and directors of BIG. Effective as of the completion of this
offering, certain of these officers and directors will resign from their
positions with BIG. However, Mr. Meehan will continue to serve as Vice Chairman
of the Board of Directors of BIG, Robert M. Menke will continue to serve as
President and Chairman of the Board of Directors of BIG, and Robert G. Menke
will continue to serve as Executive Vice President of BIG. In addition, as
described below, the Company will continue to have a variety of contractual
relationships with BIG. As the interests of the Company and BIG may differ,
Messrs. Meehan, Robert M. Menke and Robert G. Menke may face certain conflicts
of interests. See "Principal and Selling Shareholders" and "Certain
Transactions."
The Company's relationship with BIG is governed by various agreements,
including (i) an administration services agreement pursuant to which BIG
provides benefits administration, cash management, and certain limited
accounting and legal services to the Company, (ii) service agreements pursuant
to which the Company provides policy and claims administration services for BIG,
(iii) lease agreements pursuant to which BIG leases certain facilities to the
Company, and (iv) an employee leasing agreement pursuant to which BIG leases
certain of its employees to the Company. The agreements generally are intended
to maintain the relationship between the Company and BIG in a manner consistent
in material respects with past practice, except that certain changes in the fee
structure for the Company's services have been implemented and the Company does
not anticipate receiving any loans or capital contributions from BIG following
this offering. None of these agreements resulted from arm's-length negotiations
and, as a result, the terms of such agreements may be more or less favorable to
the Company than could be obtained from an independent third party. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations of the Company" and "Certain Transactions."
RIGHTS OF FORMER GEOTRAC SHAREHOLDER
The Company has entered into a Corporate Governance Agreement with Geotrac
and Daniel J. White setting forth certain terms and conditions pertaining to the
operation of Geotrac following the Geotrac Acquisition. The Corporate Governance
Agreement provides, in part, that for so long as Mr. White is a shareholder of
the Company or Geotrac or has an option to purchase Geotrac stock, (i) the
Company will vote all of its shares of Geotrac stock to fix and maintain the
number of Geotrac directors at five, (ii) the Company will vote its shares of
Geotrac stock to elect as directors of Geotrac two persons designated by Mr.
White, (iii) Mr. White's termination as a Geotrac employee will require the vote
of four out of five members of the Board of Directors, and (iv) certain actions
by Geotrac will require the unanimous approval of the Geotrac Board of
Directors, including any merger or consolidation, the payment of management or
similar fees to the Company, or its subsidiaries or affiliates, the sale or
issuance of Geotrac stock, and the sale of Geotrac assets outside the ordinary
course of business to anyone other than an affiliate of Geotrac. Mr. White also
has a right of first refusal to purchase the assets of Geotrac in the event such
assets are to be sold. The Corporate Governance Agreement therefore allows Mr.
White to block certain transactions involving Geotrac even if such transactions
are approved by all of the other directors of Geotrac and may be in the best
interest of the Company and its shareholders. Mr. White is a director and
shareholder of the Company. See "Management," "Principal and Selling
Shareholders" and "Certain Transactions -- Geotrac Transactions."
7
<PAGE> 13
DEPENDENCE ON SENIOR MANAGEMENT
The success of the Company is largely dependent upon the efforts, direction
and guidance of its senior management, and in particular David K. Meehan, the
Company's Chairman of the Board, President and Chief Executive Officer, Jeffrey
S. Bragg, the Company's Executive Vice President and Chief Operating Officer,
and Daniel J. White, Geotrac's President and Chief Executive Officer. Although
each of the Company's executive officers, including Messrs. Meehan, Bragg and
White, is a party to an employment agreement with the Company, no assurances can
be given that any of them will remain in the employment of the Company. The
Company's continued growth and success depends in part on its ability to attract
and retain qualified managers, and on the ability of its executive officers and
key employees to manage its operations successfully. The loss of any of the
Company's senior management or key personnel, or its inability to attract and
retain key management personnel in the future, could have a material adverse
effect on the Company's business, financial condition and results of operations.
See "Management."
LIMITED OPERATING HISTORY IN THIRD-PARTY OUTSOURCING
Since its inception, the Company has provided outsourcing services to BIG,
the largest underwriter of flood insurance policies through independent agents
(and the second largest overall) in the United States. As BIG's outsourcing
provider, the Company has become one of the leading flood insurance outsourcing
providers nationally; however, to date it has not derived significant revenue
from unaffiliated third-party outsourcing customers. A key element of the
Company's growth strategy is to leverage its experience and expertise in
servicing BIG's flood, homeowners and automobile business to market its
outsourcing capabilities in various P&C lines, including flood, homeowners and
automobile insurance, to other insurance companies and financial institutions.
There can be no assurance that the Company will be successful in implementing
this growth strategy, and the failure to do so could have a material adverse
effect on the business, financial condition and results of operations of the
Company. See "Business -- Growth Strategy."
EXISTENCE OF WELL-POSITIONED COMPETITORS
The Company competes principally in three markets -- the market for flood
insurance outsourcing services, the market for other P&C insurance outsourcing
services and the market for flood zone determinations and related services. The
markets for these services are highly competitive. The market for flood
insurance outsourcing services is dominated by several principal competitors. As
the outsourcing provider to BIG, the largest underwriter of flood insurance
policies through independent agents (and the second largest overall) in the
United States, the Company has become a leading competitor in this market. The
Company competes for flood insurance outsourcing customers largely on the basis
of price, customer service and responsiveness. The market for other P&C
insurance outsourcing services is fragmented. In the policy administration
services segment of this market, the Company competes for customers on the basis
of customer service, performance and price. The claims administration services
segment of the outsourcing market is also highly fragmented, with competition
from a large number of claims administration companies of varying size as well
as independent contractors. Competition in this segment of the outsourcing
market is principally price driven. The Company believes, however, that its most
significant competition for outsourcing services comes from policy and claims
administration performed in-house by insurance companies. Insurers that fulfill
some or all of their policy and claims administration needs in-house typically
have made a significant investment in their information processing systems and
may be less likely to utilize the Company's services. In addition, insurance
company personnel may have a vested interest in maintaining these
responsibilities in-house. The market for flood zone determination services is
dominated by the Company and several principal competitors. The Company believes
that the principal competitive factors in the market for flood zone
determinations include quality and reliability of services, response time and
price.
Certain of the Company's competitors in each of these markets have longer
operating histories and significantly greater financial, technical, marketing
and other resources than the Company, including name recognition with current
and potential customers. As a result, these competitors may devote more
resources to the development, promotion and sale of their services or products
than the Company and respond more quickly to emerging technologies and changes
in customer requirements. In addition, current and potential
8
<PAGE> 14
competitors may establish cooperative relationships among themselves or with
third parties to increase the ability of their services and products to address
customer needs. Accordingly, new competitors or alliances among competitors may
emerge and rapidly acquire significant market share. There can be no assurance
that the Company will be able to compete successfully against current and future
competitors, or that competitive pressure faced by the Company will not have a
material adverse effect on its business, financial condition and results of
operations. See "Business -- Competition."
IMPLEMENTATION OF ACQUISITION STRATEGY
A key element of the Company's growth strategy is to pursue potential
acquisitions that offer opportunities to increase market share or expand the
Company's menu of outsourcing services. Nevertheless, there can be no assurance
that the Company will be able to locate and consummate or, if consummated,
successfully integrate future acquisitions. Acquisitions involve significant
risks which could have a material adverse effect on the Company, including: (i)
the diversion of management's time and attention to the negotiation of the
acquisition and to the assimilation of the businesses acquired; (ii) the need to
modify financial and other systems and add management resources; (iii) potential
liabilities of the acquired business; (iv) unforeseen difficulties in the
acquired operations; (v) possible adverse short-term effects on the Company's
results of operations; (vi) the dilutive effect of the issuance of additional
equity securities; and (vii) the financial reporting effects of the amortization
of goodwill and other intangible assets. Furthermore, there can be no assurance
that any business interest acquired in the future will achieve acceptable levels
of revenue and profitability or otherwise perform as expected. Currently, the
Company has no arrangements or understandings with any party with respect to any
future acquisition. The Company, however, continues to monitor potential
acquisition opportunities. See "Business -- Growth Strategy."
POTENTIAL LIABILITY TO CLIENTS
Many of the Company's contractual engagements involve projects that are
critical to the operations of its clients' business and provide benefits that
may be difficult to quantify. Any failure in a client's system could result in a
claim for substantial damages against the Company, regardless of the Company's
responsibility for such failure. Although the Company attempts to limit
contractually its liability for damages arising from negligent acts, errors,
mistakes or omissions in rendering its services, there can be no assurance that
the limitations of liability set forth in its service contracts will be
enforceable in all instances or would otherwise protect the Company from
liability for damages. Although the Company maintains general liability
insurance coverage, including coverage for errors or omissions, there can be no
assurance that such coverage will continue to be available on reasonable terms
or in sufficient amounts to cover one or more large claims, or that the insurer
will not disclaim coverage as to any future claim. The successful assertion of
one or more large claims against the Company that exceed available insurance
coverage, or changes in the Company's insurance policies, including premium
increases or the imposition of large deductible or co-insurance requirements,
could have a material adverse effect on the Company's business, financial
condition and results of operations.
DEPENDENCE ON TREND TOWARD OUTSOURCING
The Company's business and growth depends in large part on the insurance
industry's trend toward outsourcing administration and information technology
services. There can be no assurance that this trend will continue, as
organizations may elect to perform such services in-house. A significant change
in the direction of this trend could have a material adverse effect on the
Company's business, financial condition and results of operations. See
"Business -- Market Opportunities."
RELIANCE ON TECHNOLOGY AND COMPUTER SYSTEMS
The Company currently licenses its primary processing software systems from
BIG. Under the terms of its licensing agreement, the Company is responsible for
maintaining and upgrading such systems. The Company anticipates that it will be
necessary to continue to invest in and develop new technology to maintain its
competitiveness. Significant capital expenditures may be required to keep its
technology up-to-date. The Company's future success will also depend in part on
its ability to anticipate and develop information
9
<PAGE> 15
technology solutions which keep pace with evolving industry standards and
changing customer demands. The temporary or permanent loss of any such equipment
or systems, through operating malfunction or otherwise, could have a material
adverse effect on the Company's business, financial condition and results of
operations. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations of the Company," "Business -- Information Systems" and
"Certain Transactions."
In addition, the nature of the Company's business requires that it recruit
and retain qualified technical personnel. The Company generally experiences
significant turnover of its information technology personnel and is continuously
required to recruit and train replacement personnel. The demand for qualified
personnel conversant with certain technologies is intense and may exceed supply
as new and additional skills are required to keep pace with evolving computer
technology. There can be no assurance that the Company will be successful in
attracting and retaining the information technology personnel it requires to
conduct its operations successfully. Failure to attract and retain such
personnel could have a material adverse effect on the Company's business,
financial condition and results of operations.
YEAR 2000 ISSUES
There is significant uncertainty regarding the impact of Year 2000 issues,
which arise when computer systems do not properly recognize date-sensitive
information beyond December 31, 1999, thereby generating erroneous data or
failing altogether. The Company believes that its primary processing systems
will function properly with respect to dates in the Year 2000 and thereafter.
However, third parties that have relationships with the Company, including
suppliers, customers and creditors, may experience significant Year 2000 issues.
These issues may have a serious adverse impact on the operations of such third
parties, including a shut-down of operations for a period of time, which may, in
turn, have a material adverse effect on the Company's business, financial
condition and results of operations. In addition, competitors, and other third
parties may experience significant Year 2000 issues and, as a result, seek to
hire the Company's programmers and other software-related personnel at higher
salaries to address these issues. The loss of certain employees or a significant
number of employees could have a material adverse effect on the Company's
business, financial condition and results of operations. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations of the
Company -- Year 2000 Compliance."
SHARES ELIGIBLE FOR FUTURE SALE
Upon the completion of this offering, the Company will have
shares of Common Stock outstanding. Of these shares, the shares
of Common Stock sold in this offering will be freely tradable without
restriction or registration under the Securities Act by persons other than
"affiliates" of the Company, as defined under the Securities Act. The remaining
shares of Common Stock will be "restricted securities" within the
meaning of Rule 144 under the Securities Act, and may not be sold in the absence
of registration under the Securities Act unless an exemption from registration
is available, including the exemptions contained in Rule 144. Upon completion of
the offering, the Company will have options outstanding to purchase
shares of Common Stock. In addition, and additional shares
will remain available for issuance under the Company's Long Term Incentive Plan
and Non-Employee Directors' Stock Option Plan, respectively. See
"Management -- Long Term Incentive Plan," "-- Non-Employee Directors' Stock
Option Plan" and "-- Non-Qualified Stock Option Plan" and "Shares Eligible for
Future Sale."
The restricted shares owned by BIG will, under Rule 144 (and
subject to the conditions thereof, including volume limitations), become
eligible for sale 90 days after the offering. However, BIG has agreed not to
sell, contract to sell or otherwise dispose of any of these shares of Common
Stock for a period of 180 days after the date of this Prospectus without the
prior written consent of Raymond James & Associates, Inc., on behalf of the
Underwriters. After such 180-day period, this restriction will expire and shares
permitted to be sold under Rule 144 will be eligible for sale. Raymond James &
Associates, Inc., on behalf of the Underwriters, may at any time and without
prior notice, release all or any portion of the shares of Common Stock subject
to such agreement. See "Underwriting."
10
<PAGE> 16
Prior to this offering, there has been no public market for the Common
Stock and no predictions can be made of the effect, if any, that the sale or
availability for sale of additional shares of Common Stock will have on the
market price of the Common Stock. Nevertheless, sales of substantial amounts of
such shares in the public market, or the perception that such sales could occur,
could materially and adversely affect the market price of the Common Stock and
could impair the Company's future ability to raise capital through an offering
of its equity securities. See "Shares Eligible for Future Sale."
NO PRIOR PUBLIC MARKET; VOLATILITY OF STOCK PRICE
Prior to this offering, there has been no public market for the Common
Stock, and there can be no assurance that an active trading market will develop
or continue following this offering, or that the market price of the Common
Stock will not decline below the initial public offering price. The initial
public offering price for the Common Stock will be determined by negotiations
among the Company, the Selling Shareholder and the Underwriters based on several
factors, and may not be indicative of the market price for the Common Stock
after this offering. See "Underwriting."
The Company believes that various factors such as general economic
conditions and changes or volatility in the financial markets, changing market
conditions, and quarterly or annual variations in the Company's financial
results, some of which are unrelated to the Company's performance, could cause
the market price of the Common Stock to fluctuate substantially.
DILUTION
Purchasers of the Common Stock offered hereby will experience immediate and
substantial dilution of $ in the net tangible book value per share of
Common Stock, while the net tangible book value of the shares of Common Stock
owned by BIG and the Selling Shareholder will increase by $ per share. See
"Dilution."
BENEFITS OF THE OFFERING TO THE CURRENT SHAREHOLDERS
BIG and the Selling Shareholder will benefit from this offering in that a
public market will be created for their stock in the Company. The
shares of Common Stock that will be owned by BIG after this offering, which were
acquired at a cost of approximately $ , will have a value of
approximately $ , assuming a market price equal to the initial public
offering price. The shares of Common Stock that will be owned by the
Selling Shareholder after this offering, which were acquired at a cost of
approximately $ , will have a value of approximately $ ,
assuming a market price equal to the initial price to public. The Selling
Shareholder will also realize a substantial profit on the shares it sells in
this offering. See "Principal and Selling Shareholders."
GEOTRAC ACQUISITION
In July, 1997, the Company acquired a 49% equity interest in Geotrac, Inc.,
an unaffiliated Ohio corporation ("Old Geotrac"), from Daniel J. White and his
spouse (the "Whites"), as joint tenants, for $6.75 million in cash. In July,
1998, the Company acquired the remaining 51% equity interest in Old Geotrac from
the Whites in exchange for (i) shares of Common Stock (assuming an initial
public offering price of $ per share), (ii) a promissory note in the
principal amount of $1.5 million, and (iii) cash in the amount of $728,069. The
Company also granted the Whites certain demand and piggyback registration rights
with respect to the shares of Common Stock issued to them pursuant to this
transaction. The transaction was effected pursuant to the merger of Old Geotrac
into a wholly-owned subsidiary of the Company, with the surviving entity being
known as "Geotrac of America, Inc.".
Old Geotrac, a leading provider of flood zone determinations, began
operations in 1978. Old Geotrac's revenues and net income were $14.1 million and
$1.9 million (on a pro forma basis), respectively, in 1997 and $8.8 million and
$927,000 respectively, for the six months ended June 30, 1998. Old Geotrac's
President,
11
<PAGE> 17
Chief Executive Officer and joint majority shareholder, Daniel J. White, now
serves as President, Chief Executive Officer and a director of Geotrac and as a
director of the Company.
The acquisition of Old Geotrac (the "Geotrac Acquisition") strengthens the
Company's position as a leader in the flood zone determination business and
broadens the range of flood data services the Company is able to provide. In
addition, the Company is in the process of consolidating its own flood zone
determination operations with those of Old Geotrac in an effort to realize
economies of scale. Finally, the Company believes that access to Old Geotrac's
customer base of financial institutions and insurance companies will facilitate
cross-selling opportunities and expansion of the Company's outsourcing services.
USE OF PROCEEDS
The net proceeds to the Company from the sale of the shares
of Common Stock offered by the Company (assuming an initial public offering
price of $ per share), after deducting the underwriting discounts and
commissions and estimated offering expenses payable by the Company, are
estimated to be approximately $ million. The Company intends to use
approximately $ million of the net proceeds to repay indebtedness that
is outstanding at the time of this offering. The Company intends to use the
remaining net proceeds of approximately $ million for general corporate
purposes, including working capital, capital expenditures on upgraded technology
and possible acquisitions. The Company has no present commitments or
understandings with respect to the acquisition of any business, although the
Company continues to monitor potential acquisition opportunities. Pending such
uses, the Company intends to invest the net proceeds of this offering in
short-term, investment grade, interest-bearing securities. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations of the
Company -- Liquidity and Capital Resources" and "Business -- Growth Strategy".
The indebtedness to be repaid with proceeds from this offering includes a
term loan of Geotrac, which had an outstanding principal balance of $7,500,000
at June 30, 1998, currently bears interest at the prime rate and matures June
2004, and various debt instruments of the Company including (i) a note payable
to affiliate entered into on March 31, 1998 (previously reflected as a
non-interest bearing affiliate balance), which had an outstanding balance of
$4,950,000 at June 30, 1998, bears interest at 8.5% and matures April, 1999,
(ii) notes payable to affiliates entered into on April 1, 1998 (used to fund
capital additions), which had an outstanding balance of $2,755,924 at June 30,
1998, bears interest at 8.5% and matures at various dates through January 2000,
(iii) a note payable to bank entered into December, 1997 (used to fund capital
additions), which had an outstanding balance of $1,811,623 at June 30, 1998,
bears interest at 8.19% and matures December, 2000, (iv) various other term
loans which totaled $893,139 at June 30, 1998, bearing interest at rates ranging
from 8.19% to 8.50%, maturing at various dates from December, 1999 to December,
2000 and (v) a note payable entered into May, 1998 (used to repurchase preferred
stock of a subsidiary), which has an outstanding balance of $6,750,000, bears
interest at 8.5% and matures December, 1998.
The Company will not receive any proceeds from the sale of shares of Common
Stock by the Selling Shareholder. The net proceeds to be received by the Selling
Shareholder from the sale of the shares offered by the Selling
Shareholder (assuming an initial public offering price of $ per share) will
be approximately $ after deducting underwriting discounts and
commissions payable by the Selling Shareholder. A wholly-owned subsidiary of the
Selling Shareholder has agreed to loan $ million to BIG in exchange for a
subordinated note. It is anticipated that this loan will be funded using a
portion of the net proceeds to be received by the Selling Shareholder in this
offering. BIG has agreed with the Company to use a portion of such loan proceeds
to satisfy outstanding accounts and note payable to the Company not later than
ten business days following receipt of the loan proceeds. As of June 30, 1998,
BIG's accounts and note payable to the Company totaled approximately $13.2
million. The balance of the loan proceeds will provide BIG with additional
capital to repay other outstanding indebtedness and expand its operations. The
Company, in turn, has agreed with BIG to use a portion of the funds received
from BIG to satisfy accounts, income taxes and notes payable to BIG. As of June
30, 1998, the Company's accounts, income taxes and notes payable to BIG totaled
approximately $20.5 million. See "Principal and Selling Shareholders" and
"Certain Transactions."
12
<PAGE> 18
DIVIDEND POLICY
In December, 1996, December, 1997, and June, 1998, the Company paid
dividends of $1.0 million, $3.5 million, and $1.1 million, respectively, to BIG.
The Company currently anticipates that all of its earnings will be retained for
development and expansion of the Company's business and does not anticipate
declaring or paying any cash dividends in the foreseeable future.
13
<PAGE> 19
CAPITALIZATION
The following table sets forth the capitalization of the Company as of June
30, 1998: (1) on an actual basis; (2) on a pro forma basis to reflect the
Geotrac Acquisition, which was completed in July, 1998, using the purchase
method of accounting as if the Geotrac Acquisition had occurred on June 30,
1998; and (3) on a pro forma basis, as adjusted to reflect (i) the application
of the net proceeds from the issuance and sale of shares of
Common Stock offered hereby (assuming an initial public offering price of
$ per share), after deducting underwriting discounts and commissions and
estimated offering expenses payable by the Company, and (ii) settlement or
satisfaction of intercompany accounts from funds made available to BIG by a loan
from a subsidiary of the Selling Shareholder, using a portion of the net
proceeds of the offering received by the Selling Shareholder. See "Use of
Proceeds."
<TABLE>
<CAPTION>
JUNE 30, 1998
---------------------------------------
PRO FORMA,
ACTUAL PRO FORMA AS ADJUSTED
--------- ----------- -------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<S> <C> <C> <C>
Current portion of long-term debt........................... $ 1,351 $ 2,890 $
Current portion of notes payable -- affiliates.............. 14,238 14,238
Note payable(1)............................................. 600 600
Due to affiliates........................................... 2,527 2,527
Income taxes payable to Parent.............................. 3,471 3,471
Long-term debt, less current portion........................ 1,668 9,844
Notes payable -- affiliates, less current portion........... 218 218
Shareholders' equity:
Preferred stock, $.01 par value, 20,000,000 shares
authorized, no shares issued and outstanding........... -- --
Common stock, $.01 par value, 100,000,000 shares
authorized; 20,000,000 shares issued and outstanding;
shares issued and outstanding on a pro
forma basis; and shares issued and
outstanding on a pro forma basis, as adjusted(2)....... 200 205
Additional paid-in capital (deficit)...................... (30) 5,731
Retained earnings......................................... 857 734
------- ------- -------
Total shareholders' equity................................ 1,027 6,670
------- ------- -------
Total capitalization.............................. 25,100 $40,458 $
======= ======= =======
</TABLE>
- ---------------
(1) This note was repaid in full in August, 1998.
(2) Excludes (a) shares of Common Stock reserved for issuance under
the Company's Long Term Incentive Plan, pursuant to which options to
purchase shares will be granted immediately upon the completion of
this offering, (b) shares of Common Stock reserved for issuance
under the Company's Non-Employee Directors' Stock Option Plan, and (c)
shares of Common Stock reserved for issuance under the Company's
Non-Qualified Stock Option Plan, pursuant to which options to purchase
shares will be granted immediately upon the completion of this
offering. See "Management -- Long Term Incentive Plan," "-- Non-Employee
Directors' Stock Option Plan" and "-- Non-Qualified Stock Option Plan."
14
<PAGE> 20
DILUTION
Purchasers of the Common Stock offered hereby will experience an immediate
and substantial dilution in the net tangible book value (deficiency) of their
Common Stock from the initial public offering price. The net tangible book value
(deficiency) of the Company as of June 30, 1998 (on pro forma basis) was
approximately $(9.7 million), or $( ) per share. Net tangible book value
(deficiency) per share represents the amount of the Company's tangible net worth
(total tangible assets less total liabilities) divided by the total number of
shares of Common Stock outstanding. After giving effect to the sale of
shares of Common Stock by the Company in this offering and the
application of the estimated net proceeds therefrom (after deduction of
underwriting discounts and commissions and estimated offering expenses payable
by the Company), the pro forma net tangible book value of the Company as of June
30, 1998 would have been $ million, or $ per share of Common Stock.
This represents an immediate increase in pro forma net tangible book value of
$ per share to the existing shareholders and an immediate dilution of
$ per share to purchasers of shares of Common Stock in this offering. The
following table illustrates the per share dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share............. $
--------
Net tangible book value (deficiency) per share before this
offering............................................... $
--------
Increase per share attributable to new investors..........
--------
Pro forma net tangible book value after this offering(1)....
--------
Dilution in net tangible book value per share to new
investors................................................. $
========
</TABLE>
- ---------------
(1) If the Underwriters' over-allotment option is exercised in full, the net
tangible book value after this offering would be $ per share, resulting
in dilution to new investors in this offering of $ per share.
The following table sets forth on a pro forma basis as of June 30, 1998 the
number of shares of Common Stock purchased from the Company, the total
consideration paid and the average price per share of Common Stock paid by the
Company's existing shareholders and to be paid by new investors in this offering
and before deduction of estimated underwriting discounts and commissions and
estimated offering expenses (and assuming no exercise of the Underwriters'
over-allotment option):
<TABLE>
<CAPTION>
SHARES
PURCHASED(1) TOTAL CONSIDERATION AVERAGE
----------------- -------------------- PER
NUMBER PERCENT AMOUNT PERCENT PRICE SHARE
------- ------- ---------- ------- -----------
<S> <C> <C> <C> <C> <C>
Existing shareholders................... % $ % $
New investors...........................
------- --- ---------- --- --------
Total......................... 100% $ 100% $
======= === ========== === ========
</TABLE>
- ---------------
(1) Does not reflect the sale of shares of Common Stock by the
Selling Shareholder in this offering and does not include an aggregate of
shares of Common Stock issuable upon the exercise of stock options
to be granted upon the completion of this offering. See "Management -- Long
Term Incentive Plan," "-- Non-Employee Directors' Stock Option Plan" and
"-- Non-Qualified Stock Option Plan." Sales by the Selling Shareholder in
this offering will reduce the number of shares held by existing shareholders
to shares, or approximately %, and will increase the
number of shares held by new investors to , or approximately
%, of the total number of shares of Common Stock outstanding after this
offering. See "Principal and Selling Shareholders."
15
<PAGE> 21
SELECTED CONSOLIDATED FINANCIAL DATA OF THE COMPANY
(IN THOUSANDS, EXCEPT PER SHARE DATA)
The following selected consolidated financial data should be read in
conjunction with the Consolidated Financial Statements of the Company and Notes
thereto, Pro Forma Condensed Consolidated Financial Statements (unaudited) of
the Company, and "Management's Discussion and Analysis of Financial Condition
and Results of Operations of the Company" included elsewhere in the Prospectus.
The following selected consolidated financial data of the Company as of and for
the years ended December 31, 1995, 1996, and 1997 have been derived from the
Company's audited consolidated financial statements. The historical information
presented as of and for the years ended December 31, 1993 and 1994 and the six
months ended June 30, 1997 and 1998 was derived from the unaudited financial
statements of the Company. With respect to the unaudited financial information,
the Company is of the opinion that all material adjustments, consisting only of
normal recurring adjustments, necessary for the fair presentation of the
Company's results of operations and financial position have been included. The
results of operations presented below are not necessarily indicative of the
results of operations that may be achieved in the future.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
---------------------------------------------------------------- ---------------------------------
PRO FORMA PRO FORMA
1993 1994 1995 1996 1997 1997(1) 1997 1998 1998(1)
------ ------ ------- ---------- ---------- ---------- ------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Revenues
Outsourcing services..... $1,454 $1,861 $ 3,444 $ 5,125 $ 29,714 $ 30,577 $14,276 17,754 17,754
Flood zone determination
services............... 2,661 2,975 5,127 7,705 8,792 22,600 4,341 4,643 13,490
------ ------ ------- ---------- ---------- ---------- ------- ---------- ----------
Total revenues..... 4,115 4,836 8,571 12,830 38,506 53,177 18,617 22,397 31,244
------ ------ ------- ---------- ---------- ---------- ------- ---------- ----------
Expenses
Cost of outsourcing
services............... 1,000 1,586 2,955 3,896 21,989 22,097 10,806 12,794 12,512
Cost of flood zone
determination
services............... 2,052 1,842 3,415 5,362 4,764 10,552 2,099 2,164 6,082
Selling, general and
administrative......... 630 990 804 1,121 3,026 5,927 1,500 1,984 3,540
Management services from
Parent................. 232 362 725 1,054 2,344 2,344 1,172 1,369 1,369
Deferred compensation
(non-recurring item)... -- -- -- -- -- 1,461 -- -- --
Depreciation and
amortization........... 37 106 184 309 684 3,861 242 1,037 2,123
------ ------ ------- ---------- ---------- ---------- ------- ---------- ----------
Total expenses..... 3,951 4,886 8,083 11,742 32,807 46,242 15,819 19,347 25,626
------ ------ ------- ---------- ---------- ---------- ------- ---------- ----------
Operating income (loss).... 164 (50) 488 1,088 5,699 6,935 2,798 3,049 5,618
Equity in earnings of
Geotrac, Inc............. -- -- -- -- 201 -- -- 485 --
Other income (non-recurring
item).................... -- -- -- -- -- 1,700 -- -- --
Interest income............ -- -- -- -- -- -- -- 106 106
Interest expense(3)........ -- (48) (72) (75) (378) (1,601) (73) (614) (1,114)
------ ------ ------- ---------- ---------- ---------- ------- ---------- ----------
Income (loss) before income
taxes.................... 164 (98) 416 1,013 5,522 7,034 2,725 3,026 4,610
Provision (benefit) for
income taxes............. 69 (31) 162 396 2,112 3,026 1,039 1,069 1,928
------ ------ ------- ---------- ---------- ---------- ------- ---------- ----------
Net income (loss).......... $ 95 $ (67) $ 254 $ 617 $ 3,410 $ 4,008 $ 1,686 $ 1,957 $ 2,682
====== ====== ======= ========== ========== ========== ======= ========== ==========
Net income (loss) per
common share............. $ $ $ $ $ $ $ $ $
====== ====== ======= ========== ========== ========== ======= ========== ==========
Weighted average common
shares outstanding.......
====== ====== ======= ========== ========== ========== ======= ========== ==========
Dividends declared on
Common Stock(4).......... $ -- $ -- $ -- $ 1,000 $ 3,500 $ 3,500 $ -- $ 1,100 $ 1,100
====== ====== ======= ========== ========== ========== ======= ========== ==========
</TABLE>
16
<PAGE> 22
<TABLE>
<CAPTION>
JUNE 30,
-----------------------------------------------
DECEMBER 31, PRO FORMA,
------------------------------------------- PRO FORMA AS ADJUSTED
1993 1994 1995 1996 1997 1997 1998 1998(1) 1998(2)
------ ------ ------ ------ ------- ------- -------- ------------ -----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital
(deficiency)....... $ 28 $ (146) $ (141) $ (425) $ (148) $ 908 $(10,322) $(8,534)
Total assets......... 1,186 1,311 2,649 3,441 19,532 10,192 28,514 46,309
Long-term debt, less
current portion.... 140 278 156 894 2,187 737 1,668 9,844
Notes payable,
affiliates, less
current portion.... -- -- -- -- -- -- 218 218
Preferred Stock of
Subsidiary......... -- -- -- -- 6,750 -- -- --
Total shareholders'
equity............. 172 125 529 260 170 1,946 1,027 6,670
</TABLE>
- ---------------
(1) Unaudited pro forma condensed consolidated financial data as of June 30,
1998 and for the six months ended June 30, 1998 and the year ended December
31, 1997 reflect (1) the Geotrac Acquisition, which was completed in July,
1998, using the purchase method of accounting as if the Geotrac Acquisition
had occurred at June 30, 1998 for the Balance Sheet Data and at January 1,
1997 for the Statement of Operations Data, (ii) the new affiliated service
and administrative agreements that are effective January 1, 1998 as though
the new terms were in existence on January 1, 1997 and (iii) the purchase of
certain fixed assets from affiliated companies used in the business, which
occurred in April, 1998, as if such purchases had occurred at January 1,
1997 for the Statement of Operations Data. See "Geotrac Acquisition,"
"Certain Transactions" and the Company's Pro Forma Condensed Consolidated
Financial Statements (unaudited).
(2) Pro forma, as adjusted to reflect (i) the application of the net proceeds
from the issuance and sale of shares of Common Stock offered
hereby (assuming an initial public offering price of $ per share), after
deducting underwriting discounts and commissions and estimated offering
expenses payable by the Company and (ii) settlement or satisfaction of
intercompany accounts from funds made available to BIG by a loan from a
subsidiary of the Selling Shareholder, using a portion of the net proceeds
of the offering received by the Selling Shareholder. See "Use of Proceeds"
and "Capitalization."
(3) Dividends declared on Preferred Stock for 1997 and the six months ended June
30, 1998 were $229,315 and $189,370, respectively, and were included in
interest expense. See Note 8 to the Company's Consolidated Financial
Statements.
(4) In December, 1996, December, 1997, and June, 1998, the Company paid
dividends of $1.0 million, $3.5 million, and $1.1 million, respectively, to
BIG. The Company currently anticipates that all of its earnings will be
retained for development and expansion of the Company's business and does
not anticipate declaring or paying any cash dividends in the foreseeable
future. See "Dividend Policy."
17
<PAGE> 23
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF THE COMPANY
The following discussion and analysis should be read in conjunction with
the Company's Consolidated Financial Statements and the notes thereto included
elsewhere in this Prospectus.
OVERVIEW
Insurance Management Solutions Group, Inc. (together with its subsidiaries,
the "Company") is a holding company that was incorporated in the State of
Florida in December, 1996 by Bankers Insurance Group, Inc. (together with its
subsidiaries, "BIG"), which contributed to the Company two of its wholly-owned
operating subsidiaries, Insurance Management Solutions, Inc. ("IMS") and Bankers
Hazard Determination Services, Inc. ("BHDS"), that were previously formed in
August, 1991 and June, 1988, respectively. BIG is a diversified group of P&C
insurance companies with premium writings in all fifty states. BIG's principal
lines of business include flood, homeowners and automobile insurance lines. From
1993 to 1997, BIG experienced substantial growth in total written premiums from
$113.7 million to $259.0 million.
Prior to 1997, the Company's outsourcing services principally related to
information technology services provided to BIG on a cost reimbursement basis.
In 1997, the Company entered into service arrangements with BIG to provide a
broader menu of outsourcing services. These services primarily consisted of
policy and claims administration (including policy issuance, billing and
collection functions, claims adjusting and processing) and information
technology services provided for BIG's flood and homeowners insurance lines of
business. Revenues for these services were derived based on a percentage of
direct written premiums for policy administration services and direct paid
claims for claims administration services. The Company also provided claims
administration services for BIG's other insurance lines, excluding flood and
homeowners, on a cost reimbursement basis in 1997.
Effective January 1, 1998, the Company entered into written service
agreements with BIG which modified the existing arrangements to (i) expand the
services provided by the Company to include policy administration for certain
automobile lines of business, (ii) recognize claims outsourcing revenue based
not on a cost reimbursement basis, but rather on a percentage of earned premiums
and, with respect to certain types of claims, a percentage of incurred losses,
and (iii) implement a change in fee structure from a percentage of incurred loss
to a percentage of earned premiums with respect to homeowners claims services.
These changes were negotiated in order to effect more uniform revenue
recognition. To obtain BIG's agreement to such changes, the Company, in turn,
agreed to the revised fee structure with respect to homeowners claims services.
BIG presently accounts for approximately 98% of the Company's outsourcing
services revenues and is expected to continue to account for a significant
majority of the Company's outsourcing revenues in the near future. See "Risk
Factors -- Reliance on Key Customer" and "Certain Transactions -- Service
Agreements."
In July, 1997, the Company acquired a 49% interest in Old Geotrac, a
leading provider of flood zone determinations. Until July, 1998, when the
remaining 51% interest was acquired, this investment was accounted for on the
equity method.
Outsourcing service revenues are principally derived from written and
earned insurance premiums. Such premiums are affected by seasonal fluctuations
in volume of new and renewal policies received. Outsourcing service revenues
generated from the flood and homeowners lines of business increase in the late
second quarter and peak during the third quarter in conjunction with home sales.
In the Company's experience, increased levels of flood insurance purchases occur
in the Southeastern United States during the second and third quarters in
anticipation of the onset of the hurricane season.
Federal residential flood insurance rates are set by FEMA and are the same
for all flood insurance carriers. Consequently, policyholder retention is
typically dependent upon the quality of customer service being offered. Higher
retention or renewal rates provide more consistent recurring revenues. Flood
insurance carriers often utilize independent agents to sell their product.
Competing flood insurance carriers offering more attractive commissions to such
agents pose a significant risk for declines in business.
During periods of peak demand for flood and homeowners insurance, the
number of policies waiting to be issued increases. This backlog represents
future service fee income to be earned, generally within one month.
18
<PAGE> 24
Flood zone determination revenues, which are recognized as services are
performed, are cyclically impacted by both changes in mortgage interest rates
and trends in home sales.
The cost of outsourcing services primarily includes wages and related
benefits associated with personnel who perform policy and claims administration
services, as well as postage and telephone charges, data processing and other
direct costs associated with providing service to customers.
Cost of flood zone determination services primarily includes wages and
related benefits associated with personnel who perform flood zone determination
services, telephone expenses, general liability insurance, data processing and
other direct costs associated with providing service to customers. Due to the
ongoing automation of the Company's flood zone database, a gradual increase in
the number of automated flood zone determinations, versus manually determined
flood zones, has occurred. Automated flood zone determinations cost less for the
Company to perform than manually generated determinations.
Selling, general and administrative expenses include the wages and related
benefits of sales and marketing, executive, finance and accounting personnel, as
well as other general operating costs. In addition, wages and related benefits
of the management staff of each processing department (i.e. Customer Service,
Claims, and Information Services) are included in selling, general and
administrative expenses.
Management services from Parent have historically been charged to the
Company under a management agreement with BIG for common costs that are incurred
by BIG and allocated to its affiliated companies. These common costs include
human resources, legal, corporate planning and communications, cash management,
certain executive management and rent. Allocation of the management services is
based on employee head counts and estimates of time incurred, which management
believes to be a reasonable basis of allocation.
The Company presently purchases certain services, including human
resources, internal audit and legal services, from BIG. See "Certain
Transactions." If the Company develops the capability to provide these services
internally, certain sales and administrative support costs may fluctuate.
QUARTERLY RESULTS
The following table presents unaudited quarterly operating results for the
Company for the quarters included in years 1996 and 1997 and the first two
quarters of 1998. This information has been prepared on the same basis as the
Company's Consolidated Financial Statements included elsewhere in this
Prospectus, and includes all adjustments, consisting of normal recurring
accruals, that the Company considers necessary for a fair presentation of the
periods presented. These operating results are not necessarily indicative of the
Company's future performance.
<TABLE>
<CAPTION>
QUARTER ENDED
------------------------------------------------------------------------------------------
MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31, MARCH 31, JUNE 30, SEPTEMBER 30,
1996 1996 1996 1996 1997 1997 1997
--------- -------- ------------- ------------ --------- -------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues
Outsourcing services......... $1,200 $1,270 $1,279 $1,376 $6,857 $7,419 $ 7,901
Flood zone determination
services................... 1,822 2,237 1,888 1,758 1,947 2,394 2,241
------ ------ ------ ------ ------ ------ -------
Total revenues......... 3,022 3,507 3,167 3,134 8,804 9,813 10,142
------ ------ ------ ------ ------ ------ -------
Expenses
Cost of outsourcing
services................... 964 963 952 1,017 5,019 5,787 5,722
Cost of flood zone
determination services..... 1,343 1,567 1,269 1,183 974 1,125 1,263
Selling, general and
administrative............. 281 269 257 314 727 773 746
Management services from
Parent..................... 263 264 263 264 586 586 586
Depreciation and
amortization............... 67 75 80 87 116 126 195
------ ------ ------ ------ ------ ------ -------
Total expenses......... 2,918 3,138 2,821 2,865 7,422 8,397 8,512
------ ------ ------ ------ ------ ------ -------
Operating income.............. 104 369 346 269 1,382 1,416 1,630
Equity in earnings (loss) of
Geotrac, Inc................. -- -- -- -- -- -- (32)
Interest income............... -- -- -- -- -- -- --
Interest expense.............. (19) (19) (18) (19) (36) (36) (151)
------ ------ ------ ------ ------ ------ -------
Income before income taxes.... 85 350 328 250 1,346 1,380 1,447
Provision for income taxes.... 35 136 127 98 513 527 605
------ ------ ------ ------ ------ ------ -------
Net income.................... 50 214 201 152 833 853 842
====== ====== ====== ====== ====== ====== =======
<CAPTION>
QUARTER ENDED
-----------------------------------
DECEMBER 31, MARCH 31, JUNE 30,
1997 1998 1998
------------ --------- --------
<S> <C> <C> <C>
Revenues
Outsourcing services......... $7,537 $ 8,655 9,099
Flood zone determination
services................... 2,210 2,291 2,352
------ ------- -------
Total revenues......... 9,747 10,946 11,451
------ ------- -------
Expenses
Cost of outsourcing
services................... 5,461 6,427 6,367
Cost of flood zone
determination services..... 1,402 1,192 971
Selling, general and
administrative............. 780 923 1,061
Management services from
Parent..................... 586 679 690
Depreciation and
amortization............... 246 273 764
------ ------- -------
Total expenses......... 8,475 9,494 9,853
------ ------- -------
Operating income.............. 1,272 1,452 1,598
Equity in earnings (loss) of
Geotrac, Inc................. 233 408 77
Interest income............... -- -- 106
Interest expense.............. (156) (216) (398)
------ ------- -------
Income before income taxes.... 1,349 1,644 1,383
Provision for income taxes.... 467 535 535
------ ------- -------
Net income.................... 882 1,109 848
====== ======= =======
</TABLE>
19
<PAGE> 25
RESULTS OF OPERATIONS
The following table sets forth for the periods indicated certain selected
historical operating results of the Company as a percentage of total revenues:
<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED DECEMBER 31, ENDED JUNE 30,
--------------------------------- -------------------------
PRO FORMA PRO FORMA
1995 1996 1997 1997 1997 1998 1998
----- ----- ----- --------- ----- ----- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues
Outsourcing services................... 40.2% 39.9% 77.2% 57.5% 76.7% 79.3% 56.8%
Flood zone determination services...... 59.8 60.1 22.8 42.5 23.3 20.7 43.2
----- ----- ----- ----- ----- ----- -----
Total revenues.................. 100.0 100.0 100.0 100.0 100.0 100.0 100.0
----- ----- ----- ----- ----- ----- -----
Expenses
Cost of outsourcing services........... 34.5 30.4 57.1 41.6 58.0 57.1 40.0
Cost of flood zone determination
services............................. 39.8 41.8 12.4 19.8 11.3 9.7 19.5
Selling, general and administrative.... 9.4 8.7 7.8 11.1 8.1 8.9 11.3
Management services from Parent........ 8.5 8.2 6.1 4.4 6.3 6.1 4.4
Deferred compensation (non-recurring
item)................................ -- -- -- 2.8 -- -- --
Depreciation and amortization.......... 2.1 2.4 1.8 7.3 1.3 4.6 6.8
----- ----- ----- ----- ----- ----- -----
Total expenses.................. 94.3 91.5 85.2 87.0 85.0 86.4 82.0
----- ----- ----- ----- ----- ----- -----
Operating income......................... 5.7 8.5 14.8 13.0 15.0 13.6 18.0
Equity in earnings of Geotrac, Inc....... -- -- 0.5 -- -- 2.2 --
Other income (non-recurring item)........ -- -- -- 3.2 -- -- --
Interest income.......................... -- -- -- -- -- .4 .4
Interest expense......................... (0.8) (0.6) (1.0) (3.0) (0.4) (2.7) (3.6)
----- ----- ----- ----- ----- ----- -----
Income before income taxes............... 4.9 7.9 14.3 13.2 14.6 13.5 14.8
Provision for income taxes............... 1.9 3.1 5.5 5.7 5.6 4.8 6.2
----- ----- ----- ----- ----- ----- -----
Net income............................... 3.0% 4.8% 8.8% 7.5% 9.0% 8.7% 8.6%
===== ===== ===== ===== ===== ===== =====
</TABLE>
COMPARISON OF THE SIX MONTHS ENDED JUNE 30, 1998 AND 1997
Outsourcing Services Revenues. Outsourcing services revenue increased $3.5
million, or 24.4%, to $17.8 million for the six months ended June 30, 1998 from
$14.3 million for the corresponding period in 1997. The increase was primarily
attributable to (i) the expansion of the services provided to BIG to include
policy administration for certain of BIG's automobile lines of insurance, (ii)
the change in fee structure for claims administration (excluding BIG's flood and
homeowners lines) from a cost reimbursement basis to a percentage of earned
premium and, in certain instances, incurred losses, and (iii) increased services
provided to BIG due to the growth in the volume of BIG's flood insurance
business. The increase was partially offset by the revised fee structure
pertaining to policy administration and claims administration for BIG's
homeowners insurance line.
Flood Zone Determination Services Revenues. Flood zone determination
services revenues increased $302,000, or 7.0%, to $4.6 million for the six
months ended June 30, 1998 from $4.3 million for the corresponding period in
1997. The revenue growth was primarily attributable to the increased number of
flood zone determinations processed due to the large number of mortgage
financings and refinancings occurring largely as a result of continued low
interest rates.
Cost of Outsourcing Services. Cost of outsourcing services increased $2.0
million, or 18.4%, to $12.8 million for the six months ended June 30, 1998 from
$10.8 million for the corresponding period in 1997. The increase in cost of
outsourcing services was primarily attributable to (i) increases in staffing due
to the expansion of the services provided to BIG to include policy
administration for certain of BIG's automobile lines of insurance, (ii)
increased services provided to BIG due to the growth in the volume of BIG's
insurance business and (iii) the Company assuming responsibility for claims
costs for independent adjusters and appraisers that were previously borne by
BIG. These increases were partially offset by a decrease in the lease cost of
fixed assets that were purchased by the Company from BIG on April 1, 1998. Prior
to April 1, 1998, the depreciation for such equipment, which totaled $282,515
and $573,189 during the six months ended
20
<PAGE> 26
June 30, 1998 and 1997, respectively, was charged to the Company under an
arrangement similar to an operating lease and is included in cost of outsourcing
services. Such costs are now included in depreciation and amortization.
Cost of Flood Zone Determination Services. Cost of flood zone
determination services increased $65,000, or 3.1%, to $2.2 million for the six
months ended June 30, 1998 from $2.1 million for the corresponding period in
1997. As a percentage of flood zone determination services revenue, cost of
flood zone determination services decreased from 48.3% for the six months ended
June 30, 1997 to 46.6% for the corresponding period in 1998. The decrease in
cost of flood zone determination services as a percentage of flood zone
determination services revenue primarily resulted from a reduction of
approximately $303,000 in insurance costs associated with the Company's life of
loan program due to favorable loss experience under the life of loan program,
partially offset by cross-licensing fees for database management paid to Old
Geotrac. These cross-licensing fees were terminated upon the merger of Old
Geotrac into the Company in July, 1998. Effective June 1, 1998, the Company
terminated its insurance policy associated with its life of loan program.
Consequently, from such date forward, the Company deferred a portion of each
life of loan fee received in order to account for its obligation to perform
future flood zone redeterminations.
Selling, General and Administrative Expense. Selling, general and
administrative expenses increased $484,000, or 32.3%, to $2.0 million for the
six months ended June 30, 1998 from $1.5 million for the corresponding period in
1997. The increase is primarily related to additional wages and related benefits
associated with adding executive management, accounting, sales and marketing and
other administrative staff during 1998 to support the Company's expanded
operations.
Management Services from Parent. Management services from Parent increased
$197,000, or 16.8%, to $1.4 million for the six months ending June 30, 1998 from
$1.2 million for the corresponding period in 1997. The increase is primarily
related to an increase in management services provided to the Company due to the
Company's expanded operations. Such increased services primarily include agency
accounting, audit services and cash management services.
Depreciation and Amortization Expense. Depreciation and amortization
expense increased $795,000, or 328.5%, to $1.0 million for the six month period
ended June 30, 1998 from $242,000 for the same period in 1997 primarily as a
result of depreciation recorded related to assets consisting of telephone
equipment and computer hardware and software, transferred and assigned to the
Company in April, 1998 for use in its business. Prior to April 1, 1998, the
depreciation for such equipment, which totaled $282,515 and $573,189 during the
six months ended June 30, 1998 and 1997, respectively, was charged to the
Company under an arrangement similar to an operating lease and is included in
cost of outsourcing services. Also, the six month period ended June 30, 1998
reflects amortization of Goodwill related to the Geotrac Acquisition which took
place in July, 1997.
Equity in Earnings of Geotrac, Inc. During July, 1997, the Company
purchased a 49% interest in Old Geotrac. Equity in earnings of Old Geotrac
contributed $485,000 to net income of the Company for the six months ended June
30, 1998.
Provision for Income Taxes. The Company's effective income tax rates were
35.3% and 38.1% for the six months ended June 30, 1998 and 1997, respectively.
Income before income taxes for the first six months of 1998, excluding the
equity in earnings of Old Geotrac, resulted in a effective income tax rate of
40.0%. The equity in earnings in Old Geotrac are presented net of tax.
As a result of the Company's acquisition of the remaining 51% interest in
Old Geotrac during July, 1998, the Company recorded additional goodwill that is
non-deductible for income tax purposes. The annual amortization of the
non-deductible goodwill will total approximately $325,000. On a pro forma basis,
had the purchase occurred on January 1, 1998, the effective tax rate for the six
months ended June 30, 1998 would have been 41.8%.
21
<PAGE> 27
COMPARISON OF THE YEARS ENDED DECEMBER 31, 1997 AND 1996
Outsourcing Services Revenues. Outsourcing services revenues increased
$24.6 million, or 479.8%, to $29.7 million in 1997 from $5.1 million in 1996.
During 1997, outsourcing services revenue was generated primarily from the
Company's service agreements with BIG to provide policy and claims
administration related to its flood and homeowners insurance programs. In
addition, during 1997, the Company provided claims administration services on a
cost reimbursement basis for most of BIG's other lines of business, excluding
flood and homeowners. During 1996, the Company provided only information
technology services to its affiliated companies on a cost reimbursement basis.
Flood Zone Determination Services Revenues. Flood zone determination
services revenues increased $1.1 million, or 14.1%, to $8.8 million in 1997 from
$7.7 million in 1996. The increase in revenues was due to the increase in
determinations performed, offset by a decrease of approximately 6.0% in the
average fee per determination as a result of competitive pressures.
Cost of Outsourcing Services. Cost of outsourcing services increased $18.1
million, or 464.4%, to $22.0 million in 1997 from $3.9 million in 1996. The
increase was primarily the result of the transfer of various policy and claims
administration units from BIG to the Company, as well as upward pressure on
salaries resulting from continued competition for qualified employees.
Cost of Flood Zone Determination Services. Cost of flood zone
determination services decreased $598,000, or 11.2%, to $4.8 million in 1997
from $5.4 million in 1996. As a percentage of flood zone determination services
revenue, cost of flood zone determination services decreased from 69.6% in 1996
to 54.2% in 1997. The decrease was primarily the result of reduced insurance
cost of approximately $800,000 related to the Company's life of loan program due
to favorable loss experience under the life of loan program. The cost savings
during 1997 under this program was partially offset by increases in personnel to
process the increased volume of flood zone determinations.
Selling, General and Administrative Expense. Selling, general and
administrative expenses increased $1.9 million, or 169.9%, to $3.0 million in
1997 from $1.1 million in 1996. The increase was primarily related to additional
wages and related benefits associated with adding executive management,
accounting, sales and marketing and other administrative staff during 1997 to
support the Company's expanded operations.
Management Services from Parent. Management services from Parent increased
$1.3 million, or 122.4%, to $2.3 million in 1997 from $1.1 million in 1996. The
increase is primarily related to the expansion of the Company's services during
1997 to include policy and claims administration. Prior to 1997, the Company
mainly provided data processing services to its affiliates. The expansion of
services resulted in a significant need for additional space and human resource
services, which were included in the management services allocation.
Depreciation and Amortization Expense. Depreciation and amortization
expense increased $375,000, or 121.1%, to $684,000 in 1997 from $309,000 in 1996
primarily as a result of upgrading existing data processing equipment.
Interest Expense. Interest expense increased $303,000, or 402.5%, to
$379,000 in 1997 from $75,000 in 1996 as a result of increased borrowings used
to fund the Company's capital expenditures.
Equity in Earnings of Geotrac, Inc. During July 1997, the Company
purchased a 49% interest in Old Geotrac. Equity in earnings of Old Geotrac
contributed $201,000 to the earnings of the Company in 1997.
Provision for Income Taxes. The Company's effective income tax rates were
38.3% and 39.1% in 1997 and 1996, respectively. Income before provision for
income taxes for 1997, excluding the equity in earnings of Old Geotrac, resulted
in an effective income tax rate of 38.1%. The equity in earnings in Old Geotrac
are presented net of tax.
22
<PAGE> 28
COMPARISON OF THE YEARS ENDED DECEMBER 31, 1996 AND 1995
Outsourcing Services Revenues. Outsourcing services revenues increased
$1.7 million, or 48.8%, to $5.1 million in 1996 from $3.4 million in 1995
primarily as a result of an increase in the information technology services
provided to BIG due to the growth in the volume of BIG's insurance business.
Flood Zone Determination Services Revenues. Flood zone determination
services revenue increased $2.6 million, or 50.3%, to $7.7 million in 1996 from
$5.1 million in 1995, primarily as a result of significant growth in the
Company's client base and in the number of requests for flood zone
determinations, partially offset by a decrease in the average fee per
determination due to competitive pressures.
Cost of Outsourcing Services. Cost of outsourcing services increased
$941,000, or 31.8%, to $3.9 million in 1996 from $3.0 million in 1995. The
increase resulted primarily from additions to the Company's information
technology staff due to the growth in the volume of BIG's insurance business, as
well as salary adjustments due to the competitive market for qualified
personnel.
Cost of Flood Zone Determination Services. Cost of flood zone
determination services increased $2.0 million, or 57.0%, to $5.4 million in 1996
from $3.4 million in 1995. The increase was primarily attributable to an
increased demand for the Company's life of loan program, for which the Company
purchases insurance to fund its obligation to update flood zone determinations
under the life of loan program. Additionally, the increase in cost of flood zone
determination services was attributable to the addition of flood zone
determination staff to handle higher business volume levels.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased $317,000 or 39.4%, to $1.1 million in 1996
from $804,000 for 1995, primarily as a result of adding additional
administrative staff to support the Company's growth.
Management Services from Parent. Management services from Parent increased
$329,000, or 45.4%, to $1.1 million in 1996 from $725,000 in 1995. The increase
is primarily related to the growth of the Company's data processing department
and resulting need for additional space and human resource services, which were
included in the management services allocation.
Depreciation and Amortization. Depreciation and amortization increased
$125,000, or 67.9%, to $309,000 in 1996 from $184,000 in 1995 primarily as a
result of adding $1.0 million of property and equipment in 1996.
LIQUIDITY AND CAPITAL RESOURCES
The Company has historically funded its operations through cash generated
from operations and receipt of service fees advanced from BIG. Bank borrowings
have been used to finance fixed asset purchases. Net cash provided by operating
activities for the six months ended June 30, 1997 and 1998 was $2.9 million and
$3.3 million, respectively. For 1995, 1996 and 1997, net cash provided by
operating activities was $831,000, $963,000 and $7.7 million, respectively. The
significant increase in net cash provided by operating activities in 1997 was
primarily attributable to the increased level of net income, employee-related
accrued expenses and income taxes payable to BIG.
Net cash used in investing activities for the six months ended June 30,
1997 and 1998 was $513,000 and $724,000, respectively. For 1995, 1996 and 1997,
net cash used in investing activities was $464,000, $1.0 million and $8.2
million, respectively. In July 1997, BHDS issued $6.75 million in
non-cumulative, 8% Preferred Stock. The proceeds from the sale of the Preferred
Stock were used to fund the purchase of the Company's 49% interest in Old
Geotrac. In May 1998, the Company repurchased the outstanding Preferred Stock in
exchange for a note. The note is payable in its entirety on December 31, 1998
and accrues interest at 8.5%. The Company intends to use a portion of the net
proceeds from this offering to repay the note. See "Use of Proceeds."
Net cash used in financing activities for the six months ended June 30,
1997 and 1998 was $2.4 million and $2.5 million, respectively. For 1995, 1996
and 1997, net cash provided by (used in) financing activities was $(333,000),
$12,000 and $681,000, respectively. Cash dividends were paid to BIG in 1996 and
1997 in the
23
<PAGE> 29
amount of $1.0 million and $3.5 million, respectively. Additionally, the Company
paid a cash dividend of $1.1 million to BIG in June, 1998. Net advances to BIG
were $2.2 million and $5.1 million for the six months ended June 30, 1997 and
the year ended December 31, 1997, respectively.
At December 31, 1997 and June 30, 1998 amounts due from BIG totaled $8.8
million and $8.3 million, respectively. At the same dates, amounts due to BIG
and income tax payable to BIG, totaled $5.1 million and $6.0 million,
respectively. In addition, at June 30, 1998, notes payable to BIG totaled $14.5
million. Upon completion of this offering, it is contemplated that intercompany
balances will be satisfied. The Company maintained a zero balance account
arrangement with BIG through June, 1998. As a result of this funding
arrangement, the Company has a negative cash balance for financial reporting
purposes representing checks that have been issued but that have not yet been
presented to the bank for payment. This arrangement was discontinued in June,
1998. See "Certain Transactions -- Miscellaneous."
The Company believes that cash flows from operations and net proceeds from
this offering will not only satisfy working capital needs for approximately one
year but will also be sufficient to retire or redeem most existing debts of the
Company, including (i) acquisition debt of approximately $14.3 million
outstanding as of June 30, 1998 and (ii) debts assigned to the Company in
conjunction with the transfer of certain fixed assets from its affiliates. See
"Geotrac Acquisition" and "Use of Proceeds." Prior to the consummation of the
Geotrac Acquisition, Geotrac's operations generated cash flows sufficient to
provide it with necessary working capital, and the Company anticipates this
trend will continue in the future, although no assurances can be given in this
regard. Unanticipated rapid expansion, business or systems development, or
potential acquisitions may cause the Company to require additional funds. In
addition, prior to this offering, the Company at times relied upon advances
against the service fees it charges its affiliates to support working capital
needs, which included payroll, particularly with respect to certain members of
the management team who had previously allocated or divided their duties between
the Company and the affiliates. After this offering, this practice will
discontinue. In June, 1998, the Company received a commitment for a $5.0 million
revolving line of credit with a commercial bank that will provide bridge
financing for working capital or acquisition needs. The Company identifies and
assesses, in the normal course of its business, technologies or businesses which
it believes to strategically fit its business plan. The Company has no current
commitments with respect to any such transaction. The Company may, however,
enter into such transactions should opportunities present themselves in the
future.
NEW ACCOUNTING PRONOUNCEMENT
SFAS No. 130. In June, 1997, the Financial Accounting Standards Board
issued Statement of Financial Accounting Standards No. 130 ("SFAS 130"),
Reporting of Comprehensive Income, which establishes standards of reporting and
displaying of comprehensive income and its components (revenues, expenses, gains
and losses) in the financial statements. SFAS 130 requires comprehensive income
to be reported with the same prominence as other items in the financial
statements. This statement is effective for fiscal years beginning after
December 15, 1997. Reclassification of financial statements for earlier periods
presented for comparative purposes is required. The adoption of SFAS 130 in 1998
did not have any impact on the consolidated financial statements.
YEAR 2000 COMPLIANCE
The Company is currently addressing a universal situation commonly referred
to as the "Year 2000 Problem." The Year 2000 Problem relates to the inability of
certain computer software programs to properly recognize and process
date-sensitive information relative to the Year 2000 and beyond. The Company has
tested its primary operating systems and has determined that they are Year 2000
compliant. The Company has not experienced any difficulty in processing policies
with terms extending beyond the Year 2000 and has not incurred significant costs
in connection with determining the Year 2000 compliance of its core processing
systems. The Company is now in the process of identifying non-core systems and
other technology in which Year 2000 problems could be embedded and establishing
a program for testing those systems for Year 2000 compliance. Management does
not expect to incur material testing or compliance costs relating to this
program and does not believe that the potential non-compliance of these programs
presents a material risk to
24
<PAGE> 30
the Company's financial condition or results of operations, although the
Company's day-to-day operations could be interrupted on a short-term basis.
The Company has also implemented a plan that requires all of its
third-party software vendors to certify that their software products are Year
2000 compliant. While some vendors have responded affirmatively, a majority of
the Company's vendors have not provided the required certification. If such
certifications are not forthcoming and the Company does not otherwise verify the
Year 2000 compliance of such products, the Company plans to obtain similar
products from vendors who can provide the necessary certifications. Although
management anticipates that the Company will be able to obtain such products,
the Company will incur additional costs in the short term relating to the
purchase price of the new software (which may be inflated if demand is high),
conversion of data to the newly purchased software, and training personnel to
operate the new software. Management does not expect these costs to materially
adversely affect the Company's business, financial condition or results of
operations.
The Company has implemented a similar certification requirement for the
independent agents with whom it transacts business. Most of these agents have
not yet indicated that their systems are Year 2000 compliant, and the Company is
unable to determine reliably their progress in this area. If these agents, or
the customers with whom the Company transacts business electronically, do not
become Year 2000 compliant, the Company will be required to enter the data they
provide manually, which will increase the Company's production costs until
compliance is achieved. Such increased costs could have a short-term material
adverse effect on the Company's business, financial condition or results of
operations.
The Company has not established a separate Year 2000 compliance budget and
does not expect to do so in the immediate future. The Company has not incurred
material compliance costs to date, and although no assurance can be given,
management does not expect to incur material compliance costs in the future. See
"Risk Factors -- Year 2000 Compliance."
25
<PAGE> 31
SELECTED CONSOLIDATED FINANCIAL DATA OF GEOTRAC
(IN THOUSANDS)
The following selected financial data should be read in conjunction with
the Financial Statements of SMS Geotrac, Inc. (as the predecessor to Geotrac,
Inc. (formerly YoSystems, Inc.) ("Old Geotrac")) and the Notes thereto, the
Financial Statements of Old Geotrac and the Notes thereto, and "Management's
Discussion and Analysis of Financial Condition and Results of Operations of
Geotrac" included elsewhere in this Prospectus. The following selected financial
data of SMS Geotrac, Inc. for the years ended June 30, 1996 and 1997 and for the
one month ended July 31, 1997 and of Old Geotrac for the years ended December
31, 1995, 1996, and 1997 have been derived from the company's audited financial
statements. The selected financial data presented as of June 30, 1998 and the
six months ended June 30, 1998 were derived from the unaudited financial
information of Old Geotrac. The pro forma selected financial data of Geotrac for
the years ended December 31, 1996 and 1997 was derived from the unaudited
financial statements and notes thereto of Old Geotrac. The pro forma selected
financial data of Geotrac for the six months ended June 30, 1997 was derived
from unaudited financial data of Old Geotrac and SMS Geotrac not included
herein. With respect to the unaudited financial information, the Company is of
the opinion that all material adjustments, consisting only of normal recurring
adjustments, necessary for the fair presentation of the company's interim
results of operations have been included. This data should be read in
conjunction with the Financial Statements of SMS Geotrac, Inc. and the Financial
Statements of Old Geotrac included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
OLD GEOTRAC (FORMERLY
SMS GEOTRAC, INC. YOSYSTEMS, INC.) GEOTRAC
------------------------------- ---------------------- ------------------------------------------
YEAR ENDED ONE MONTH YEAR ENDED YEAR ENDED SIX MONTHS ENDED
JUNE 30, ENDED DECEMBER 31, DECEMBER 31, JUNE 30,
------------------ JULY 31, ---------------------- ----------------- ----------------------
1996 1997 1997 1995 1996 1997 1996 1997 1997 1998
------- ------- ---------- ---- ---- ------ ------- ------- --------- ----------
PRO FORMA PRO FORMA HISTORICAL
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Revenues.................. $12,490 $12,522 $1,210 $ -- $ -- $6,336 $13,375 $14,063 $6,517 $8,848
------- ------- ------ ---- ---- ------ ------- ------- ------ ------
Expenses:
Cost of revenues........ 6,219 5,914 530 -- -- 2,679 6,673 6,043 2,834 3,919
Selling, general and
administrative........ 3,079 2,839 227 10 30 1,319 3,287 2,900 1,354 1,557
Deferred compensation
(non-recurring
item)................. -- -- -- -- -- 733 -- 733 -- 728
Depreciation and
amortization.......... 689 1,331 104 -- -- 594 1,639 1,908 1,150 727
------- ------- ------ ---- ---- ------ ------- ------- ------ ------
Total expenses.... 9,987 10,084 861 10 30 5,325 11,599 11,584 5,338 6,931
------- ------- ------ ---- ---- ------ ------- ------- ------ ------
Operating income (loss)... 2,503 2,438 349 (10) (30) 1,011 1,776 2,479 1,179 1,917
Other income
(non-recurring item).... -- -- -- 932 -- 1,700 -- 1,700 -- --
Interest expense.......... (82) (79) (8) -- -- (338) (770) (825) (391) (372)
------- ------- ------ ---- ---- ------ ------- ------- ------ ------
Income before income
taxes................... 2,421 2,359 341 922 (30) 2,373 1,006 3,354 788 1,545
Provision for income
taxes................... 1,047 1,079 148 -- -- 272 421 1,457 315 618
------- ------- ------ ---- ---- ------ ------- ------- ------ ------
Net income (loss)......... $ 1,374 $ 1,280 $ 193 $922 $(30) $2,101 $ 585 $ 1,897 $ 473 $ 927
======= ======= ====== ==== ==== ====== ======= ======= ====== ======
</TABLE>
<TABLE>
<CAPTION>
OLD GEOTRAC (FORMERLY
YOSYSTEMS, INC.)
-----------------------------
YEAR ENDED SIX MONTHS
DECEMBER 31, ENDED
-------------- JUNE 30,
1996 1997 1998
---- ------- ------------
<S> <C> <C> <C>
BALANCE SHEET DATA:
Working capital (deficiency)................................ $(25) $ 1,402 $ 1,788
Total assets................................................ -- 18,637 19,432
Long-term debt.............................................. -- 7,745 6,677
Total shareholders' equity (deficit)........................ (25) 7,126 8,053
</TABLE>
26
<PAGE> 32
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS OF GEOTRAC
The following discussion should be read in conjunction with the Financial
Statements of Old Geotrac and the Notes thereto and the Financial Statements of
SMS Geotrac, Inc. and the Notes thereto included elsewhere in this Prospectus.
OVERVIEW
During July, 1998, the Company completed the Geotrac Acquisition. The
Geotrac Acquisition occurred through a series of transactions beginning in July,
1997. At that time, the Company acquired 49% of the issued and outstanding
common stock of YoSystems, Inc. which had nominal net assets at the date of
acquisition. YoSystems, Inc. concurrently purchased all of the issued and
outstanding common stock of SMS Geotrac, Inc. ("SMS Geotrac"), an unaffiliated
entity. SMS Geotrac subsequently merged into YoSystems, Inc., which changed its
name to "Geotrac, Inc." ("Old Geotrac"). In July, 1998, the Company acquired the
remaining 51% of the issued and outstanding common stock of Old Geotrac.
For all periods presented herein and until August 1, 1997, Old Geotrac was
a relatively inactive S Corporation whose principal activity was to receive
contingent earn-out payments from the prior sale of its operating assets in 1994
and to distribute these earn-out payments to its shareholders.
Geotrac's primary source of revenues is derived from the performance of
flood zone determinations principally for mortgage origination and P&C insurance
companies. Revenues are recognized upon completion of services performed.
Mortgage interest rates and weather patterns have historically impacted
Geotrac's revenues. The current low level of interest rates, which has
stimulated the increase in the number of mortgage financings and refinancings,
and the increased awareness of severe weather occurrences have resulted in an
increase in the number of determinations processed by Geotrac.
Cost of revenues primarily consists of wages and related benefits for
personnel who perform flood zone determinations. As Geotrac continues to migrate
towards performing more automated than manual determinations, management
believes cost of revenues as a percentage of revenues will decrease.
For comparative purposes, the operating results herein reflect the pro
forma results of Old Geotrac for the years ended December 31, 1996 and 1997 and
the six months ended June 30, 1997 as if Old Geotrac acquired SMS Geotrac on
January 1, 1996. The pro forma adjustments that have been made reflect the
additional goodwill amortization and interest expense that would have been
incurred if Old Geotrac had acquired SMS Geotrac on January 1, 1996.
Additionally, for comparative purposes, the operating results herein reflect the
historical results of SMS Geotrac for the years ended June 30, 1996 and 1997.
Because Old Geotrac had limited operations during the year ended December
31, 1996 and for the period January 1, 1997 through July 31, 1997, the date of
the acquisition of SMS Geotrac, Inc., no comparisons of the six months ended
June 30, 1998 and 1997, the years ended December 31, 1997 and 1996, and the
years ended December 31, 1996 and 1995 are provided. Similarly, no comparison to
the prior period is provided for SMS Geotrac with respect to the one month ended
July 31, 1997.
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<PAGE> 33
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, the percentage
of revenues represented by certain income and expense items.
<TABLE>
<CAPTION>
OLD GEOTRAC (FORMERLY
SMS GEOTRAC, INC. YOSYSTEMS, INC.) GEOTRAC
------------------------- ---------------------- -------------------------------------
YEAR ENDED ONE MONTH YEAR ENDED YEAR ENDED SIX MONTHS ENDED
JUNE 30, ENDED DECEMBER 31, DECEMBER 31, JUNE 30,
------------- JULY 31, ---------------------- ------------- ---------------------
1996 1997 1997 1995 1996 1997 1996 1997 1997 1998
----- ----- --------- ----- ----- ------ ----- ----- --------- ---------
PRO FORMA PRO FORMA HISTORICAL
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues..................... 100.0% 100.0% 100.0% 0.0% 0.0% 100.0% 100.0% 100.0% 100.0% 100.0%
----- ----- ----- --- --- ----- ----- ----- ----- -----
Expenses:
Cost of revenues........... 49.8 47.2 43.8 0.0 0.0 42.3 49.9 43.0 43.5 44.3
Selling, general and
administrative........... 24.7 22.7 18.7 0.0 0.0 20.8 24.6 20.6 20.8 17.6
Deferred compensation (non-
recurring item).......... 0.0 0.0 0.0 0.0 0.0 11.5 -- 5.2 -- 8.2
Depreciation and
amortization............. 5.5 10.6 8.6 0.0 0.0 9.4 12.2 13.6 17.6 8.2
----- ----- ----- --- --- ----- ----- ----- ----- -----
Total expenses....... 80.0 80.5 71.1 0.0 0.0 84.0 86.7 82.4 81.9 78.3
----- ----- ----- --- --- ----- ----- ----- ----- -----
Operating income............. 20.0 19.5 28.9 0.0 0.0 16.0 13.3 17.6 18.1 21.7
Other income (non-recurring
item)...................... 0.0 0.0 0.0 0.0 0.0 26.8 -- 12.1 -- --
Interest expense............. (0.6) (0.7) (0.7) 0.0 0.0 (5.3) (5.8) (5.8) (6.0) (4.2)
----- ----- ----- --- --- ----- ----- ----- ----- -----
Income before income taxes... 19.4 18.8 28.2 0.0 0.0 37.5 7.5 23.9 12.1 17.5
Provision for income taxes... 8.4 8.6 12.2 0.0 0.0 4.3 3.1 10.4 4.8 7.0
----- ----- ----- --- --- ----- ----- ----- ----- -----
Net income................... 11.0% 10.2% 16.0% 0.0% 0.0% 33.2% 4.4% 13.5% 7.3% 10.5%
===== ===== ===== === === ===== ===== ===== ===== =====
</TABLE>
28
<PAGE> 34
COMPARISON OF THE SIX MONTHS ENDED JUNE 30, 1998 AND 1997 ON A PRO FORMA
BASIS -- GEOTRAC
Revenues. Revenues increased $2.3 million, or 35.8%, to $8.8 million for
the six months ended June 30, 1998 from $6.5 million for the same period in
1997. This revenue growth was attributable to the increased number of
determinations processed due to the large number of mortgage financings and
refinancings as a result of continued low interest rates.
Cost of Revenues. Cost of revenues increased $1.1 million, or 38.2%, to
$3.9 million for the six months ended June 30, 1998 from $2.8 million for the
same period in 1997. As a percentage of revenues, cost of revenues increased to
44.3% for the six months ended June 30, 1998 from 43.5% for the same period in
1997. The increase primarily relates to additions to staffing in order to
process the increased number of determinations. During May, 1998, Old Geotrac
began processing large blocks of flood zone determinations for the Company.
Pursuant to their cross-license agreement, Old Geotrac was reimbursed on a flat
monthly fee basis. The flat monthly fee resulted in revenue per determination
that was significantly less than Old Geotrac was receiving from its other
customers. The increase was partially offset by the effect of the efficiencies
associated with the increased volume of determinations, coupled with the greater
proportion of automated determinations.
Selling, General and Administrative Expense. Selling, general and
administrative increased $203,000, or 15.0%, to $1.6 million for the six months
ended June 30, 1998 from $1.4 million for the same period in 1997. As a
percentage of revenues, selling, general and administrative expenses decreased
to 17.6% for the six months ended June 30, 1998 from 20.8% for the same period
in 1997. This percentage decrease was primarily due to spreading certain fixed
costs over a larger revenue base.
Interest Expense. Interest expense decreased $19,000, to $372,000 for the
six months ended June 30, 1998 from $391,000 for the same period in 1997.
Provision for Income Taxes. The effective income tax rate was 40.0% for
the six months ended June 30, 1998 and 1997.
COMPARISON OF YEARS ENDED DECEMBER 31, 1997 AND 1996 ON A PRO FORMA
BASIS -- GEOTRAC
Revenues. Revenues increased $688,000, or 5.1%, to $14.1 million in 1997
from $13.4 million in 1996. Most of this revenue growth occurred after SMS
Geotrac was acquired in July, 1997, as a result of the increased number of
determinations processed due to the large number of mortgage financings and
refinancings as a result of continued low interest rates.
Cost of Revenues. Cost of revenues decreased $630,000, or 9.4%, to $6.0
million in 1997 from $6.7 million in 1996. As a percentage of revenues, cost of
revenues decreased to 43.0% in 1997 from 49.9% in 1996. The decrease, in both
actual dollar amount and as a percentage of revenues, resulted primarily from
(i) efficiencies associated with an increased volume of determinations, (ii) a
greater proportion of automated determinations, and (iii) higher expenses
incurred in 1996 related to the expansion of Old Geotrac's automated database.
Selling, General & Administrative Expense. Selling, general and
administrative expenses decreased $387,000, or 11.8%, to $2.9 million in 1997
from $3.3 million in 1996. As a percentage of revenues, selling, general and
administrative expenses decreased from 24.6% in 1996 to 20.6% in 1997. This
decrease was the result of a reduction of bad debt expense in 1997 resulting
from improved billing and collection procedures.
Deferred Compensation (Non-Recurring Item). On September 11, 1997, Old
Geotrac's Board of Directors, recognizing the nonbinding commitment of the
president of SMS Geotrac, which commitment originated prior to the acquisition
of SMS Geotrac, approved and granted bonuses to certain current and former
employees of SMS Geotrac. Such bonuses were principally related to prior
services rendered by these employees and resulted in additional compensation in
1997 of $732,795, which amount is separately disclosed in the statement of
operations as deferred compensation (non-recurring item) and of which
approximately $362,000 and $371,000 relate to cost of revenues and selling,
general and administrative expenses, respectively. These amounts are to be paid
to the individuals on or before December 31, 1998.
Prior to and at the time of the acquisition of SMS Geotrac, the president
of SMS Geotrac also had a nonbinding commitment to grant to certain former and
current employees options to purchase shares of Old
29
<PAGE> 35
Geotrac common stock held jointly by the president and his spouse, for prior
employee services rendered. On May 12, 1998, the president and his spouse
awarded 46.45 shares of their common stock to these individuals. In conjunction
with the agreement and plan of merger with the Company, Old Geotrac acquired the
common stock held by these individuals for approximately $728,069. In May, 1998,
Old Geotrac will record additional compensation expense (non-recurring item) of
$728,069 and an increase to contributed capital of $728,069.
Interest Expense. Interest expense increased $55,000 to $825,000 from
$770,000 in 1996.
Other Income (Non-Recurring Item). In 1997, Old Geotrac received a
contingent earn-out of $1,700,000, representing the final payment under a 1994
sale agreement. No payment was received in 1996.
Provision for Income Taxes. The effective income tax rate was 43.4% in
1997 and 41.9% in 1996.
COMPARISON OF THE YEAR ENDED JUNE 30, 1997 AND 1996 -- SMS GEOTRAC, INC.
Revenues. Revenues remained relatively unchanged at $12.5 million in
fiscal 1997 and 1996. The flat revenues were primarily attributable to a lack of
marketing emphasis.
Cost of Revenues. Cost of revenues decreased $305,000, or 4.9%, to $5.9
million in fiscal 1997 from $6.2 million for fiscal 1996. As a percentage of
revenues, cost of revenues decreased to 47.2% in fiscal 1997 from 49.8% in
fiscal 1996. Management attributes this decrease to a greater proportion of
automated determinations, which are less costly than manual determinations.
Selling, General and Administrative Expense. Selling, general and
administrative expense decreased $240,000, or 7.8%, to $2.8 million in fiscal
1997 from $3.1 million in fiscal 1996. As a percentage of revenues, selling,
general and administrative expense decreased to 22.7% in fiscal 1997 from 24.7%
in fiscal 1996. The reduction of bad debt expense in 1997, resulting from
improved billing and collections procedures, accounted for the decrease in the
dollar amount and percentage.
Provision for Income Taxes. The effective income tax rate was 45.8% in
fiscal 1997 and 43.2% in fiscal 1996, reflecting an additional provision for
state income taxes in 1997.
LIQUIDITY AND CAPITAL RESOURCES
Historically, Geotrac has funded its operations primarily through cash
generated from operations and to a lesser extent from capital leases and a
revolving line of credit.
The July, 1997 acquisition of SMS Geotrac was funded by BHDS' contribution
of $6,750,000 in cash and proceeds of a seven-year term note of $8,750,000
entered into by Old Geotrac. The note, which had an outstanding balance of
$7,500,000 at June 30, 1998, currently bears interest at prime rate and is
collateralized by substantially all of the assets of Old Geotrac. It is
anticipated that the note will be repaid from a portion of the offering
proceeds. In conjunction with BHDS' purchase of the remaining 51% of Old
Geotrac, BHDS was the surviving company and changed its name to "Geotrac, Inc."
Accordingly, Geotrac is presently a wholly-owned subsidiary of the Company. As
such, the above information should be read in conjunction with "Selected
Consolidated Financial Data of the Company," "Management's Discussion and
Analysis of Financial Condition and Results of Operations of the Company," the
Company's Consolidated Financial Statements and the Company's Pro Forma
Condensed Consolidated Financial Statements (unaudited).
30
<PAGE> 36
BUSINESS
GENERAL
The Company provides (1) comprehensive policy and claims outsourcing
services to the property and casualty ("P&C") insurance industry, with an
emphasis on providing these services to the flood insurance market, and (2)
flood zone determinations to financial institutions, mortgage lenders and
insurance companies. The Company's outsourcing services, which are offered on
either a bundled or "a la carte" basis, include policy administration, claims
administration and information technology services. The Company processed
approximately 575,000 insurance policies in 1997, including approximately
450,000 flood insurance policies, making it one of the largest providers of
flood administration services in the United States. The Company currently
provides flood outsourcing services to its affiliate, Bankers Insurance Group,
Inc. (together with its subsidiaries, "BIG"), Mobile USA Insurance Company, Inc.
and AAA Auto Club South Insurance Company, as well as to insurance companies
that offer flood insurance utilizing BIG as their private label servicing
carrier, such as Armed Forces Insurance Corporation and AMICA Mutual Insurance
Company. In conjunction with BIG, the Company is able to offer insurance
companies the ability to create a turnkey private label flood insurance product.
The Company believes this product is attractive to insurance companies that
desire to offer flood insurance but are not certified by the Federal Emergency
Management Agency ("FEMA") to sell and service flood insurance. FEMA estimates
that only 25% to 33% of U.S. properties required to be covered by flood
insurance are in fact covered. The Company anticipates continued growth in the
demand for flood insurance, and related flood outsourcing and flood zone
determination services, over the next several years.
In 1997, the Company processed approximately 1.4 million flood zone
determinations for over 730 customers, including financial institutions such as
SouthTrust Bank, mortgage lenders such as ABN Amro North America, Inc. and
Mortgage Corporation of America, and P&C insurance companies such as Allendale
Mutual Insurance Company and Wausau Underwriters Insurance Company. Flood
insurance is required by federal law in connection with virtually all
residential mortgage loans, including refinancing loans, covering properties
located within federally designated high-risk flood zones. A flood zone
determination is necessary in order to ascertain a property's flood zone
classification. In addition, due to more stringent underwriting criteria, P&C
insurers increasingly require flood zone determinations prior to issuing
commercial property policies. The Company uses its proprietary database,
compiled and digitized from flood maps distributed by FEMA, to determine whether
a particular property or structure is located within a flood zone classification
that requires flood insurance. The Company estimates that its electronic
database includes over 85% of all U.S. households.
The Company is a 77.6% owned subsidiary of BIG, a holding company chartered
in Florida in 1976. BIG provides multiple lines of P&C insurance, most notably
flood, homeowners and automobile insurance, to individuals and businesses
throughout the United States. From 1993 to 1997, BIG's premiums grew from $113.7
million to $259.0 million, representing annual growth rates of 14.8%, 22.5%,
46.8% and 10.4%, respectively, and a compound annual growth rate of 22.8%. BIG
is the largest underwriter of flood insurance policies through independent
agents (and the second largest overall) in the United States. Upon completion of
this offering, BIG will beneficially own % of the Company's Common Stock.
BIG is the Company's principal customer, accounting for approximately 56% of the
Company's total revenues (on a pro forma basis) and 98% of the Company's
outsourcing revenues (on a pro forma basis) in 1997.
OVERVIEW OF THE FEDERAL FLOOD INSURANCE PROGRAM
The U.S. flood insurance market is regulated by FEMA, which launched the
National Flood Insurance Program (the "Flood Program") in 1968. FEMA created the
Flood Program to provide federally-backed flood insurance to residents in
designated floodplain communities, on the condition that such communities comply
with the Flood Program's floodplain management requirements. The Flood Program,
as it exists today, is administered by the Federal Insurance Administration
("FIA").
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The Flood Program was launched in 1968, and in 1983, FIA opened the flood
insurance market to private insurance companies by establishing the National
Flood Insurance Write Your Own ("WYO") program. The WYO program permits private
insurance companies who meet FEMA requirements to sell flood insurance
underwritten by the federal government and subject to federal regulation.
In 1994, Congress passed the National Flood Insurance Reform Act of 1994
(the "1994 Reform Act"). The 1994 Reform Act clarified and strengthened the
obligations of mortgage lenders to oversee and ensure the purchase of flood
insurance by borrowers who obtain federally-insured residential mortgage loans
on properties located in federally designated high-risk flood zones. Under the
1994 Reform Act, mortgage lenders must notify borrowers when flood insurance is
required, require flood insurance as a condition to making certain loans, and
place flood insurance premiums in escrow. Lenders who fail to comply with the
1994 Reform Act are subject to substantial monetary penalties.
MARKET OPPORTUNITIES
Growth in the Flood Market. The U.S. flood insurance market has grown
significantly in recent years. Currently, almost 19,000 communities participate
in the Flood Program, and approximately 100 insurance companies are registered
to offer WYO flood insurance. The following table illustrates the growth in
flood insurance policies and premiums under the Flood Program since 1987 and
highlights the Company's increased penetration of this growing market:
<TABLE>
<CAPTION>
PERCENTAGE OF
ANNUAL TOTAL FLOOD
TOTAL NUMBER OF NUMBER OF FLOOD PROGRAM FLOOD PREMIUMS
POLICIES IN FLOOD POLICIES TOTAL ANNUAL PREMIUMS ADMINISTERED
FLOOD ADMINISTERED BY FLOOD ADMINISTERED BY BY THE
AS OF SEPTEMBER 30, PROGRAM(1) THE COMPANY PREMIUMS(2) THE COMPANY COMPANY
- ------------------- --------------- --------------- ------------- --------------- -------------
(IN 000'S) (IN 000'S) (IN 000'S) (IN 000'S)
<S> <C> <C> <C> <C> <C>
1987.......... 2,023 55 $ 554,249 $ 16,105 2.9%
1988.......... 2,052 66 571,265 17,918 3.1
1989.......... 2,167 91 623,409 21,277 3.4
1990.......... 2,341 115 658,359 27,055 4.1
1991.......... 2,459 142 716,650 33,171 4.6
1992.......... 2,530 156 779,746 37,723 4.8
1993.......... 2,690 193 859,128 49,591 5.8
1994.......... 2,805 208 946,898 58,737 6.2
1995.......... 3,265 274 1,114,059 79,914 7.2
1996.......... 3,546 376 1,209,178 101,973 8.4
1997.......... 3,811 453 1,390,015 132,041 9.5
</TABLE>
- ---------------
(1) Source: National Flood Insurance Program Bureau and Statistical Agent and
the 1997 FIA Annual Report.
(2) Source: National Flood Insurance Program Bureau and Statistical Agent.
The following table illustrates the growth in the number of flood zone
determinations performed by the Company from 1994 through 1997:
<TABLE>
<CAPTION>
TOTAL NUMBER OF TOTAL NUMBER OF
FLOOD ZONE DETERMINATIONS 1-4 FAMILY MORTGAGE
YEAR GENERATED BY THE COMPANY LOAN ORIGINATIONS IN U.S.(1)
- ---- ------------------------- ----------------------------
<S> <C> <C>
1994................................... 458,232 7,484,600
1995................................... 757,642 5,976,700
1996................................... 1,191,182 6,882,300
1997................................... 1,384,089 7,192,000
</TABLE>
- ---------------
(1) Reported by Mortgage Bankers Association of America ("MBAA") based on
statistics from the U.S. Department of Housing & Urban Development, the
Federal Housing Finance Board and the MBAA.
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<PAGE> 38
The Company believes that the demand for flood outsourcing services and
flood zone determinations will continue to grow as a result of the following
factors:
- Higher Levels of Compliance with Federal Flood Laws. The 1994
Reform Act has compelled mortgage lenders to enforce federal flood
insurance requirements or be subject to substantial monetary
penalties. As a result, a higher percentage of purchasers of
residential property located in federally designated high-risk flood
zones are being required to purchase flood insurance as a condition
to receiving mortgage financing from a federally-backed financial
institution. Based on a FEMA estimate that only 25% to 33% of U.S.
properties required to be covered by flood insurance are in fact
covered, and given that only approximately 3.8 million U.S.
properties were covered as of September 30, 1997, management
estimates that approximately 11.4 million to 15.2 million U.S.
properties are in fact required to be covered by flood insurance.
The Company believes the demand for flood insurance outsourcing
services will grow as compliance with federal flood insurance
requirements increases. The Company also believes such compliance
will result in greater demand for flood zone determinations, since a
flood zone determination is necessary in order to determine whether
a property is located in a high-risk flood zone.
- Increase in Voluntary Purchase of Flood Insurance. The Company
expects the number of property owners who purchase flood insurance
on a voluntary basis to increase over the next several years.
Management believes consumers are increasingly aware that affordable
flood insurance is available to them through the Flood Program.
Management attributes this growing awareness to a number of factors,
including (1) the Flood Program's national advertising campaign,
known as Cover America, which began in 1995, (2) increasing consumer
awareness that the typical homeowners' policy does not cover flood
damage, and (3) the occurrence of several recent flooding disasters,
such as the Mississippi River floods of 1993 and the Red River
floods of 1997. Similarly, the substantial media attention given the
El Nino phenomenon and the resulting severe weather patterns, have
heightened the public's awareness that flood insurance may be
necessary even for properties not located in high-risk flood zone
classifications. Approximately 25% to 30% of flood damage claims
paid relate to properties located outside such flood zone
classifications. According to the National Flood Insurance Program
Bureau and Statistical Agency, the number of flood insurance
policies purchased by homeowners on a voluntary basis has increased
from 168,000 policies as of September 30, 1994 to 442,000 policies
as of September 30, 1997, a compound annual growth rate of 38.0%.
- Growth in Commercial Flood Zone Determination Business. The demand
for flood zone determinations by commercial property insurers and
commercial mortgage lenders has increased recently and the Company
expects this growth pattern to continue. Commercial property
insurance policies generally cover floods and similar events. As
public attention has focused more closely on severe weather patterns
in recent years and insurers have become increasingly aware of the
importance of flood coverage, P&C insurers that issue such policies
have been developing more stringent underwriting criteria.
Trend Toward Outsourcing in the P&C Industry. The P&C industry provides
financial protection for individuals, businesses and others against losses of
property or losses by third parties for which the insured is liable. P&C
insurers underwrite policies that cover various types of risk, which can
generally be divided into personal lines of insurance covering individuals and
commercial lines of insurance covering businesses. Personal lines are comprised
primarily of automobile and homeowners insurance. Commercial lines cover a wide
range of commercial risks that affect businesses.
According to A.M. Best, premium revenues in the P&C industry have increased
by an average of 3.5% annually since 1990. The P&C industry is highly
competitive, with insurance companies competing primarily on the basis of price,
consumer satisfaction and the ability to pay claims. According to A.M. Best, as
of December 31, 1997, there were approximately 3,300 P&C insurance companies in
the United States. These companies generated approximately $277 billion in
annual P&C premium revenues in 1997, of which more than one-half related to
personal lines automobile, homeowners and flood insurance business, the core
markets
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<PAGE> 39
serviced by the Company. The Company believes there are a significant number of
P&C insurance companies for which outsourcing is a viable alternative to
maintaining in-house processing capabilities. More specifically, the Company
believes it can offer many of these insurance companies the opportunity to
reduce their processing costs by outsourcing such functions to the Company for a
flat fee.
Over the past decade, many P&C insurance companies have begun using
third-party vendors to provide certain policy and claims administration services
that were traditionally performed in-house. This outsourcing of services allows
insurers to focus on their core competencies, reduce costs and eliminate capital
expenditures for the development, installation, operation and maintenance of
information management and automation systems. Insurance companies historically
have invested less in information technology than companies in other industries.
In 1996, for example, insurance companies spent only 2.4% of revenues on
information technology, as compared to 6.6% for banking firms and 2.9% for all
industry sectors combined. The Company believes that insurance companies will
increase their levels of outsourcing as they determine that policy and claims
administration and regulatory compliance are complicated and too costly to
perform efficiently in-house. According to forecasts published by The Yankee
Group, the amount spent annually by insurers on outsourcing is expected to
increase from $5 billion in 1997 to $13 billion within the next five years. The
Company believes it will have significant opportunities to market its
outsourcing services for the following reasons:
- Consolidation and Drive for Cost Efficiencies. Providers of
outsourcing services are able to consolidate large volumes of business
into automated and effective processing systems, thereby creating
significant cost efficiencies. The Company believes insurance
companies typically outsource administrative services because
outsource providers can provide better quality services at a lower
cost.
- Technological Challenges and Complexities. The investment in the
specialized technical knowledge required to develop, install and
operate information systems necessary for P&C insurers to remain
competitive is often cost prohibitive, particularly for smaller
companies and new entrants to the market. Insurance companies can take
advantage of the economies of technology created by an outsource
provider's investment in information systems. For example, the Company
believes the Year 2000 issue will generate additional demand for
outsourcing services because many insurance companies will resolve the
Year 2000 issue by either purchasing new software systems or
outsourcing some or all of their policy and claims requirements.
- Changing Distribution Channels. The Company believes that demand for
outsourcing services will increase as banks, credit unions and other
financial service companies enter the P&C market. These new entrants
were generally precluded from selling insurance until the U.S. Supreme
Court decision in Barnett Bank v. Nelson in 1996. The Company believes
that, following this decision, and despite continuing restrictions and
pressure from state regulators, banks and other financial institutions
will enter the P&C market at an increasing rate, often forming joint
ventures and other alliances with certain insurers to sell P&C
insurance. Many new entrants lack the technology, expertise or desire
to perform policy and claims processing in-house. These so-called
"virtual insurance companies" often focus their resources on the core
marketing, underwriting and financial aspects of the P&C business and
seek to outsource their policy and claims administration to
third-party vendors. The Company believes that it is well-positioned
to provide services to new entrants to the P&C market.
- Regulatory Reporting Requirements. State insurance regulators closely
regulate the product offerings, claims processes and premium rate
structures of insurance companies. To comply with such regulations,
companies must file annual and other reports relating to their
financial condition. Third-party vendors with effective policy and
claims administration systems can facilitate compliance with many
regulatory requirements by automating statutory reporting and other
compliance tasks.
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<PAGE> 40
THE IMSG SOLUTION
The Company believes it has positioned itself to capitalize on the
foregoing market opportunities in the following ways:
- Flood Insurance Experience. The Company is one of the leading
providers of flood insurance outsourcing services in the United
States, currently servicing over 450,000 flood insurance policies. As
a result, the Company has developed substantial expertise and scale in
virtually all aspects of the flood insurance servicing business.
- Flexible, Comprehensive, Turnkey Solutions. The Company offers a
comprehensive range of outsourcing services, both individually and on
a bundled basis, giving clients flexibility in selecting and matching
services to their needs. The Company's turnkey solutions allow clients
to focus on core competencies and better manage costs and allow new
market entrants an opportunity to offer insurance products on a
cost-effective basis by leveraging the Company's systems and business
processes.
- Insurance Industry Expertise. Unlike certain of its competitors, the
Company's senior management has substantial experience in the
insurance industry. See "Management." As a result of this core
competence, management believes the Company is better suited to
understand and address its customers' needs.
- Flood Zone Determination Services. The Company offers a highly
automated flood zone determination service based on its proprietary
national database. This service provides an accurate, prompt and
relatively low cost determination of a residential or commercial
property's status with respect to national flood zones. Insurance
companies, credit unions, banks and other financial institutions use
this service to comply with federal laws requiring mortgage lenders to
oversee and ensure the purchase of flood insurance by certain
borrowers, create a competitive advantage in loan approval/insurance
underwriting response time and generate additional fees from their
borrowers.
- Modular, Integrated and Real-time Systems. The Company's information
systems are table-driven and modular in design, enabling the Company
to provide systems that address the specific needs of the client, such
as distinct underwriting rules. The core system permits integration of
a client's database, thereby eliminating the need for data re-entry
for multiple applications. The system provides real-time processing of
key functions, such as policy processing and endorsements, that
enhances completeness and accuracy in processing. The Company's system
also has a proven track record of reliability and low system
"down-time." The Company is committed to upgrading and maintaining its
systems in an effort to remain competitive.
- Customer Service to Independent Agent Networks and Policyholders.
Because residential flood insurance rates are set by FEMA and
therefore are not directly subject to competitive pressures, the
Company believes customer service is a critical consideration for
independent sales agents in determining which carrier's flood
insurance policies to sell. BIG is the largest underwriter of flood
insurance policies through independent agents in the United States,
and the Company processes and services all of BIG's flood insurance
policies. The Company believes that as a result of its affiliation
with BIG it has developed a customer service-oriented culture that
strengthens its clients' relationships with their independent sales
agent networks and policyholders. The Company focuses on providing
superior service, such as timely policy issuance and rapid and
professional response to agent and policyholder inquiries. The Company
maintains and monitors quality service standards and continually seeks
to measures customer satisfaction. The Company believes that its focus
on customer service has enabled it to retain all of its principal
outsourcing customers since 1994.
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<PAGE> 41
GROWTH STRATEGY
The Company's objectives are (1) to become a leading provider of
outsourcing services to the P&C industry and (2) to become the leading provider
of flood zone determinations to financial institutions, mortgage lenders and P&C
insurers. The Company's principal strategies for achieving these objectives are
as follows:
- Expand Flood Outsourcing Business. The Company has extensive
experience and expertise in virtually all aspects of the flood
insurance servicing business and occupies a leading position in that
market. Key aspects of the Company's growth strategy include (1)
marketing flood outsourcing services to existing WYO carriers that
it believes will benefit for cost or infrastructure reasons from the
Company's services, (2) offering its outsourcing services to new
entrants that lack the infrastructure or expertise necessary to
service flood insurance customers, (3) marketing its ability, in
conjunction with BIG, to provide and service a private label
insurance product to insurance companies that desire to offer flood
insurance but are not certified by FEMA to sell and service flood
insurance, and (4) increasing the volume of flood outsourcing
services business from the Company's existing customer base, which
includes over 20 customers under contract, either directly or
through BIG.
- Expand Relationships with Existing Customers. The Company intends
to capitalize on its existing flood insurance outsourcing customer
base and substantial flood zone determination customer base by
cross-marketing its flood, homeowners and automobile outsourcing
services to certain of these customers. Management believes these
marketing opportunities are especially prevalent today, given that
recent regulatory changes have permitted non-traditional insurance
companies -- most notably banks, credit unions and other financial
services companies -- to enter the P&C insurance industry. These new
entrants -- many of which are existing flood zone determination
customers of the Company -- often do not have the necessary
infrastructure or expertise in place and are natural candidates for
outsourcing. See "-- Market Opportunities."
- Focus on Maximizing Economies of Scale. The Company believes that
demand for P&C insurance outsourcing services will grow as such
services become more affordable and cost effective. To achieve such
affordability and cost effectiveness, a P&C outsourcing provider
must develop certain economies of scale. The Company currently
services over 575,000 insurance policies annually. As a result, it
has developed a large number of efficiencies in most aspects of its
operations, from the receipt of policy applications to billings and
collections. By deploying internally developed applications
software, rating disks for applications input, lockbox and cash
office processing, automated voice response, computerized forms and
automated policy assembly, the Company has attained expense
efficiencies that management believes are characteristic of insurers
processing substantially greater policy volumes. As a consequence,
the Company believes it is well-positioned to capitalize on the
growing trend toward outsourcing administrative functions in the P&C
industry by offering insurers better quality and more cost-effective
"back office" operations. Moreover, the Company intends to continue
expanding these efficiencies by increasing the utilization of its
existing infrastructure and databases.
- Expand Direct Sales Force and Develop Strategic Relationships. The
Company has recently begun to develop a direct sales force and sales
support organization to focus on new customer opportunities and
generate additional business from the Company's current customer
base. The Company is also seeking to develop new business
opportunities by creating additional strategic distribution and
marketing alliances. For example, the Company's flood zone
determination business targets credit unions of all sizes through
its marketing alliance with CUNA Mutual Group, the largest provider
of insurance products to credit unions, and large mortgage lenders
through its marketing alliance with Equifax Mortgage Services, the
nation's largest mortgage credit reporting agency. See
"-- Services."
- Generate Recurring Revenues. The Company seeks to generate
recurring revenues by entering into contractual relationships
(typically one to three years) with its outsourcing customers and by
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<PAGE> 42
offering services that are structured to generate revenues based on
events that occur frequently in the normal course of a customer's
business, such as claims, mortgage applications and insurance policy
renewals.
- Pursue Strategic Acquisitions. A key element of the Company's growth
strategy is to pursue potential acquisitions that offer opportunities
to increase market share or expand the Company's line of outsourcing
services. The Company's recent Geotrac Acquisition enabled it to
solidify its position as a leader in the flood zone determination
business and broaden the range of ancillary services the Company is
able to provide. Moreover, the Company is currently in the process of
consolidating its own flood zone determination operations with those
of Old Geotrac. See "Geotrac Acquisition."
SERVICES
Outsourcing Services. The Company's outsourcing services include policy
administration, claims administration and information technology services. The
Company works with each customer in an effort to ensure a seamless integration
of the customer's in-house and outsourced activities.
Policy administration describes the range of services the Company offers
customers that are considering outsourcing their policy administration
functions. When policy administration is outsourced, the customer retains all
financial risk and works with the Company to set underwriting and rating
guidelines. The Company typically receives a percentage of premiums for
performing policy administration services. The Company's policy administration
menu includes the following services: policy processing and related data entry;
policy issuance and acceptance; premium management and distribution; accounting,
billing and collections; customer service phone center for policyholders and
agents; and data collection, statutory reporting and regulatory compliance.
Claims administration describes the range of services the Company offers in
connection with the management of insurance claims. In reviewing a claim, the
Company performs a thorough claim analysis and, if warranted, prepares a check
for payment of the claim. The Company has a special investigative unit that
assists in detecting and deterring fraud in the claim review process. The
Company also offers a fully automated, stand-alone catastrophe claims operation,
distinguishing its outsourcing services in the P&C insurance market. The Company
is typically compensated for claims administration services on either a
percentage of earned premiums or claims-paid basis. The Company's claims
administration menu includes the following services: toll-free claim reporting;
initial coverage confirmation services; loss investigation and determination;
review and appraisal of claims; special investigation services, including fraud
detection; adjustment of claims and vendor management; litigation management;
and settlement and payment of claims.
The Company also offers a range of information technology services to
assist customers in operating, maintaining and enhancing information systems.
The Company integrates the customer's system platform with the Company's
processing platform, including the installation of all necessary hardware
components, depending on the customer's needs. This integration allows the
customer to administer its policies and claims internally by using the Company's
systems and software. The Company typically receives a percentage of premiums as
compensation, subject to a minimum fee. The Company's information technology
menu includes the following services: information management via integrated,
secure computer systems; document imaging; on-line rating and underwriting
services; monetary systems services, including payment processing; automated
printing, packaging and distribution of documents; generation of agent
commission statements and production reports; security administration and access
control; software application enhancement and maintenance; problem resolution
and reporting; and data backup and disaster recovery functions.
Because the Company is affiliated with and provides comprehensive
outsourcing services to BIG, a certified WYO carrier under the Flood Program, it
emphasizes to prospective customers its ability to provide third-party
administration outsourcing for flood insurance. The Company offers its flood
outsourcing services, including software and processing functions, policy
administration, claims administration and statistical reporting, on either a
bundled or "a la carte" basis. New market entrants and certain other insurers
may prefer to purchase unbundled services, allowing them to retain in-house
control over specific aspects of their
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<PAGE> 43
businesses. The Company makes available virtually any combination of outsourcing
services required by the customer.
The Company also offers flood outsourcing services to insurance companies
that seek to provide flood insurance, but do not want to become certified WYO
carriers. In this case, the services are provided in conjunction with a
proprietary flood product. An insurance company can establish a private label
insurance product written through BIG whereby the customer's name and logo
appear on the policy documents, while BIG acts as the servicing carrier. The
Company also intends to market its outsourcing services to banks, credit unions
and other financial institutions as they become increasingly involved in the
sale of insurance.
Flood Zone Determination Business. For a fixed fee, the Company will
provide a customer -- typically a mortgage loan originator or an insurance
company -- with a determination as to whether a specified property is located
within a federally-designated flood zone classification. The Company uses its
proprietary national flood zone database to make flood zone determinations. This
database, which is continually updated, allows the Company to determine if a
particular structure is located within the special flood hazard areas
established by FEMA. These determinations assist mortgage lenders in complying
with federal regulations under which they must require borrowers to purchase the
appropriate level of flood insurance. Management estimates that approximately
85% of all U.S. households are captured in the Company's flood zone database.
For approximately 70% of determinations requested, the Company is able to
perform automated flood zone determinations in a matter of seconds.
Determinations made on a fully-automated basis are significantly more cost
effective than manual determinations. In some cases, particularly where a
property is not clearly within or outside a flood hazard area, the database
search will not produce an automatic determination, or "hit," and a manual
search becomes necessary. Manual searches require extra time and labor and are
not nearly as cost effective as fully-automated searches.
The Company provides both one-time and life-of-loan flood zone
determinations. Under a "life of loan" determination, the Company is responsible
for updating the initial flood zone determination based on revisions to the
federal flood maps occurring during the term of the loan. The Company also
provides portfolio analyses and audits for mortgage service agencies by
reviewing blocks of loans that usually require between 100 and 50,000 flood zone
determinations.
In addition to flood zone determinations, the Company provides
flood-related ancillary services. For example, the Company provides a standard
flood compliance packet to lenders which includes information on community
status, mapping, specific structure location, amount of flood insurance
required, secondary market and government program restrictions, and floodway and
coastal zone barrier restrictions. The life-of-loan product tracks both
community status and FEMA map changes on a daily basis for the life of the loan.
If changes occur that affect the subject property, a new report is automatically
generated for no additional charge. Certain ancillary services are transferable
if the mortgage loan for which the flood zone determination was done is sold or
transferred. Through its GeoCompass(R) service, the Company provides certain
CD-ROM services on-site at customer locations. The CD-ROM delivery system offers
customers the ability to perform certain flood zone determinations at their own
desktops.
The Company also actively seeks to leverage its expertise in mapping
technology by providing ancillary mapping services. For example, the Company has
been engaged by various municipalities to digitize manual property tax maps and
then integrate these maps with appraisal data. Most municipality property tax
maps have not been digitized and the Company believes there is a significant
opportunity to penetrate this market. Additionally, the Company was recently
hired by the Columbus, Ohio Police Department to digitize property records and
then integrate these records with crime statistics in order to better monitor
crime trend activity. The Company believes there are numerous other related
opportunities to apply its core mapping technology expertise.
The Company has established a relationship with Kirloskar Computer Services
("KCS"), located in India, which the Company believes can provide certain
services that will increase the efficiency of the Company's flood zone
determination business. Under a Secrecy and Confidentiality Agreement, KCS has
agreed, for a period of five years from the date of termination of its
relationship with Geotrac, not to engage, directly or indirectly, in certain
activities relating to Geotrac's business. KCS currently builds databases and
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<PAGE> 44
creates digitized maps that the Company uses in connection with its flood zone
determination business. In addition, KCS is able to perform manual flood zone
determination searches at costs significantly below U.S. market rates. The
Company currently plans to capitalize on its relationship with KCS by
implementing a pilot program pursuant to which the Company will outsource
approximately 20% of its manual searches to KCS over the next several years.
This pilot program is subject to change based upon political and economic
conditions in India.
The Company uses different pricing and contractual arrangements for
one-time and life-of-loan flood zone determinations. The Company performs flood
zone determinations for both residential and commercial properties, with
determinations for residential properties comprising approximately 85% of such
business.
CUSTOMER SUPPORT AND INSTALLATION
The Company's outsourcing services are provided from two separate customer
service centers in St. Petersburg, Florida -- one for policy and claims
administration and one for catastrophic claims administration.
The policy administration center has approximately 200 employees, most of
whom are trained customer service representatives. Customer service
representatives are responsible for the timely handling and resolution of
incoming phone calls related to underwriting, rating, billing, policy status and
other policy administration matters. While most calls come from insurance
agents, the phone center also handles calls from mortgage companies,
policyholders and insureds. The policy administration phone center handles an
average of approximately 17,000 calls per week.
The claims administration customer service center is responsible primarily
for handling calls from claimants and insureds reporting property losses. The
center also handles calls from agents and others related to coverage of existing
claims. The center has approximately 160 employees, approximately half of which
are licensed claims representatives responsible for the adjustment of claims.
Incoming calls are taken by 15 customer service representatives who are trained
to handle all types of insurance claims. Unlike many other claims administration
centers, the Company's service center is able to immediately assign each claim
to a licensed adjuster for processing. The claims administration switchboard is
open weekdays from 7:30 a.m. to 9:00 p.m. (Eastern time), and customer service
representatives and licensed adjusters are available 24 hours a day, seven days
a week, to handle emergency claims.
The Company currently maintains two separate customer service centers
relating exclusively to its flood zone determination business, one of which was
acquired as part of the acquisition of Geotrac. The Company is currently in the
process of consolidating its own flood zone determination operations with those
of Geotrac. See "Geotrac Acquisition." The Company believes the service center
acquired as part of the Geotrac Acquisition is one of the largest flood zone
determination service centers in the industry. A team comprised of a senior
manager and up to four service representatives is assigned to each customer
account. The team advises the customer in all matters of flood compliance and
will train a customer's staff at their own or the Company's offices. The team
also provides direct support to their customers' independent direct sales agent
networks.
The Company installs its GeoCompass(R) CD-ROM system on site at customer
locations. GeoCompass(R), which enables customers to make their own flood zone
determinations, is based on the Windows operating system, operates on the
customer's network and is relatively simple for customers to learn to use.
SALES AND MARKETING
The Company seeks to market its outsourcing capabilities by leveraging its
existing expertise in flood insurance administration, expanding its
relationships with existing flood zone determination customers and targeting
prospective customers, such as insurers with high expense ratios or limited
expertise in certain P&C lines. The Company recently formed a sales and
marketing division dedicated to direct sales of its outsourcing services. The
Company began staffing its sales and marketing division in 1997. This division
now includes a senior vice president, a marketing vice president, two full-time
sales representatives, two project managers and a marketing assistant. The
Company plans to add two additional full-time sales representatives in the near
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<PAGE> 45
future. In addition to direct marketing, the Company markets its P&C outsourcing
services through insurance brokers, reinsurers and other strategic partners. The
Company also advertises in various trade publications and participates in
industry conventions and trade shows to enhance the penetration of its flood and
non-flood markets.
The Company markets its flood zone determination services both directly
through its own sales personnel and indirectly through its alliances with other
service providers. For example, the Company targets credit unions of all sizes
through its alliance with CUNA Mutual Group, the nation's largest provider of
insurance products to credit unions, and large mortgage lenders through its
alliance with Equifax Mortgage Services, believed by the Company to be the
largest mortgage credit reporting agency in the U.S.
INFORMATION SYSTEMS
The Company utilizes fully-integrated, real-time, processing systems at its
St. Petersburg facilities to provide many of its outsourcing services. These
systems, which run on an IBM AS/400 platform coupled with a relational database,
enable the Company to provide on-line ratings and underwriting information,
issue required insurance forms to policyholders and agents and produce renewal
and non-renewal notices. The processing systems interface with a disbursement
system which enables the Company to generate checks automatically.
A separate IBM AS/400 is used to develop, enhance, and test new and
existing systems. In the event of a power failure, the AS/400 site is supported
by a fully-functional backup system that provides additional processing time of
one hour under full load. Insurance policies and related documents are scanned
to optical disks, and are retrievable at most LAN workstations. The Company also
has an optical jukebox that can store approximately 10 million documents. The
Company data center has controls to ensure security and a disaster recovery plan
which is tested regularly.
The Company also utilizes computer systems at its Geotrac location,
including two IBM AS/400 processors. Geotrac also has several major production
systems, including GeoCompass(R) and life-of-loan tracking.
The Company is capable of developing modifications or enhancements to its
licensed software to meet its outsourcing customers' particular needs. Business
analysts from the Company work with each customer to ensure that the Company
understands the customer's system requirements. Once the system requirements
have been documented, the Company dedicates a team of systems analysts to
develop the appropriate modifications or enhancements to its software system.
The Company believes that the principal computer equipment and software
currently used by the Company will function properly with respect to dates in
the year 2000 and thereafter. See "Risk Factors -- Year 2000 Issues" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations of the Company -- Year 2000 Compliance."
CUSTOMERS
The Company currently provides outsourcing services to 18 companies. The
Company's largest customer, BIG, accounted for approximately 40%, 37%, 76% and
56%, respectively, of the Company's revenues in 1995, 1996, 1997 and 1997 (pro
forma). Any material decrease in the outsourcing business from BIG would have a
material adverse effect on the Company's business, financial condition and
results of operations. See "Risk Factors -- Reliance on Key Customer." The
Company provides outsourcing services to other WYO carriers, including AAA Auto
Club South Insurance Company and Mobile USA Insurance Company, Inc. The Company
also provides outsourcing services to various insurance companies, such as Armed
Forces Insurance Corporation and AMICA Mutual Insurance Company, that utilize
BIG as their servicing carrier.
The Company provides flood zone determination services to over 730 banks,
credit unions, mortgage lenders, insurance companies and, other financial
institutions. The Company's principal financial institution customers for such
services include SouthTrust Bank. The Company's principal insurance company
customers for such services include Allendale Mutual Insurance Company and
Wausau Underwriters Insurance
40
<PAGE> 46
Company. In addition, the Company provides flood zone determination services to
numerous credit unions, a number of which became customers as a result of the
Company's alliance with CUNA Mutual Group, the nation's largest provider of
insurance products to credit unions. The Company also provides such services to
mortgage lenders such as ABN Amro North America, Inc. and Mortgage Corporation
of America primarily through its alliance with Equifax Mortgage Services,
believed by the Company to be the largest mortgage credit reporting agency in
the U.S.
COMPETITION
The Company competes principally in three markets: (1) the market for flood
insurance outsourcing services, (2) the market for other P&C insurance
outsourcing services and (3) the market for flood zone determination services.
The markets for these services are highly competitive.
The market for flood insurance outsourcing services is dominated by the
Company and several principal competitors, including National Con-Serv, Inc. and
Electronic Data Systems, Inc. The Company competes for these outsourcing
customers largely on the basis of price, customer service and responsiveness.
The market for other P&C insurance outsourcing services is fragmented. In
the policy administration services segment of this market, principal competitors
include Policy Management Services Corporation and INSpire Insurance Solutions,
Inc. In this segment of the market, the Company competes for customers on the
basis of customer service, performance and price. The claims administration
services segment of the P&C outsourcing market also is highly fragmented, with
competition from a large number of claims administration companies of varying
size, as well as independent contractors. Competition in this segment of the
outsourcing market is principally price driven. Competitors include Lindsey
Morden Claim Services, Inc., Crawford & Company, Inc. and INSpire Insurance
Solutions, Inc.
The Company believes, however, that its most significant competition for
P&C insurance outsourcing services comes from policy and claims administration
performed in-house by insurance companies. Insurers that fulfill some or all of
their policy and claims administration needs in-house typically have made a
significant investment in their information processing systems and may be less
likely to utilize the Company's services. In addition, insurance company
personnel have a vested interest in maintaining these responsibilities in-house.
The market for flood zone determination services is dominated by the
Company and several principal competitors, including First American Financial,
Pinnacle Data Corporation (a subsidiary of National Insurance Group),
TransAmerica, Chicago Title Corp. and Palma Lazar & Ulsh. The Company believes
that the principal competitive factors in the market for flood zone
determinations include price, quality and reliability of services, and response
time.
Certain of the Company's competitors in each of these markets have longer
operating histories and significantly greater financial, technical, marketing
and other resources than the Company, including name recognition with current
and potential customers. As a result, these competitors may devote more
resources to the development, promotion and sale of their services or products
than the Company and respond more quickly to emerging technologies and changes
in customer requirements. There can be no assurance that the Company will be
able to compete successfully against current and future competitors, or that
competitive pressure faced by the Company will not have a material adverse
effect on its business, financial condition and results of operations.
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<PAGE> 47
FACILITIES
The following table sets forth certain information with respect to the
principal facilities used in the Company's operations:
<TABLE>
<CAPTION>
SQUARE
LOCATION FEET FUNCTION LEASE EXPIRATION
-------- ------ -------- ----------------
<S> <C> <C> <C>
St. Petersburg, 76,700 Corporate Headquarters December 1999(2)
Florida(1)............ and Outsourcing
St. Petersburg, 7,400 Outsourcing December 1999(2)
Florida(1)............
St. Petersburg, 6,600 Flood Zone Determination May 1999(3)
Florida(1)............
Norwalk, Ohio........... 12,400 Flood Zone Determination August 1999(4)
Norwalk, Ohio........... 21,000 Flood Zone Determination November 2002(4)
</TABLE>
- ---------------
(1) Each of these facilities is leased or subleased from BIG. See "Certain
Transactions."
(2) The Company has the option to renew each of these leases for an additional
two-year period.
(3) The Company is currently negotiating with BIG to reassign this lease to BIG
as of the end of 1998. No assurances can be given that such assignment will
occur.
(4) The Company has the option to renew each of these leases for an additional
five-year period.
The Company believes that its existing facilities and additional or
alternate space available to it are adequate to meet its requirements for the
foreseeable future.
EMPLOYEES
As of July 31, 1998, the Company had 810 full-time employees, consisting of
15 in sales and marketing, 444 in customer service and support, 318 in technical
support, and 33 in management, administration and finance. None of the Company's
employees is subject to a collective bargaining agreement, and the Company
considers its relations with its employees generally to be good.
LEGAL PROCEEDINGS
The Company is not involved in any pending legal proceedings other than
routine litigation arising in the ordinary course of business. The Company does
not believe that the results of such litigation, even if the outcome were
unfavorable to the Company, would have a material adverse effect on the
Company's business, financial condition or results of operations.
Bankers Insurance Company ("BIC"), a subsidiary of BIG, the Company's
principal shareholder and customer, is currently subject to an investigation by
the Florida Department of Insurance (the "DOI"), the principal regulator of
insurance activities in the State of Florida, stemming from BIC's use of a
private investigator to gather information on a DOI employee and the private
investigator's unauthorized use of illegal wiretaps in connection therewith. In
addition, BIC and certain of its employees (one of whom is now an officer of IMS
and several of whom are now employees of the Company) have been subpoenaed on
behalf of FEMA to produce documentation or testify in connection with its
investigation of, among other things, certain of BIC's cash management
practices. In the event either or both of these investigations or any
consequence thereof materially adversely affects the business or operations of
BIC, it could result in the loss of or material decrease in the Company's
business from BIC, which would have a material adverse effect on the Company's
business, financial condition and results of operations.
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<PAGE> 48
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The Company's Board of Directors consists of eight members divided into
three classes, with the members of each class serving three-year terms expiring
at the third annual meeting of shareholders. The following table sets forth
information, as of the date of this Prospectus, regarding the directors and
executive officers of the Company.
<TABLE>
<CAPTION>
TERM AS
DIRECTOR
NAME AGE POSITION EXPIRES
- ---- --- -------- --------
<S> <C> <C> <C>
David K. Meehan........................... 51 Chairman of the Board, President, Chief 1999
Executive Officer and Director
Jeffrey S. Bragg.......................... 49 Executive Vice President, Chief Operating 1998
Officer and Director
Kelly K. King............................. 40 Vice President, Treasurer, Chief Financial
Officer and Secretary
Daniel J. White........................... 48 President and Chief Executive Officer of 1999
Geotrac and Director
Robert M. Menke........................... 65 Director 2000
Robert G. Menke........................... 36 Director 1998
John A. Grant, Jr......................... 54 Director 1999
William D. Hussey......................... 64 Director 2000
E. Ray Solomon............................ 69 Director 2000
Alejandro M. Sanchez...................... 40 Director 1998
</TABLE>
David K. Meehan has served as the Chairman of the Board, Chief Executive
Officer and a director of the Company since December, 1996. Mr. Meehan joined
BIG in 1976 as Corporate Secretary. He was appointed President of BIG in 1979
and will serve in such capacity until the completion of this offering. He is
currently Vice Chairman of the Board of BIG and Bankers Insurance Company. Mr.
Meehan has served on the Board of Governors of each of the Florida Joint
Underwriting Association, the Florida Property and Casualty Joint Underwriting
Association and the Florida Residential Property and Casualty Joint Underwriting
Association. Mr. Meehan is Director/Vice Chairman of the Florida Insurance
Council and past Chairman and President of the Florida Association of Domestic
Insurance Companies.
Jeffrey S. Bragg has served as Executive Vice President and Chief Operating
Officer of the Company since November, 1997 and as a director of the Company
since May, 1997. Mr. Bragg has 20 years experience in the insurance and
insurance related information technology industries. He was with Policy
Management Systems Corporation from 1987 to 1995, most recently serving as
Senior Vice President and Group Manager. He was also appointed by President
Reagan in 1981 to head the Federal Insurance Administration, with responsibility
for administering the Flood Program, Federal Crime Insurance program, and
Federal Riot Reinsurance programs. Mr. Bragg has served on Legislating and
Advising Boards for the Alliance of American Insurance and the National
Association of Mutual Insurance Companies.
Kelly K. King has served as Vice President, Treasurer and Chief Financial
Officer of the Company since December, 1996 and as Secretary of the Company
since May, 1998. Mr. King joined BIG in 1992 and served as Vice President and
Chief Financial Officer from February, 1993 to October, 1997. Prior to 1992, he
was employed in various capacities with Integon Insurance Corporation, NAC Re
Corporation, A.M. Best Company and Kemper Group. He is a CPA and a Chartered
Property Casualty Underwriter.
Daniel J. White has served as a director of the Company since May, 1998.
Mr. White founded Geotrac in 1977 and has served as President of Geotrac since
August, 1987 and as Chief Executive Officer of Geotrac since September, 1994.
Mr. White also currently serves as a director of Independent Community Bank
Corp.
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<PAGE> 49
Robert M. Menke has served as a Director of the Company since December,
1996. Mr. Menke founded BIG in 1976 and has been the Chairman of the Board since
1979. He was honored as "Insurance Man Of The Year" in 1986 by the Florida
Association of Domestic Insurance Companies. Mr. Menke is also a member of the
Florida Insurance Council. Mr. Menke is currently Chairman of the Board and
President of First Community Insurance Company, Bankers Security Insurance
Company, Bankers Life Insurance Company and Bankers Insurance Company, all
affiliates of BIG and the Company. He is also a director of the Florida
Windstorm Association and First Community Bank of America.
Robert G. Menke has served as a Director of the Company since December,
1996. Mr. Menke, the son of Robert M. Menke, joined BIG in 1985 and has held
positions as programmer, systems analyst, systems manager, manager of
information services, and Vice President and Senior Vice President of Corporate
Services. He is currently Executive Vice-President of BIG and has served in such
capacity since October, 1997.
John A. Grant, Jr. has served as a Director of the Company since December,
1996. Mr. Grant has been a partner with the St. Petersburg, Florida-based law
firm of Harris, Barrett, Mann, and Dew since 1989. Since 1986, he has also been
a member of the Florida State Senate, where he currently serves as Chairman of
the Education Committee and where he previously served as the Chairman of the
Banking & Insurance, Commerce, Criminal Justice, Judiciary, and Government
Reform committees. He was a former Advisory Board Member of the United States
Small Business Administration and served on the Graduate Fellows Board of the
United States Department of Education.
William D. Hussey has served as a Director of the Company since December,
1996. Mr. Hussey is a retired President and Chief Executive Officer of the
Florida League of Financial Institutions and is an advisor with the Florida
Bankers Association.
E. Ray Solomon, Ph.D., CLU, has served as a Director of the Company since
December, 1996. Dr. Solomon is a retired Professor and the former Dean of the
School of Business at Florida State University.
Alejandro M. Sanchez has served as a Director of the Company since July,
1998. Mr. Sanchez is also Chief Executive Officer of the Florida Bankers
Association and has served in such capacity since February, 1998. From November,
1993 to January, 1998, he served as Vice President for Government Affairs of the
Florida Bankers Association. He previously served as Senior Corporate Attorney
for GTE Information Services in Tampa, Florida.
Messrs. Robert M. Menke, Meehan and Hussey are also members of the Board of
Directors of First Community Insurance Company (a company owned 72% by BIG and
28% by Bankers Life Insurance Company). Messrs. Robert M. Menke and Meehan are
on the Board of Directors of Bankers Security Insurance Company, which is
wholly-owned indirectly by BIG. Messrs. Robert M. Menke and Meehan are on the
Board of Directors of each of Bankers Insurance Company and Bankers Life
Insurance Company, which are owned directly or indirectly by BIG.
KEY EMPLOYEES
Kathleen M. Batson has served as Senior Vice President of Insurance
Management Solutions, Inc., the Company's outsourcing subsidiary ("IMS"), since
December, 1996. She also served as Senior Vice President of the Company from
December, 1996 to June, 1998. Mrs. Batson joined BIG in 1983 and most recently
served as Senior Vice President of BIG from June, 1992 to December, 1996. Prior
to such time, she was employed with Colonial Penn Insurance Company as Sales
Manager from 1977 to 1983. Mrs. Batson was the founding Director and Secretary
and past President of the Flood Insurance Servicing Companies Association of
America, Inc. and is a member of the National Write Your Own (WYO) Flood
Marketing Committee and the Institute for Business and Home Safety Flood
Committee.
S. Kyle Moll has served as Vice President and Chief Information Officer of
IMS since December, 1996. He also served as Vice President and Chief Information
Officer of the Company from December, 1996 to June, 1998. Mr. Moll joined BIG in
1993 and served as its Vice President and Chief Information Officer from
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<PAGE> 50
October, 1996 to October, 1997. Prior to joining BIG, he was employed by
Electronic Data Systems from July, 1985 to September, 1993 as Systems Engineer
Manager.
Robert G. Gantley has served as Vice President -- Claims of IMS since
August, 1997. He also served as Vice President-Claims of the Company from
August, 1997 to June, 1998. Mr. Gantley joined BIC in October, 1996 and will
serve as Vice President -- Claims until the completion of this offering. Prior
to joining BIC, Mr. Gantley was the Assistant Director of the Massachusetts
State Lottery from 1993 to 1996 and a Territorial Claims Manager with Allstate
Insurance Company from 1989 to 1993.
Howard B. Davis has served as Vice President -- Customer Service and
Residual Markets of IMS since December, 1996. He also served as Vice
President -- Customer Service and Residential Markets of the Company from
August, 1997 to June, 1998. Mr. Davis joined BIG in 1988 and served as its Vice
President -- Customer Service and Residual Markets from 1990 to 1997. He was
appointed Executive Vice President of Universal Acceptance Corporation in 1991
and will continue to serve in such capacity until the completion of this
offering. Prior to joining BIG, Mr. Davis was with Colonial Penn Insurance
Company. He is a past President of the Florida Premium Finance Association and
past Chairman of the Florida Auto Joint Underwriting Association Operating
Committee.
Karen R. Kiedrowicz has served as Vice President -- Human Resources of
Geotrac since January, 1996. Ms. Kiedrowicz joined Geotrac in September, 1993
and served as Training Leader from September, 1993 to May, 1995 and as Human
Resources Manager from May, 1995 to January, 1996. Prior to joining Geotrac, she
served as Recruiting and Training Manager of KPMG Peat Marwick LLP from
September, 1989 to July, 1992.
Thomas Becker has served as Vice President -- Production and Operations of
Geotrac since March, 1996. Prior to joining Geotrac, Mr. Becker spent over 15
years with Equifax, Inc., most recently as Regional Office Manager from October,
1988 to February, 1996.
James J. Andrews has served as Vice President -- Information Systems of
Geotrac since March, 1998. Mr. Andrews joined Geotrac in June, 1996 as AS/400
Project Leader and served in such capacity until March, 1998. Prior to joining
Geotrac, Mr. Andrews was President and owner of Andrews Technical Services,
Inc., a computer consulting firm, from May, 1995 to June, 1996, and MIS Manager
of Green Circle Growers, Inc. and Express Seed Company from August, 1984 to May,
1995.
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<PAGE> 51
EXECUTIVE COMPENSATION
The following table sets forth certain information concerning compensation
paid to or earned by the Company's Chairman of the Board and Chief Executive
Officer and each of the Company's three other current executive officers for the
year ended December 31, 1997.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION(1)
--------------------------------------
OTHER
NAME AND ANNUAL
PRINCIPAL POSITION SALARY BONUS COMPENSATION(2)
- ------------------ -------- ------- ---------------
<S> <C> <C> <C>
David K. Meehan
Chairman of the Board and Chief Executive
Officer(3).......................................... $220,999 $58,000 --
Jeffrey S. Bragg
Executive Vice President and Chief Operating
Officer(4).......................................... 84,806 10,000 --
Kelly K. King
Vice President, Treasurer, Chief Financial Officer
and Secretary(5).................................... 56,151 7,500 --
Daniel J. White
President and Chief Executive Officer of
Geotrac(6).......................................... -- -- --
</TABLE>
- ---------------
(1) During the year ended December 31, 1997, certain of the executive officers
of the Company were also executive officers or employees of BIG, and, in
certain instances, BIG paid a portion of their respective compensation. The
amounts reflected in the table above were all paid to the respective
executive officers by the Company. David K. Meehan was the only executive
officer of the Company who was paid in excess of $100,000 by the Company in
1997.
(2) Does not include the value of the perquisites provided to certain of the
named executive officers which in the aggregate did not exceed 10% of such
officer's salary and bonus. Also excludes benefits, if any, accruing to
Messrs. Meehan, Bragg and King under the Executive Phantom Stock Plan of
Bankers Financial Corporation, the parent of BIG. Upon completion of this
offering, no officers or directors of the Company (with the exception of
Robert G. Menke) will be eligible to receive additional grants under such
Phantom Stock Plan.
(3) Mr. Meehan did not receive any cash compensation from BIG during the year
ended December 31, 1997.
(4) Mr. Bragg joined the Company in May, 1997. He did not receive any cash
compensation from BIG during the year ended December 31, 1997.
(5) Excludes $56,151 in salary and $7,500 in bonus paid to Mr. King by BIG for
his service as an executive officer of BIG during the year ended December
31, 1997.
(6) Mr. White did not join the Company as an officer until the consummation of
the Geotrac Acquisition in July, 1998.
EMPLOYMENT AGREEMENTS
The Company has entered into employment agreements with each of Messrs.
Meehan, Bragg and King, which shall become effective as of the completion of
this offering. The initial annual base salary payable to these executive
officers under their respective employment agreements are as follows: David K.
Meehan, $245,000; Jeffrey S. Bragg, $145,000; and Kelly K. King, $125,000. The
remaining terms of each of the employment agreements are substantially the same.
Each employment agreement provides for an initial term of three years, subject
to automatic continuation until terminated by either party. Each agreement
further provides that, if the employee is terminated by the Company without
cause (as defined therein), the employee shall be entitled to severance
payments, payable in accordance with the Company's usual payroll practices,
equal to the employee's then current annual base salary. In the event the
employee secures employment during the twelve months following termination, then
the Company shall be entitled to a credit against its obligation to make
severance payments in the amount of 75% of the base salary paid to the employee
by his or her new employer during the twelve-month period following termination
by the Company.
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<PAGE> 52
Each employment agreement provides that the employee shall be provided
benefits, such as health, life and disability insurance, on the same basis as
the Company's other employees. In addition, to the extent authorized by the
Board of Directors, the employee also shall be entitled to participate in the
Company's bonus, stock option and other plans, if any. Each agreement further
provides that, during the term of the agreement and for a period of two years
thereafter, the employee will not, directly or indirectly, compete with the
Company by engaging in certain proscribed activities.
In connection with the Geotrac Acquisition, Geotrac entered into an
employment agreement with Daniel J. White pursuant to which Mr. White will
continue to serve as President and Chief Executive Officer of Geotrac. This
agreement provides for an initial term of four years and shall continue in
effect thereafter until terminated by either party upon 90 days prior written
notice. The agreement provides for an initial annual base salary of $150,000,
subject to annual review by Geotrac's board of directors. To the extent
authorized by Geotrac's board of directors, Mr. White shall be entitled to
participate in any bonus programs established by Geotrac. Mr. White shall also
be entitled comparable benefits, including health, life and disability
insurance, as are offered to any of Geotrac's other executive officers. In the
event of Mr. White's death or disability, Geotrac's obligations under the
agreement will automatically terminate, except that Mr. White shall be entitled
to severance equal to his then current annual base salary. The agreement further
provides that, in the event of termination by Geotrac without cause (as defined
therein) or by Mr. White for good reason (as defined therein), or in the event
the agreement is not renewed for any reason other than death, disability or for
cause, then Geotrac shall pay Mr. White at the rate of his annual base salary
then in effect for the longer of (i) the remainder of the term of the agreement
and (ii) one year after such termination date, subject to a credit of up to 75%
of the base salary paid to Mr. White by his new employer, if any.
This agreement also provides that, for a period of two years following Mr.
White's termination of employment other than by Mr. White for good reason or by
Geotrac without cause, Mr. White will not, directly or indirectly, engage (or
have an interest) in the flood zone compliance business nor in any other
business engaged or planned to be engaged in by Geotrac within any state or
country in which Geotrac is doing or plans to do business. Finally, the
agreement provides that, during the term of the agreement and for a period of
two years thereafter, Mr. White will not, directly or indirectly, employ,
attempt to employ, or solicit for employment, any of Geotrac's employees.
LONG TERM INCENTIVE PLAN
The Company currently maintains a Long Term Incentive Plan (the "Incentive
Plan") to attract, retain and motivate participating employees of the Company
and its subsidiaries through awards of shares of Common Stock, options to
purchase shares of Common Stock and stock appreciation rights ("SARs"). A total
of shares of Common Stock may be issued pursuant to the Incentive
Plan. The Incentive Plan has been adopted by the Company's Board of Directors
and is expected to be approved by the shareholders of the Company prior to the
consummation of this offering.
The Incentive Plan provides for the grant of incentive or nonqualified
stock options to purchase shares of Common Stock. Upon the completion of this
offering, the executive officers of the Company will be granted options to
purchase a total of shares of Common Stock at the initial public
offering price as follows: David K. Meehan, shares; Jeffrey S. Bragg,
shares; Kelly K. King, shares; and Daniel J. White,
shares. All employees of the Company as a group, including these
executive officers, will be granted options to purchase a total shares
of Common Stock at the initial public offering price. All of such options expire
on the tenth anniversary of the date of grant. Options shall become exercisable
60% after three years, 20% after four years and 20% after five years. The
Incentive Plan is administered by the Compensation Committee of the Board of
Directors.
NON-EMPLOYEE DIRECTORS' STOCK OPTION PLAN
The Company also maintains a Non-Employee Directors' Stock Option Plan (the
"Non-Employee Director Plan") to secure for the Company and its shareholders the
benefits of the incentive inherent in increased Common Stock ownership by the
members of the Company's Board of Directors who are not
47
<PAGE> 53
employees of the Company. The Non-Employee Director Plan has been adopted by the
Company's Board of Directors and is expected to be approved by the shareholders
of the Company prior to the consummation of this offering.
The Non-Employee Director Plan provides for the grant of nonqualified stock
options to purchase up to 7,200 shares of Common Stock in any three-year period
to members of the Board of Directors who are not employees of the Company. As of
the date of this Prospectus, such members held no options under the Non-
Employee Director Plan. The Company will initially grant to each non-employee
director options to purchase 7,200 shares of Common Stock. Non-employee
directors receiving such options will become vested in options for the purchase
of 800 shares of Common Stock after the adjournment of each annual meeting of
shareholders of the Company, to the extent he or she has been granted options
that have not yet vested, and provided that he or she is then a non-employee
director of the Company. In addition, each non-employee director shall become
vested in options for the purchase of 400 shares of Common Stock (200 shares in
the event the non-employee director is absent from, arrives late for, or departs
early from, such meeting) upon the adjournment of each regularly scheduled
quarterly meeting of the Board of Directors (other than following the annual
meeting of shareholders), to the extent he or she has been granted options that
have not yet vested, and provided that he or she is then a non-employee director
of the Company. Notwithstanding the foregoing, neither Robert M. Menke nor
Robert G. Menke will accept any option grants under the Non-Employee Director
Plan. All options granted will have an exercise price equal to the fair market
value of the Common Stock as of the date of grant, will become exercisable upon
vesting, and will expire on the sixth anniversary of the date of grant. The
Non-Employee Director Plan is a formula plan and accordingly is intended to be
self-governing. To the extent that questions of interpretation arise, they will
be resolved by the Board of Directors.
NON-QUALIFIED STOCK OPTION PLAN
The Company's Board of Directors also has adopted a Non-Qualified Stock
Option Plan (the "Non-Qualified Plan"), which plan is expected to be approved by
the shareholders of the Company prior to the consummation of this offering. The
Non-Qualified Plan provides for the grant of non-qualified stock options to
purchase up to shares of Common Stock. Upon the completion of this
offering, options to purchase shares of Common Stock at the initial
public offering price will be granted to certain executive officers of BIG,
including options to purchase shares each to Messrs. Robert M. Menke
and Robert G. Menke, directors of the Company. All of such options expire on the
tenth anniversary of the date of grant. Options shall become exercisable 60%
after three years, 20% after four years and 20% after five years. The
Non-Qualified Plan is administered by the Compensation Committee of the Board of
Directors of the Company.
DIRECTOR COMPENSATION
Directors who are executive officers of the Company receive no compensation
as such for service as members of either the Board of Directors or committees
thereof. Directors who are not executive officers of the Company receive $1,000
per Board meeting attended and $150 ($200 in the case of a committee
chairperson) per committee meeting attended, plus reimbursement of reasonable
expenses. The outside directors are also eligible to receive options to purchase
Common Stock under the Company's 1998 Non-Employee Directors' Stock Option Plan.
See " -- Stock Option Plans -- 1998 Non-Employee Directors' Stock Option Plan."
COMMITTEES OF THE BOARD
The Board of Directors has established committees whose responsibilities
are summarized as follows:
Audit Committee. The Audit Committee is comprised of Messrs. Solomon,
Hussey and Grant and is responsible for reviewing the independence,
qualifications and activities of the Company's independent certified public
accountants and the Company's financial policies, control procedures and
accounting staff. The Audit Committee recommends to the Board the
appointment of the independent certified public accountants and reviews and
approves the Company's financial statements. The Audit Committee
48
<PAGE> 54
is also responsible for the review of transactions between the Company and
any Company officer, director or entity in which a Company officer or
director has a material interest.
Compensation Committee. The Compensation Committee is comprised of
Messrs. Solomon, Hussey and Grant and is responsible for establishing the
compensation of the Company's directors, officers and other managerial
personnel, including salaries, bonuses, termination arrangements, and other
executive officer benefits. In addition, the Compensation Committee is
responsible for the administration of the Employee Plan, including the
recipients, amounts and terms of stock option grants thereunder.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Company's Compensation Committee recently was established in connection
with this offering. Except for David K. Meehan, no officer or employee of the
Company has participated in deliberations of the Board of Directors prior to
this offering concerning executive officer compensation.
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<PAGE> 55
PRINCIPAL AND SELLING SHAREHOLDERS
The following table sets forth certain information regarding the beneficial
ownership of Common Stock as of the date of this Prospectus, and as adjusted to
reflect the sale of Common Stock offered hereby, with respect to: (i) each of
the Company's directors and the executive officers named in the Summary
Compensation Table; (ii) all directors and executive officers of the Company as
a group; and (iii) each person known by the Company to own beneficially more
than 5% of the Common Stock. Each of the shareholders listed below has sole
voting and investment power over the shares beneficially owned.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY SHARES BENEFICIALLY
OWNED OWNED
PRIOR TO OFFERING SHARES AFTER OFFERING
-------------------- BEING -------------------
NAME SHARES PERCENT OFFERED SHARES PERCENT
- ---- ---------- ------- ------- -------- --------
<S> <C> <C> <C> <C> <C>
Bankers Insurance Group, Inc.(1)............. 15,900,000 77.6% -- %
Venture Capital Corporation(2)............... 4,100,000 20.0
David K. Meehan(3)........................... -- -- -- -- --
Jeffrey S. Bragg............................. -- -- -- -- --
Kelly K. King................................ -- -- -- -- --
Daniel J. White.............................. (4) -- (4)
Robert M. Menke(3)........................... -- -- -- -- --
Robert G. Menke.............................. -- -- -- -- --
John A. Grant, Jr............................ -- -- -- -- --
William D. Hussey............................ -- -- -- -- --
E. Ray Solomon............................... -- -- -- -- --
Alejandro M. Sanchez......................... -- -- -- -- --
All directors and executive officers as a
group (10 persons)(3)(4)................... -- -- -- -- --
</TABLE>
- ---------------
* Less than 1%.
(1) The business address of Bankers Insurance Group, Inc. is 360 Central Avenue,
St. Petersburg, Florida 33701. Bankers Insurance Group, Inc. is an indirect
subsidiary of Bankers International Financial Corporation, Ltd. ("BIFC"), a
Cayman Islands corporation wholly owned by Bankers International Financial
Corporation II Trust, a discretionary charitable trust. The sole trustee of
this trust is Ansbacher (Cayman) Limited, a Cayman Islands corporation
unaffiliated with BIG, the Company or their respective officers or
directors. Pursuant to the trust's declaration of trust, Independent
Foundation for the Pursuit of Charitable Endeavors, Ltd., a not for profit
Cayman Islands corporation ("IFPCE"), possesses the discretionary power to
(i) direct the trustee to appoint the trust fund to another trust for the
benefit of one or more of the beneficiaries of the trust and (ii) remove the
trustee and appoint one or more new trustees outside the Cayman Islands. A
majority vote of the directors of IFPCE is required to take either of these
actions. The Articles of Association of IFPCE provide that the Board of
Directors shall consist of seven members, three of whom shall be the top
three executives of Bankers International Financial Corporation, a Florida
corporation and subsidiary of BIFC, three of whom shall be Mr. Robert M.
Menke and his lineal descendants, and one of whom shall be a director
elected by a majority vote of the remaining six directors (or, if they
cannot agree, appointed by a court of competent jurisdiction). Until his
death or adjudication of incompetency, Robert M. Menke shall have five votes
and all other directors shall have one vote, and Robert M. Menke's presence
at a meeting shall be required for a quorum. As of the date of this
Prospectus, the directors of IFPCE include David K. Meehan, Robert M. Menke
and Robert G. Menke.
(2) The business address of Venture Capital Corporation is Bank America
Building, Fort Street, Georgetown, Grand Cayman, British West Indies.
Venture Capital Corporation is a Cayman Islands corporation wholly owned by
Venture II Trust, a discretionary charitable trust. The sole trustee of this
trust is Cayman National Bank, a Cayman bank unaffiliated with BIG, the
Company or their respective officers or directors. Pursuant to the trust's
declaration of trust, IFPCE possesses the same discretionary powers as
described in note (1) above.
50
<PAGE> 56
(3) Excludes shares held by Bankers Insurance Group, Inc. and
shares held by Venture Capital Corporation. See Notes (1) and
(2) above.
(4) Held jointly with his spouse. Constitutes the number of shares of Common
Stock issued jointly to the Whites in connection with the Geotrac
Acquisition, assuming an initial public offering price of $ . If
the initial public offering price is greater or less than $ , the
number of shares held jointly by the Whites will be adjusted
proportionately. See "Geotrac Acquisition."
CERTAIN TRANSACTIONS
ADMINISTRATION SERVICES AGREEMENT
Effective as of January 1, 1998, the Company and BIG entered into an
Administration Services Agreement (the "Administration Agreement") pursuant to
which BIG (i) provides the Company with various administrative and support
services, including benefits administration, accounting, legal, cash management
and investment services, requested by the Company from time to time and
reasonably necessary in the conduct of its operations, and (ii) makes available
its facilities to the Company as requested by the Company from time to time and
as reasonably necessary to the conduct of its operations. The Company reimburses
BIG for all direct and directly allocable expenses determined by BIG to be
attributable to the provision of such services and facilities, plus an agreed
upon assessment for direct overhead. For the services and facilities being
provided in 1998, the Company shall pay BIG a quarterly fee of $396,250, subject
to renegotiation by either party. In addition, the Company shall pay BIG at
established hourly rates or negotiated fees for any legal and corporate
communications services provided. The initial term of the Administration
Agreement expires on December 31, 1998, but may be renewed by the Company, at
its sole option, for two successive one-year periods upon 30 days prior written
notice. Thereafter, the Administration Agreement may be terminated by either
party upon 60 days prior written notice. The Administration Agreement
memorializes the administrative service arrangements that existed between the
Company and BIG prior to such time.
SERVICE AGREEMENTS
During 1995, 1996 and 1997, the Company provided information technology
services to BIG based generally on actual cost incurred (including selling,
general and administrative expenses), which amounted to $3,443,628, $4,787,772
and $3,236,255 in outsourcing revenue for 1995, 1996 and 1997, respectively.
Under the terms of its service arrangements with BIG in 1997, the Company
charged a monthly fee for its policy and claims administration services based on
certain factors. For policy and claims administration, the Company charged a fee
based on a percentage of direct written premiums and a percentage of direct paid
losses for certain lines of business, respectively. The fee ranged from 8.5% to
9.0% for services rendered in connection with policy administration and 0.5% to
15.0% for claims administration services related to these policies. Also, in
1997, the Company processed claims for BIG and its other affiliates related to
those lines of business not covered under the service agreement and provided
other miscellaneous services on a cost reimbursement basis. Charges related to
this claims processing and other miscellaneous services amounted to $9,518,525
for 1997.
Effective as of January 1, 1998, the Company entered into a separate
Service Agreement (each a "Service Agreement") with each of Bankers Insurance
Company, First Community Insurance Company and Bankers Security Insurance
Company, all direct or indirect subsidiaries of BIG, pursuant to which the
Company will continue to provide policy administration, claims administration
and data processing services to such entities in connection with their flood,
homeowners and automobile lines of business, and claims administration and data
processing services for all such entities' other P&C lines of business. Under
the Service Agreements, each entity pays the Company as follows: (1) for its
policy administration services a monthly fee based upon direct written premiums
for the flood, homeowners and automobile insurance programs; (2) for its claims
administration services a monthly fee based upon direct earned premiums for the
property, casualty, automobile property, automobile casualty, flood, and
workers' compensation insurance programs (In addition, a monthly fee based upon
direct incurred losses is charged for flood claims
51
<PAGE> 57
administration and a reimbursement not to exceed 5% of direct incurred losses
from a single event in excess of $2 million is charged to property claims.); (3)
for its data processing services, a monthly fee based upon direct earned
premiums for all insurance programs; and (4) for certain customer services such
as mailroom, policy assembly and cash office a monthly fee based upon direct
earned premiums (except, if provided in connection with their flood, homeowner
and automobile insurance lines, where no such fees are imposed). The term of
each Service Agreement shall expire on June 1, 2001, provided that it shall
thereafter be automatically extended until terminated upon 90 days prior notice
by either party.
PROPERTY LEASES
The Company currently leases from BIC approximately 76,700 square feet of
office space in St. Petersburg, Florida at a monthly rate of approximately
$76,700. The initial term of this lease expires on December 31, 1999. The
Company has an option to renew this lease for an additional two-year term at a
monthly rate not to exceed approximately $83,200.
The Company currently leases from BIG approximately 7,400 square feet of
office space in St. Petersburg, Florida at a monthly rate of approximately
$7,400. The initial term of this lease also expires on December 31, 1999,
subject to the Company's right to renew the lease for an additional two-year
period at a monthly rate not to exceed approximately $8,000.
Effective January 1, 1998, BIG assigned to the Company a lease of
approximately 6,600 square feet of office space in St. Petersburg, Florida. This
lease expires on May 31, 1999, subject to the Company's right to renew the lease
for four successive one-year terms. The current monthly rental rate under this
lease is approximately $2,500. The Company is currently negotiating with BIG to
reassign this lease to BIG as of the end of 1998. No assurances can be given
that such assignment will occur.
EMPLOYEE LEASING AGREEMENT
Effective as of January 1, 1998, the Company entered into an Employee
Leasing Agreement with BIC (the "Employee Leasing Agreement") pursuant to which
the Company continues to lease customer service personnel from BIC. The number
of employees to be leased will vary depending on the needs of the Company and
the availability of employees from BIC. The Company shall be responsible for all
expenses associated with such leased employees, including salaries, bonuses and
benefits. The Company may terminate any leased employee for disloyalty,
misconduct or other similar cause. The Employee Leasing Agreement is terminable
by either the Company or BIC upon 60 days prior notice.
SALES AND ASSIGNMENT AGREEMENT
In May, 1998, the Company entered into a sales and assignment agreement
with BIG and certain affiliated companies whereby certain assets were
transferred and assigned to the Company, effective retroactively to April, 1998,
for use in its business. The assets, including, but not limited to, telephone
equipment, computer hardware and software, and service marks were transferred at
their net book value as of the date of transfer. The Company paid consideration
consisting of $325,075 in cash and entered into two promissory notes amounting
to $2,802,175. The notes require monthly installment payments of $10,417 plus
accrued interest and mature on April 1, 1999 and December, 2000. In addition,
the Company assumed the existing leases with unaffiliated third parties relating
to various computer equipment.
SOFTWARE LICENSING AGREEMENT
Effective January 1, 1998, the Company entered into a non-exclusive license
agreement with BIG and BIC pursuant to which the Company licenses its primary
operating systems from BIG and BIC in exchange for a nominal fee. The term of
the license is perpetual. The license agreement provides that the Company shall
be solely responsible for maintaining and upgrading the systems and shall have
the authority to sell or license such systems to third parties.
52
<PAGE> 58
TAX INDEMNITY AGREEMENT
As of July 31, 1998, BIG had sold a sufficient number of shares in the
Company such that the Company will no longer file its tax return with Bankers
International Financial Corporation ("BIFC") on a consolidated basis. Effective
as of July 31, 1998, the Company and BIFC entered into a Tax Indemnity Agreement
pursuant to which (i) BIFC agrees to indemnify the Company in the event the
Company incurs a tax liability as a result of taxable income of BIFC or one of
its subsidiaries, and (ii) the Company agrees to indemnify BIFC in the event
BIFC incurs a tax liability as a result of taxable income of the Company or one
of its subsidiaries. Each party also agrees to reimburse the other for certain
tax credits arising on or before July 31, 1998. Under the Tax Indemnity
Agreement, the parties terminated a previous tax allocation agreement which had
been in effect since October 1, 1993.
GEOTRAC TRANSACTIONS
During the year ended June 30, 1996 and on July 30, 1997, SMS Geotrac, Inc.
("SMS Geotrac") made payments of $932,222 and $1,700,000, respectively, to SMS
Geotrac's former owner in conjunction with the August 1, 1994 purchase of SMS
Geotrac. The amounts were recorded as an increase to goodwill and an additional
capital contribution to SMS Geotrac.
During the year ended June 30, 1997, SMS Geotrac and its parent agreed to
treat all outstanding amounts owed to the parent, $1,611,140, as an additional
capital contribution. In addition, the parent contributed $500,000 to SMS
Geotrac.
During the one month period ended July 31, 1997, SMS Geotrac, Inc. advanced
$797,000 to YoSystems, Inc. ("YoSystems").
On July 31, 1997, the Company, through its subsidiary, BHDS, acquired a 49%
interest in YoSystems. YoSystems concurrently acquired all of the issued and
outstanding shares of capital stock of SMS Geotrac. SMS Geotrac merged into
YoSystems, with YoSystems being the surviving entity and changing its name to
Geotrac. The Company acquired its 49% interest in YoSystems for $6,750,000 in
cash. YoSystems acquired SMS Geotrac for $15,000,000, consisting of $6,750,000
in cash and a term note in the principal amount of $8,250,000.
In connection with the Company's purchase of a 49% interest in YoSystems,
BHDS issued 675,000 shares of non-cumulative 8% preferred stock to Heritage
Hotel Holding Company ("Heritage"), a corporation owned by the half brother of
Robert M. Menke, a director of the Company. Heritage funded the preferred stock
purchase by entering into a note agreement with a commercial bank for
$6,750,000, with the preferred stock serving as collateral. On May 8, 1998, the
Company purchased the outstanding preferred stock of BHDS in exchange for a note
to Heritage in the principal amount of $6,750,000. The note is payable in its
entirety on December 31, 1998 and accrues interest at a rate of 8.5%. After May
8, 1998, the preferred stock of BHDS held by the Company was exchanged for
675,000 shares of 8.5% cumulative preferred stock of BHDS. The shares of
non-cumulative 8% preferred stock were then retired. The new preferred stock
serves as collateral on the note payable to the commercial bank.
In July, 1998, the Company acquired the remaining 51% interest in Old
Geotrac pursuant to the merger of Old Geotrac with and into BHDS, with the
surviving entity being known as "Geotrac of America, Inc." In connection with
this transaction, Geotrac entered into an employment agreement with Daniel J.
White pursuant to which Mr. White will serve as President and Chief Executive
Officer of Geotrac. See "Geotrac Acquisition" and "Management -- Employment
Agreements."
In addition, the Company entered into a Corporate Governance Agreement with
Mr. White and Geotrac setting forth certain terms and conditions upon which
Geotrac will operate following the merger. The Corporate Governance Agreement
provides, in part, that, for so long as Mr. White owns stock in the Company or
Geotrac, or has an option to purchase stock in Geotrac, (i) the Company will
vote all of its shares in Geotrac to fix and maintain the number of directors on
the Geotrac Board of Directors at five, (ii) the Company will vote its shares in
Geotrac to elect as directors of Geotrac two persons designated by Mr. White,
(iii) the termination of Mr. White as an employee of Geotrac will require the
vote of four out of five members
53
<PAGE> 59
of the Board of Directors, and (iv) certain actions by Geotrac will require the
unanimous approval of the Geotrac Board of Directors, including any merger or
consolidation, the payment of management or similar fees to the Company or its
subsidiaries and affiliates, the sale or issuance of Geotrac stock, and the sale
of Geotrac assets outside the ordinary course of business to anyone other than
an affiliate of Geotrac. Mr. White also has a right of first refusal to purchase
the assets of Geotrac in the event such assets are to be sold.
Geotrac currently leases a 12,400 square-foot facility in Norwalk, Ohio
from DanYo LLC, a limited liability company wholly owned by Daniel J. White and
his spouse. This lease is for a term of five years, expiring on August 31, 1999,
and provides for monthly rental payments of approximately $8,717, plus payment
of utilities, real estate taxes and assessments, insurance, repairs and similar
expenses.
MISCELLANEOUS
A wholly-owned subsidiary of the Selling Shareholder has agreed to loan
$ million to BIG in exchange for a subordinated note. It is anticipated that
this loan will be funded by using a portion of the net proceeds to be received
by the Selling Shareholder in this offering. BIG has agreed with the Company to
use a portion of such loan proceeds to satisfy outstanding accounts and note
payable to the Company not later than ten business days following receipt of the
loan proceeds. As of June 30, 1998 (on a pro forma basis), BIG's accounts and
note payable to the Company totaled approximately $13.2 million. The balance of
the loan proceeds will provide BIG with additional capital to repay other
outstanding indebtedness and expand its operations. The Company, in turn, has
agreed with BIG to use a portion of the funds received from BIG to satisfy
accounts, income taxes and notes payable to BIG. As of June 30, 1998 (on a pro
forma basis), the Company's accounts, income taxes and notes payable to BIG
totaled approximately $20.5 million. See "Use of Proceeds" and "Principal and
Selling Shareholders."
The Audit Committee of the Board of Directors is responsible for reviewing
all future transactions between the Company and any officer or director of the
Company or any entity in which an officer or director has a material interest.
Any such transactions must be on terms no less favorable than those that could
be obtained on an arms-length basis from independent third parties.
DESCRIPTION OF CAPITAL STOCK
GENERAL
The authorized capital stock of the Company consists of 100,000,000 shares
of Common Stock, par value $.01 per share, and 20,000,000 shares of Preferred
Stock, par value $.01 per share. As of the date of this Prospectus, there were
issued and outstanding shares of Common Stock and no shares of
Preferred Stock. See "Principal and Selling Shareholders." The following
description is qualified in its entirety by reference to the Company's Amended
and Restated Articles of Incorporation (the "Articles of Incorporation") and
Amended and Restated Bylaws (the "Bylaws"), which are filed as exhibits to the
Registration Statement of which this Prospectus is a part.
COMMON STOCK
The holders of Common Stock are entitled to one vote for each share held of
record on all matters submitted to a vote of shareholders. Cumulative voting in
the election of directors is not permitted. Subject to preferences that may be
granted to holders of Preferred Stock, holders of Common Stock are entitled to
receive ratably such dividends as may be declared by the Board of Directors out
of funds legally available therefor. See "Dividend Policy." In the event of
liquidation, dissolution or winding up of the Company, holders of Common Stock
are entitled to share ratably in all assets remaining after payment of
liabilities and the liquidation preference, if any, which may be granted to the
holders of Preferred Stock. Holders of Common Stock have no conversion,
preemptive or other rights to subscribe for additional shares or other
securities, and there are no redemption or sinking fund provisions with respect
to such shares. The issued and outstanding shares of Common Stock are, and the
shares offered hereby will be upon payment therefor, fully paid and
nonassessable.
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<PAGE> 60
PREFERRED STOCK
The Board of Directors has the authority to issue up to 20,000,000 shares
of Preferred Stock in one or more series and to fix the number of shares
constituting any such series and the rights and preferences thereof, including
dividend rates, terms of redemption (including sinking fund provisions),
redemption price or prices, voting rights, conversion rights and liquidation
preferences of the shares constituting such series, without any further vote or
action by the Company's shareholders. The issuance of Preferred Stock by the
Board of Directors could adversely affect the rights of holders of Common Stock.
For example, an issuance of Preferred Stock could result in a class of
securities outstanding that would have preferences over the Common Stock with
respect to dividends and liquidations, and that could (upon conversion or
otherwise) enjoy all of the rights appurtenant to Common Stock.
CERTAIN STATUTORY AND OTHER PROVISIONS
The Florida Business Corporation Act (the "Florida Act"), the Company's
Articles of Incorporation and the Company's Bylaws contain provisions that could
have an anti-takeover effect. These provisions are intended to enhance the
likelihood of continuity and stability in the composition of the Board and in
the policies formulated by the Board and to discourage certain types of
transactions described below, which may involve an actual or threatened change
of control of the Company. The provisions are designed to encourage any person
interested in acquiring the Company to negotiate with and obtain the approval of
the Board in connection with the transaction. However, certain of these
provisions may discourage a future acquisition of the Company not approved by
the Board in which shareholders might receive the maximum value for their shares
or which a substantial number and perhaps even a majority of the Company's
shareholders believes to be in the best interests of all shareholders. As a
result, shareholders who might desire to participate in such a transaction may
not have the opportunity to do so. See "Risk Factors -- Anti-Takeover
Considerations."
Statutory Provisions. The Company is subject to several anti-takeover
provisions under Florida law that apply to a public corporation organized under
Florida law unless the corporation has elected to opt out of such provisions in
its Articles of Incorporation or (depending on the provision in question) its
Bylaws. The Company has not elected to opt out of these provisions. The Florida
Act contains a provision that prohibits the voting of shares in a publicly held
Florida corporation which are acquired in a "control share acquisition" unless
the board of directors approves the control share acquisition or the holders of
a majority of the corporation's voting shares (exclusive of shares held by
officers of the corporation, inside directors or the acquiring party) approve
the granting of voting rights as to the shares acquired in the control share
acquisition. A control share acquisition is defined as an acquisition that
immediately thereafter entitles the acquiring party to vote in the election of
directors within each of the following ranges of voting power: (i) one-fifth or
more but less than one-third of such voting power, (ii) one third or more but
less than a majority of such voting power and (iii) a majority or more of such
voting power. This statutory voting restriction is not applicable in certain
circumstances set forth in the Florida Act.
The Florida Act also contains an "affiliated transaction" provision that
prohibits a publicly-held Florida corporation from engaging in a broad range of
business combinations or other extraordinary corporate transactions with an
"interested shareholder" unless (i) the transaction is approved by a majority of
disinterested directors before the person becomes an interested shareholder,
(ii) the interested shareholder has owned at least 80% of the Company's
outstanding voting shares for at least five years, or (iii) the transaction is
approved by the holders of two-thirds of the Company's voting shares other than
those owned by the interested shareholder. An interested shareholder is defined
as a person who, together with affiliates and associates, beneficially owns (as
defined in Section 607.0901(1)(e), Florida Statutes) more than 10% of the
Company's outstanding voting shares.
Classified Board of Directors. Under the Company's Articles of
Incorporation and Bylaws, the Board of Directors of the Company is divided into
three classes, with staggered terms of three years each. Each year the term of
one class expires. The Company's Articles of Incorporation provide that any
vacancies on the Board of Directors shall be filled only by the affirmative vote
of a majority of the directors then in office, even if less
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<PAGE> 61
than a quorum. The Articles of Incorporation of the Company also provide that
any director may be removed from office, with or without cause.
Special Voting Requirements. The Company's Articles of Incorporation
provide that all actions taken by shareholders must be taken at an annual or
special meeting of the shareholders or by unanimous written consent. The
Articles of Incorporation provide that special meetings of shareholders may be
called by only a majority of the members of the Board of Directors, the Chairman
of the Board or the holders of not less than 10% of the Company's outstanding
voting shares. Under the Company's Bylaws, shareholders will be required to
comply with advance notice provisions with respect to any proposal submitted for
shareholder vote, including nominations for elections to the Board of Directors.
The Articles of Incorporation and Bylaws of the Company contain provisions
requiring the affirmative vote of the holders of at least two-thirds of the
Common Stock to amend certain provisions thereof.
Indemnification and Limitation of Liability. The Florida Act authorizes
Florida corporations to indemnify any person who was or is a party to any
proceeding (other than an action by, or in the right of, the corporation), by
reason of the fact that he or she is or was a director, officer, employee, or
agent of the corporation or is or was serving at the request of the corporation
as a director, officer, employee, or agent of another corporation or other
entity, against liability incurred in connection with such proceeding, including
any appeal thereof, if he or she acted in good faith and in a manner he or she
reasonably believed to be in, or not opposed to, the best interests of the
corporation and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his or her conduct was unlawful. In the case of an
action by or on behalf of a corporation, indemnification may not be made if the
person seeking indemnification is adjudged liable, unless the court in which
such action was brought determines such person is fairly and reasonably entitled
to indemnification. The indemnification provisions of the Florida Act require
indemnification if a director or officer has been successful on the merits or
otherwise in defense of any action, suit or proceeding to which he or she was a
party by reason of the fact that he or she is or was a director or officer of
the corporation. The indemnification authorized under Florida law is not
exclusive and is in addition to any other rights granted to officers and
directors under the Articles of Incorporation or Bylaws of the corporation or
any agreement between officers and directors and the corporation. A corporation
may purchase and maintain insurance or furnish similar protection on behalf of
any officer or director against any liability asserted against the officer or
director and incurred by the officer or director in such capacity, or arising
out of the status, as an officer or director, whether or not the corporation
would have the power to indemnify him or her against such liability under the
Florida Act.
The Company's Articles of Incorporation provide for the indemnification of
directors, officers, employees and agents of the Company to the maximum extent
permitted by Florida law and for the advancement of expenses incurred in
connection with the defense of any action, suit or proceeding that the director,
officer, employee or agent was a party to by reason of the fact that he or she
is or was a director or executive officer of the Company so long as he or she
has undertaken to repay such amount if it is ultimately determined that such
person is not entitled to indemnification.
Under the Florida Act, a director is not personally liable for monetary
damages to the Company or any other person for acts or omissions in his or her
capacity as a director except in certain limited circumstances such as certain
violations of criminal law and transactions in which the director derived an
improper personal benefit. As a result, shareholders may be unable to recover
monetary damages against directors for actions taken by them which constitute
negligence or gross negligence or which are in violation of their fiduciary
duties, although injunctive or other equitable relief may be available.
The foregoing provisions of the Florida Act and the Company's Articles of
Incorporation and Bylaws could have the effect of preventing or delaying a
person from acquiring or seeking to acquire a substantial equity interest in, or
control of, the Company.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the Common Stock is Firstar Trust
Company, Milwaukee, Wisconsin.
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<PAGE> 62
SHARES ELIGIBLE FOR FUTURE SALE
Upon the completion of this offering, the Company will have
shares of Common Stock outstanding. Of these shares, the
shares of Common Stock sold in this offering will be freely
tradable by persons other than affiliates of the Company, without restriction
under the Securities Act of 1933, as amended (the "Securities Act"). The
remaining shares of Common Stock will be "restricted" securities
within the meaning of Rule 144 under the Securities Act and may not be sold in
the absence of registration under the Securities Act unless an exemption from
registration is available, including the exemptions contained in Rule 144. All
of the restricted shares beneficially owned by BIG will be eligible for public
sale pursuant to Rule 144 commencing 90 days after the date of this Prospectus,
subject to the volume restrictions discussed below. However, BIG has agreed not
to sell, contract to sell or otherwise dispose of any shares of Common Stock for
a period of 180 days after the date of this Prospectus without the prior written
consent of the Underwriters.
In general, under Rule 144 as currently in effect, a person (or persons
whose shares are aggregated), including an affiliate of the Company, who has
beneficially owned his or her shares for at least one year (including the prior
holding period of any prior owner other than an affiliate) is entitled to sell
within any three-month period that number of shares which does not exceed the
greater of 1% of the outstanding shares of the Common Stock, or the average
weekly trading volume during the four calendar weeks preceding each such sale.
Sales under Rule 144 also are subject to certain manner of sale provisions,
notice requirements and the availability of current public information about the
Company. A person (or persons whose shares are aggregated) who is not or has not
been deemed an "affiliate" of the Company for at least three months, and who has
beneficially owned shares for at least two years (including the holding period
of any prior owner other than an affiliate) would be entitled to sell such
shares under Rule 144 without regard to the limitations discussed above.
Prior to this offering, there has been no public market for the Common
Stock. Sales of substantial amounts of Common Stock in the public market could
adversely affect prevailing market prices.
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<PAGE> 63
UNDERWRITING
Subject to the terms and conditions set forth in the Underwriting
Agreement, the Company and the Selling Shareholder have agreed to sell to each
of the Underwriters listed below, and the Underwriters, for whom Raymond James &
Associates, Inc., Lehman Brothers Inc. and ING Baring Furman Selz LLC are acting
as representatives (the "Representatives"), have severally agreed to purchase,
the respective number of shares of Common Stock set forth opposite their names
below:
<TABLE>
<CAPTION>
UNDERWRITERS NUMBER OF SHARES
- ------------ ----------------
<S> <C>
Raymond James & Associates, Inc.............................
Lehman Brothers Inc.........................................
ING Baring Furman Selz LLC..................................
--------
Total.............................................
========
</TABLE>
Raymond James & Associates, Inc. and Lehman Brothers Inc. are acting as
Joint Lead Managers and Joint Lead Bookrunners of this offering.
The Underwriting Agreement provides that the obligations of the several
Underwriters thereunder are subject to approval of certain legal matters by
their counsel and to various other conditions. The Underwriters are obligated to
purchase all the shares of Common Stock offered hereby, excluding shares covered
by the over-allotment option granted to the Underwriters, if any are purchased.
The Company and the Selling Shareholder have been advised by the
Representatives that the Underwriters propose to offer the Common Stock to the
public at the initial public offering price set forth on the cover page of this
Prospectus and to certain dealers at such price, less a concession of not in
excess of $ per share, and that the Underwriters and such dealers may
re-allow a concession of not in excess of $ per share to other dealers. The
public offering price and concessions and re-allowances to dealers may be
changed by the Representatives after the initial public offering.
The Company and the Selling Shareholder have granted to the Underwriters an
option, exercisable within 30 days after the date of the initial public
offering, to purchase up to an additional shares of Common Stock
to cover over-allotments, at the same price per share to be paid by the
Underwriters for the other shares offered hereby. If the Underwriters purchase
any such additional shares pursuant to this option, each of the Underwriters
will be committed to purchase such additional shares in approximately the same
proportion as set forth in the above table. The Underwriters may purchase such
shares only to cover over-allotments, if any, in connection with the offering.
This offering of Common Stock is made for delivery when, as and if accepted
by the Underwriters and subject to prior sale and to withdrawal, cancellation or
modification of this offering without notice. The Underwriters reserve the right
to reject an order for the purchase of shares in whole or in part.
Until the distribution of Common Stock in this offering is completed, rules
of the Securities and Exchange Commission may limit the ability of the
Underwriters and certain selling group members to bid for and purchase the
Common Stock. As an exception to these rules, the Representatives are permitted
to engage in certain transactions that stabilize the price of the Common Stock.
Such transactions consist of bids or purchases for the purpose of pegging,
fixing or maintaining the price of the Common Stock. If the Underwriters create
a short position in the Common Stock in connection with this offering, i.e., if
they sell more shares of Common Stock than are set forth on the cover page of
this Prospectus, the Representatives may reduce the short position by purchasing
Common Stock in the open market. The Representatives may also elect to reduce
any short position by exercising all or part of the over-allotment option
described above. The Representatives may also impose a penalty bid on certain
Underwriters and selling group members. This means that if the Representatives
purchase shares of Common Stock in the open market to reduce the Underwriters'
short position or to stabilize the price of the Common Stock, they may reclaim
the amount of the selling concession from the Underwriters and selling group
members who sold those shares as part of this offering. In general, purchases of
a security for the purpose of stabilization or to reduce a short position could
58
<PAGE> 64
cause the price of the security to be higher than it might be in the absence of
such purchases. The imposition of a penalty bid might also have an effect on the
price of a security to the extent that it discouraged resales of any security.
Neither the Company, the Selling Shareholder nor any of the Underwriters makes
any representations or predictions as to the direction or magnitude of any
effect that the transactions described above may have on the price of the Common
Stock. In addition, neither the Company, the Selling Shareholder nor any of the
Underwriters makes any representation that the Representatives will engage in
such transactions or that such transactions, once commenced, will not be
discontinued without notice.
The Company, BIG, the Selling Shareholder and certain officers and
directors of the Company have agreed that they will not, without the prior
written consent of Raymond James & Associates, Inc., sell, offer to sell,
contract to sell or otherwise transfer or dispose of any shares of Common Stock
(other than the shares offered by the Selling Shareholder in this offering),
options, rights or warrants to acquire shares of Common Stock, or securities
exchangeable for or convertible into shares of Common Stock, during the 180-day
period commencing on the date of this Prospectus, except that the Company may
grant additional options under the Incentive Plan and the Non-Employee Director
Plan, provided that without the prior written consent of Raymond James &
Associates, Inc., such additional options shall not be exercisable during such
period. See "Shares Eligible for Future Sale."
Prior to this offering, there has been no public market for the Common
Stock. The initial public offering price was determined by negotiation among the
Company, the Selling Shareholder and the Representatives. The factors considered
in determining the initial public offering price include the history of and
prospects for the business in which the Company operates, past and present
operations, revenues and earnings of the Company and the trend of such earnings,
the prospects for such earnings, the general condition of the securities markets
at the time of the offering and the demand for similar securities of reasonably
comparable companies.
The Representatives have informed the Company that the Underwriters do not
intend to make sales to any accounts over which they exercise discretionary
authority.
The Company, BIG, the Selling Shareholder and the Underwriters have agreed
to indemnify, or to contribute to payments made by, each other against certain
civil liabilities, including certain civil liabilities under the Securities Act.
LEGAL MATTERS
The validity of the issuance of the shares of Common Stock offered hereby
will be passed upon for the Company by Foley & Lardner, Tampa, Florida. Certain
legal matters in connection with the sale of the Common Stock offered hereby
will be passed upon for the Underwriters by Powell, Goldstein, Frazer & Murphy
LLP, Atlanta, Georgia.
EXPERTS
The consolidated financial statements of Insurance Management Solutions
Group, Inc. as of December 31, 1996 and 1997 and for each of the three years in
the period ended December 31, 1997 appearing in this Prospectus and in the
Registration Statement, have been audited by Grant Thornton LLP, independent
certified public accountants, as set forth in their report thereon appearing
elsewhere herein and in the Registration Statement, and are included herein in
reliance upon such report given upon the authority of such firm as experts in
accounting and auditing.
The financial statements of Geotrac, Inc. (formerly YoSystems, Inc.) as of
December 31, 1996 and 1997 and for each of the three years in the period ended
December 31, 1997 appearing in this Prospectus and in the Registration
Statement, have been audited by Grant Thornton LLP, independent certified public
accountants, as set forth in their report thereon appearing elsewhere herein and
in the Registration Statement, and are included herein in reliance upon such
report given upon the authority of such firm as experts in accounting and
auditing.
59
<PAGE> 65
The financial statements of SMS Geotrac, Inc. for each of the two years in
the period ended June 30, 1997 and for the one month period ended July 31, 1997
appearing in this Prospectus and in the Registration Statement, have been
audited by Grant Thornton LLP, independent certified public accountants, as set
forth in their report thereon appearing elsewhere herein and in the Registration
Statement, and are included herein in reliance upon such report given upon the
authority of such firm as experts in accounting and auditing.
AVAILABLE INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement (of which this Prospectus is a part)
under the Securities Act with respect to the securities offered hereby. This
Prospectus does not contain all the information set forth in the Registration
Statement, certain portions of which have been omitted as permitted by the rules
and regulations of the Commission. Statements contained in the Prospectus as to
the contents of any contract or other document are not necessarily complete, and
in each instance reference is made to the copy of such contract or other
document filed as an exhibit to the Registration Statement, each such statement
being qualified in all respects by such reference and the exhibits and schedules
thereto. For further information regarding the Company and the Common Stock
offered hereby, reference is hereby made to the Registration Statement and such
exhibits and schedules which may be obtained from the Commission at the public
reference facilities maintained by the Commission at 450 Fifth Street, N. W.,
Washington, D. C. 20549, at prescribed rates. The Commission maintains a web
site that contains reports, proxy and information statements and other
information regarding registrants, including the Company, that file
electronically with the Commission. The address of such web site is
http://www.sec.gov.
The Company intends to furnish its shareholders with annual reports
containing audited financial statements certified by an independent public
accounting firm and quarterly reports containing unaudited financial statements
for the first three quarters of each fiscal year.
60
<PAGE> 66
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Pro Forma Condensed Consolidated Financial Information...... F-2
Pro Forma Condensed Consolidated Financial Statements:
Balance Sheet as of June 30, 1998 and Notes to Pro Forma
Balance Sheet.......................................... F-3
Statement of Income for the year ended December 31, 1997
and for the six months ended June 30, 1998 and Notes to
Pro Forma Condensed Consolidated Statements of
Income................................................. F-6
INSURANCE MANAGEMENT SOLUTIONS GROUP, INC. CONSOLIDATED
FINANCIAL STATEMENTS
Report of Independent Certified Public Accountants.......... F-12
Consolidated Balance Sheets as of December 31, 1996 and
1997, and June 30, 1998 (unaudited)....................... F-13
Consolidated Statements of Income for the years ended
December 31, 1995, 1996 and 1997, and for the six months
ended June 30, 1997 and 1998 (unaudited).................. F-14
Consolidated Statement of Shareholders' Equity for the years
ended December 31, 1995, 1996 and 1997, and for the six
months ended June 30, 1998 (unaudited).................... F-15
Consolidated Statements of Cash Flows for the years ended
December 31, 1995, 1996 and 1997, and for the six months
ended June 30, 1997 and 1998 (unaudited).................. F-16
Notes to Consolidated Financial Statements.................. F-17
GEOTRAC, INC. (FORMERLY YOSYSTEMS, INC.) FINANCIAL
STATEMENTS
Report of Independent Certified Public Accountants.......... F-32
Balance Sheets as of December 31, 1996 and 1997, and June
30, 1998 (unaudited)...................................... F-33
Statements of Operations for the years ended December 31,
1995, 1996 and 1997, and for the six months ended June 30,
1998 (unaudited).......................................... F-34
Statement of Shareholders' Equity (Deficit) for the years
ended December 31, 1995, 1996 and 1997, and for the six
months ended June 30, 1998 (unaudited).................... F-35
Statements of Cash Flows for the years ended December 31,
1995, 1996 and 1997, and for the six months ended June 30,
1998 (unaudited).......................................... F-36
Notes to Financial Statements............................... F-38
SMS GEOTRAC, INC. FINANCIAL STATEMENTS
Report of Independent Certified Public Accountants.......... F-46
Statements of Income for the years ended June 30, 1996 and
1997, and for the one month period ended July 31, 1997.... F-47
Statement of Shareholder's Equity for the years ended June
30, 1996 and 1997, and for the one month period ended July
31, 1997.................................................. F-48
Statements of Cash Flows for the years ended June 30, 1996
and 1997, and for the one month period ended July 31,
1997...................................................... F-49
Notes to Financial Statements............................... F-50
</TABLE>
F-1
<PAGE> 67
PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION
INTRODUCTION
The accompanying unaudited pro forma condensed consolidated balance sheet
as of June 30, 1998, and the unaudited pro forma condensed consolidated
statements of income for the year ended December 31, 1997 and for the six months
ended June 30, 1998 reflect (i) the acquisition of Geotrac, Inc., which was
completed in July 1998, using the purchase method of accounting as if the
acquisition of Geotrac, Inc. had occurred at June 30, 1998 for balance sheet
purposes and at January 1, 1997 for income statement purposes, (ii) the new
affiliated service and administrative agreements that are effective January 1,
1998 as though the new terms were in existence on January 1, 1997 for income
statement purposes and (iii) fixed asset purchases from affiliated companies,
consisting of telephone equipment and computer hardware and software, to be used
in operating the business, which occurred in April 1998, as if the purchase had
occurred at January 1, 1997 for income statement purposes.
The unaudited pro forma condensed consolidated statements of income are
based on currently available information and do not purport to represent what
the Company's results of operations would have been if the events referred to
occurred on the above dates, or to project the Company's results of operations
for any future periods.
The pro forma condensed consolidated financial statements should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations of the Company," "Management's Discussion and Analysis
of Financial Condition and Results of Operations of Geotrac," the Company's
Consolidated Financial Statements, Geotrac, Inc.'s (formerly YoSystems, Inc.)
Financial Statements and SMS Geotrac, Inc.'s financial statements.
F-2
<PAGE> 68
INSURANCE MANAGEMENT SOLUTIONS GROUP, INC. AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET (UNAUDITED)
JUNE 30, 1998
<TABLE>
<CAPTION>
INSURANCE
MANAGEMENT
SOLUTIONS GROUP PRO FORMA PRO
AND SUBSIDIARIES GEOTRAC, INC. SUB TOTAL ADJUSTMENTS FORMA(1)
---------------- ------------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents........ $ 207,243 $ 2,797,008 $ 3,004,251 $ (728,069)(a) $ 2,276,182
Accounts receivable, trade....... 1,153,074 2,413,260 3,566,334 -- 3,566,334
Due from affiliates.............. 8,291,752 -- 8,291,752 -- 8,291,752
Note receivable -- affiliate..... 4,950,000 -- 4,950,000 -- 4,950,000
Deferred tax assets and other
current assets................. 678,722 758,412 1,437,134 -- 1,437,134
----------- ----------- ----------- ------------ -----------
Total current assets...... 15,280,791 5,968,680 21,249,471 (728,069) 20,521,402
----------- ----------- ----------- ------------ -----------
PROPERTY AND EQUIPMENT, net........ 5,232,442 3,305,740 8,538,182 (122,508)(b) 8,415,674
INVESTMENT IN GEOTRAC, INC......... 7,278,262 -- 7,278,262 7,994,250(a) --
(15,272,512)(c) --
GOODWILL, net...................... -- 8,441,626 8,441,626 6,491,621(c) 14,933,247
OTHER NON-CURRENT ASSETS, net...... 722,733 1,715,732 2,438,465 -- 2,438,465
----------- ----------- ----------- ------------ -----------
Total assets.............. $28,514,228 $19,431,778 $47,946,006 $ (1,637,218) $46,308,788
=========== =========== =========== ============ ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Current portion of long-term
debt........................... $ 1,350,661 $ 1,538,952 $ 2,889,613 $ -- $ 2,889,613
Current portion of notes
payable -- affiliates.......... 14,238,424 -- 14,238,424 -- 14,238,424
Note payable..................... 600,000 -- 600,000 -- 600,000
Accounts payable, trade.......... 135,983 308,497 444,480 -- 444,480
Due to affiliates................ 2,526,874 -- 2,526,874 -- 2,526,874
Accrued expenses................. 3,145,542 709,183 3,854,725 -- 3,854,725
Income taxes payable............. -- 204,000 204,000 -- 204,000
Income taxes payable to Parent... 3,471,416 -- 3,471,416 -- 3,471,416
Deferred compensation............ -- 692,461 692,461 -- 692,461
Deferred revenue................. 133,674 -- 133,674 -- 133,674
----------- ----------- ----------- ------------ -----------
Total current
liabilities............. 25,602,574 3,453,093 29,055,667 -- 29,055,667
----------- ----------- ----------- ------------ -----------
LONG-TERM DEBT, less current
portion.......................... 1,667,507 6,676,737 8,344,244 1,500,000(a) 9,844,244
NOTES PAYABLE -- AFFILIATES, less
current portion.................. 217,500 -- 217,500 -- 217,500
DEFERRED REVENUE................... -- 521,057 521,057 -- 521,057
SHAREHOLDERS' EQUITY...............
Preferred stock.................. -- -- -- -- --
Common stock..................... 200,000 10 200,010 4,805(a) --
(10)(c) 204,805
Additional paid-in capital
(deficit)...................... (30,009) 7,443,639 7,413,630 5,761,376(a)
(7,443,639)(c) 5,731,367
Retained earnings................ 856,656 1,337,242 2,193,898 (1,337,242)(c)
(122,508)(b) 734,148
----------- ----------- ----------- ------------ -----------
Total shareholders'
equity.................. 1,026,647 8,780,891 9,807,538 (3,137,218) 6,670,320
----------- ----------- ----------- ------------ -----------
Total liabilities and
shareholders' equity.... $28,514,228 $19,431,778 $47,946,006 $ (1,637,218) $46,308,788
=========== =========== =========== ============ ===========
</TABLE>
See accompanying notes.
F-3
<PAGE> 69
INSURANCE MANAGEMENT SOLUTIONS GROUP, INC. AND SUBSIDIARIES
NOTES TO PRO FORMA CONDENSED CONSOLIDATED
BALANCE SHEET (UNAUDITED)
JUNE 30, 1998
(1) See the introduction to Pro Forma Condensed Consolidated Financial
Information.
(2) The following pro forma adjustments were made to reflect the July 1998
acquisition of the remaining 51% interest in Geotrac, Inc. using the
purchase method of accounting as if it had occurred at June 30, 1998.
(a) To record the Company's investment in Geotrac as a result of acquiring,
in July 1998, the remaining 51% of outstanding shares of Common Stock
not held by the Company. In July 1997, the Company acquired a 49%
interest in Geotrac, Inc. and, accordingly, is reflected in the
historical balance sheet at June 30, 1998. A summary of the total
consideration paid for the 51% interest consists of the following:
<TABLE>
<S> <C>
shares of Company's Common Stock valued at
$ per share, the estimated initial public
offering price............................................ $5,766,181
Promissory note............................................. 1,500,000
Cash........................................................ 728,069
----------
$7,994,250
==========
</TABLE>
The shares of the Company's Common Stock to be issued as partial
consideration will be adjusted to reflect the actual initial public
offering price.
The following is a summary of the Company's total investment in Geotrac
at June 30, 1998 assuming the remaining 51% was acquired on June 30,
1998:
<TABLE>
<S> <C>
Initial July 1997 investment (including goodwill
$3,442,500)............................................... $ 6,750,000
49% share in equity earnings, net of amortization of
goodwill.................................................. 528,000
-----------
June 30, 1998 historical basis.............................. 7,278,000
Additional July 1998 investment............................. 7,994,250
-----------
June 30, 1998 investment on pro forma basis................. $15,272,250
===========
</TABLE>
In July 1997, Geotrac, Inc. acquired 100% of SMS Geotrac's outstanding
Common Stock for $15,000,000, with $6,750,000 of the Company's
contributed cash along with a note of $8,250,000. The purchase price was
allocated based upon estimated fair value as follows:
<TABLE>
<S> <C>
Current assets.............................................. $ 3,026,000
Property and equipment...................................... 3,547,000
Goodwill.................................................... 8,847,000
Customer contracts.......................................... 1,600,000
Other assets................................................ 288,000
Liabilities assumed......................................... (2,308,000)
-----------
$15,000,000
===========
</TABLE>
In July 1998, the Company paid $7,994,000 to purchase the remaining 51%
of Geotrac, of which approximately $6,492,000 has been allocated to
goodwill, with the remaining $1,502,000 being associated with the
identifiable net assets acquired. Accordingly, on a pro forma basis, as
if the July 1997 and 1998 transactions had occurred on January 1, 1997,
aggregate goodwill would have been approximately $15,339,000
(unamortized goodwill of $14,933,000 at June 30, 1998) consisting of the
July 1997 component of $8,847,000 and the July 1998 component of
$6,492,000. In addition to goodwill, the Company also has assigned
$1,600,000 (unamortized balance of approximately $1,417,000 included in
other assets at June 30, 1998) of the total purchase price to customer
contracts. Based on various factors including the nature of the product
or service provided, the
F-4
<PAGE> 70
INSURANCE MANAGEMENT SOLUTIONS GROUP, INC. AND SUBSIDIARIES
NOTES TO PRO FORMA CONDENSED CONSOLIDATED
BALANCE SHEET (UNAUDITED) -- (CONTINUED)
Company's strong market position, historical and projected operating
results, management intends to amortize these assets using the
straight-line method over 20 years for goodwill (approximately $767,000
a year) and 8 years for customer contracts ($200,000 a year).
(b) As a result of the acquisition of Geotrac, the Company wrote-off
(charged to expense) approximately $123,000 of duplicate database costs
in July 1998. No adjustment has been made to the pro forma statements
of income since the adjustment is non-recurring.
(c) Eliminate the Company's investment in Geotrac, Inc. and reflect the
results of Geotrac, Inc. on a consolidated basis.
F-5
<PAGE> 71
INSURANCE MANAGEMENT SOLUTIONS GROUP, INC. AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME (UNAUDITED)
FOR THE YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
INSURANCE
MANAGEMENT
SOLUTIONS GROUP PRO FORMA PRO FORMA PRO FORMA
AND SUBSIDIARIES GEOTRAC, INC.(2) SUB TOTAL ADJUSTMENTS(3) ADJUSTMENTS(4) PRO FORMA(1)
---------------- ---------------- ----------- -------------- -------------- ------------
<S> <C> <C> <C> <C> <C> <C>
REVENUE
Outsourcing services... $29,714,044 $ -- $29,714,044 $ -- $ 862,756(g) $ 30,576,800
Flood zone
determination
services............. 8,791,935 14,062,665 22,854,600 (254,683)(a) -- 22,599,917
----------- ----------- ----------- ----------- ----------- ------------
Total revenues... 38,505,979 14,062,665 52,568,644 (254,683) 862,756 53,176,717
----------- ----------- ----------- ----------- ----------- ------------
EXPENSES
Cost of outsourcing
services............. 21,988,824 -- 21,988,824 -- 1,124,810(h) --
-- (1,016,349)(i) 22,097,285
Cost of flood zone
determination
services............. 4,763,723 6,042,664 10,806,387 (254,683)(a) -- 10,551,704
Selling, general and
administrative....... 3,026,388 2,900,281 5,926,669 -- -- 5,926,669
Management service from
Parent............... 2,343,866 -- 2,343,866 -- -- 2,343,866
Deferred compensation
(non-recurring
item)................ -- 732,795 732,795 728,069(b) -- 1,460,864
Depreciation and
amortization......... 683,672 1,908,276 2,591,948 252,882(c) 1,016,349(i) 3,861,179
----------- ----------- ----------- ----------- ----------- ------------
32,806,473 11,584,016 44,390,489 726,268 1,124,810 46,241,567
----------- ----------- ----------- ----------- ----------- ------------
Operating income
(loss)............... 5,699,506 2,478,649 8,178,155 (980,951) (262,054) 6,935,150
Equity in earnings of
Geotrac, Inc......... 201,009 -- 201,009 (201,009)(d) -- --
Interest expense....... (378,660) (824,621) (1,203,281) (127,500)(e) (270,619)(j) (1,601,400)
Other income (non-
recurring item)...... -- 1,700,000 1,700,000 -- -- 1,700,000
----------- ----------- ----------- ----------- ----------- ------------
Income before income
taxes................ 5,521,855 3,354,028 8,875,883 (1,309,460) (532,673) 7,033,750
Provision (benefit) for
income taxes......... 2,112,200 1,456,600 3,568,800 (342,200)(f) (200,400)(k) 3,026,200
----------- ----------- ----------- ----------- ----------- ------------
Net income............. $ 3,409,655 $ 1,897,428 $ 5,307,083 $ (967,260) $ (332,273) $ 4,007,550
=========== =========== =========== =========== =========== ============
Net income per common
share................ $ .17
===========
Weighted average common
shares outstanding... 20,000,000
===========
</TABLE>
See accompanying notes.
F-6
<PAGE> 72
INSURANCE MANAGEMENT SOLUTIONS GROUP, INC. AND SUBSIDIARIES
NOTES TO PRO FORMA CONDENSED CONSOLIDATED
STATEMENT OF INCOME (UNAUDITED)
FOR THE YEAR ENDED DECEMBER 31, 1997
(1) See the introduction to Pro Forma Condensed Consolidated Financial
Information.
(2) Represents the historical financial statements of SMS Geotrac, Inc. and
Geotrac, Inc. (formerly YoSystems, Inc.) adjusted to reflect the pro forma
1997 operations of the two entities on a calendar year basis as if Geotrac,
Inc. had acquired SMS Geotrac on January 1, 1997. A summary of pro forma
Geotrac, Inc. follows:
<TABLE>
<CAPTION>
PRO FORMA
SMS GEOTRAC, INC. GEOTRAC, INC. GEOTRAC, INC.
SEVEN MONTHS ENDED YEAR ENDED PRO FORMA YEAR ENDED
JULY 31, 1997 DECEMBER 31, 1997 SUB TOTAL ADJUSTMENTS DECEMBER 31, 1997
------------------ ----------------- ----------- ----------- -----------------
(UNAUDITED) (AUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
REVENUES
Flood zone determination
revenue.................. $7,726,640 $6,336,025 $14,062,665 $ -- $14,062,665
---------- ---------- ----------- ----------- -----------
EXPENSES
Cost of flood zone
determination services... 3,364,107 2,678,557 6,042,664 -- 6,042,664
Selling, general and
administrative........... 1,580,847 1,319,434 2,900,281 -- 2,900,281
Deferred compensation (non-
recurring item).......... -- 732,795 732,795 -- 732,795
Depreciation and
amortization............. 911,439 594,045 1,505,484 402,792(a) 1,908,276
---------- ---------- ----------- ----------- -----------
Total expenses...... 5,856,393 5,324,831 11,181,224 402,792 11,584,016
---------- ---------- ----------- ----------- -----------
Operating income............. 1,870,247 1,011,194 2,881,441 (402,792) 2,478,649
Interest expense............. (48,339) (338,391) (386,730) (437,891)(b) (824,621)
Other income (non-recurring
item)...................... -- 1,700,000 1,700,000 -- 1,700,000
---------- ---------- ----------- ----------- -----------
Income before income taxes... 1,821,908 2,372,803 4,194,711 (840,683) 3,354,028
Provision for income taxes... 840,900 272,000 1,112,900 343,700(c) 1,456,600
---------- ---------- ----------- ----------- -----------
Net income................... $ 981,008 $2,100,803 $ 3,081,811 $(1,184,383) $ 1,897,428
========== ========== =========== =========== ===========
</TABLE>
- ---------------
(a) Reflect amortization of goodwill, customer contracts and deferred financing
costs, assuming Geotrac, Inc. was purchased in its entirety on January 1,
1997. Following is a summary of the pro forma adjustment:
<TABLE>
<S> <C>
Goodwill ($8,847,119 amortized over 20 years)
January 1, 1997 through July 31, 1997..................... $258,041
Customer contracts ($1,600,000 amortized over 8 years)
January 1, 1997 through July 31, 1997..................... 116,667
Deferred financing costs ($385,171 amortized over 8 years)
January 1, 1997 through July 31, 1997..................... 28,084
--------
Total pro forma adjustment........................ $402,792
========
</TABLE>
(b) Reflect interest, at a rate of 8.5%, on a promissory note, of which
$8,250,000 was used as partial consideration to acquire SMS Geotrac, Inc. on
July 31, 1997.
(c) Provision for income taxes is calculated at an effective tax rate of 40%.
F-7
<PAGE> 73
INSURANCE MANAGEMENT SOLUTIONS GROUP, INC. AND SUBSIDIARIES
NOTES TO PRO FORMA CONDENSED CONSOLIDATED
STATEMENT OF INCOME (UNAUDITED) -- (CONTINUED)
(3) The following pro forma adjustments were made to reflect the results of
operations as though Geotrac, Inc. was purchased in its entirety on January
1, 1997.
(a) Eliminate intercompany transactions between the Company and Geotrac,
Inc. related to the Cross-License Agreement.
(b) In conjunction with the acquisition, Geotrac, Inc.'s majority
shareholders granted 46.45 shares of Common Stock to certain former and
current employees for prior employee services rendered while employed
at Geotrac. These shares were granted prior to the closing of this
transaction. In accordance with the purchase agreement, the Company
reacquired for $728,000 the stock held for these individuals.
Accordingly, compensation expense has been reflected in Geotrac's
historical financial statements in May 1998.
(c) Reflect amortization of goodwill related to the acquisition of the
remaining 51% of Geotrac, Inc. as follows:
<TABLE>
<S> <C>
Goodwill related to purchase of remaining 51% ($6,492,000
amortized over 20 years)
January 1, 1997 through December 31, 1997................. $324,600
Less: Goodwill previously recorded on the Company's books... (71,718)
--------
Total pro forma adjustment........................ $252,882
========
</TABLE>
(d) Eliminate the equity in earnings of Geotrac, Inc. which has been
reflected historically on the equity method of accounting.
(e) Reflect interest, at a rate of 8.5%, on a $1,500,000 promissory note
issued as partial purchase consideration for the acquisition of the
remaining 51% interest in Geotrac, Inc. in July 1998.
(f) Reflect the income tax effect of the Company and Geotrac, Inc.,
recognizing the following pro forma adjustments:
<TABLE>
<S> <C>
Total pro forma adjustments (loss) before income taxes...... $(1,309,000)
Equity in earnings.......................................... 201,000
Non-deductible goodwill amortization........................ 253,000
-----------
Additional pre-tax loss..................................... $ (855,000)
===========
</TABLE>
Since the above items relate to Geotrac, Inc., its statutory rate of
approximately 40% was used to calculate the income tax effect.
(4) The following pro forma adjustments were made to reflect the results of
operations for the year ended December 31, 1997 under the Company's new
service agreements, which were effective January 1, 1998:
(g) Reflects outsourcing revenues based on the revised policy and claims
administration agreements adopted January 1, 1998. The adjustment
reflects (i) a change in the service fee percentage charged for policy
administration for certain lines of business, (ii) a change in the
claims service fee from a cost reimbursement basis to percentage of
earned premium for certain lines of business, (iii) a change in the
claims service fee from a percentage of direct incurred losses to a
percentage of direct earned premium for certain lines of business, and
(iv) claims administration revenue related to the Florida Automobile
Joint Underwriting Association ("FAJUA") and the Florida Residential
Property and Casualty Joint Underwriting Association ("FRPCJUA"). The
FAJUA and FRPCJUA contracts are currently in run-off and were charged
on a cost reimbursement basis during 1997. Also included is a pro forma
adjustment to reflect a deferral of claims service fee income based
F-8
<PAGE> 74
INSURANCE MANAGEMENT SOLUTIONS GROUP, INC. AND SUBSIDIARIES
NOTES TO PRO FORMA CONDENSED CONSOLIDATED
STATEMENT OF INCOME (UNAUDITED) -- (CONTINUED)
on the 1998 service agreement as claims service fees are being charged
on an earned premium basis, which is in advance of the total claims
expense that will be recognized by the Company.
(h) Reflects additional claims adjustment expenses that would have been
recognized by the Company during 1997 had it operated under the
provisions of the 1998 service agreements. Such expenses were
previously passed through to the affiliated companies under the 1997
service agreements.
(i) Reclassify amounts previously charged to the Company related to fixed
assets that were owned by affiliated companies and purchased at their
net book value by the Company.
(j) Reflect interest, at a rate of 8.5%, on two promissory notes entered
into to fund equipment purchases from affiliated companies.
(k) Represents the income tax effects on the year ended December 31, 1997
pro forma adjustments at the statutory rate of 37.63%.
(5) The following is provided for informational purposes only:
(A) As a result of the acquisition of Geotrac, in July 1998 the Company
wrote-off (charged to expense) approximately $123,000 of duplicate
database costs.
(B) Effective January 1, 1998, the Company began servicing its affiliated
companies automobile lines of insurance under its servicing agreements.
Had this servicing commenced January 1, 1997, outsourcing service
revenue and cost of outsourcing services would have increased by
approximately $2,670,000 and $2,472,000, respectively, for the year
ended December 31, 1997.
F-9
<PAGE> 75
INSURANCE MANAGEMENT SOLUTIONS GROUP, INC. AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME (UNAUDITED)
FOR THE SIX MONTHS ENDED JUNE 30, 1998
<TABLE>
<CAPTION>
INSURANCE
MANAGEMENT
SOLUTIONS
GROUP AND PRO FORMA
SUBSIDIARIES GEOTRAC, INC. SUB TOTAL ADJUSTMENTS(2) PRO FORMA(1)
------------ ------------- ----------- -------------- ------------
<S> <C> <C> <C> <C> <C>
REVENUE
Outsourcing services........ $17,754,066 $ -- $17,754,066 $ -- $17,754,066
Flood zone determination
services................. 4,642,657 8,847,653 13,490,310 -- 13,490,310
----------- ---------- ----------- --------- -----------
Total revenues...... 22,396,723 8,847,653 31,244,376 -- 31,244,376
----------- ---------- ----------- --------- -----------
EXPENSES
Cost of outsourcing
services................. 12,794,276 -- 12,794,276 (282,015)(a) 12,512,261
Cost of flood zone
determination services... 2,163,651 3,918,662 6,082,313 -- 6,082,313
Selling, general and
administrative........... 1,983,556 1,556,638 3,540,194 -- 3,540,194
Management services from
Parent................... 1,369,017 -- 1,369,017 -- 1,369,017
Deferred compensation (non-
recurring item).......... -- 728,069 728,069 (728,069)(b) --
Depreciation and
amortization............. 1,036,724 727,486 1,764,210 282,015(a)
76,237(c) 2,122,462
----------- ---------- ----------- --------- -----------
19,347,224 6,930,855 26,278,079 (651,832) 25,626,247
----------- ---------- ----------- --------- -----------
Operating income.............. 3,049,499 1,916,798 4,966,297 651,832 5,618,129
Equity in earnings of Geotrac,
Inc......................... 485,034 -- 485,034 (485,034)(d) --
Interest income............... 106,356 -- 106,356 -- 106,356
Interest expense.............. (614,433) (371,778) (986,211) (63,750)(e-1)
(64,177)(e-2) (1,114,138)
----------- ---------- ----------- --------- -----------
Income before income taxes.... 3,026,456 1,545,020 4,571,476 38,871 4,610,347
Provision for income taxes.... 1,069,800 618,000 1,687,800 240,100(f) 1,927,900
----------- ---------- ----------- --------- -----------
Net income.................... $ 1,956,656 $ 927,020 $ 2,883,676 $(201,229) $ 2,682,447
=========== ========== =========== ========= ===========
Net income per common share... $ .10
===========
Weighted average common shares
outstanding................. 20,000,000
===========
</TABLE>
See accompanying notes.
F-10
<PAGE> 76
NOTES TO PRO FORMA
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
FOR THE SIX MONTHS ENDED JUNE 30, 1998
(1) See the introduction to Pro Forma Condensed Consolidated Financial
Information.
(2) The following pro forma adjustments were made to reflect the results of
operations as though Geotrac was purchased in its entirety on January 1,
1997.
(a) Reclassify amounts previously charged to the Company related to fixed
assets that were owned by affiliated companies and purchased at their net
book value by the Company.
(b) Reversal of compensation expense reflected in Geotrac's historical
financial statements during the six months ended June 30, 1998. This
compensation expense arose prior to the closing of Geotrac and is
reflected in the Pro Forma Condensed Consolidated Statements of Income for
the year ended December 31, 1997. See Note (3)(b) to the Company's Pro
Forma Condensed Consolidated Statement of Income (unaudited) for the year
ended December 31, 1997.
(c) Reflects amortization of additional goodwill assuming Geotrac was
purchased in its entirety on January 1, 1997. Goodwill is being amortized
using the straight-line method over a 20 year amortization period.
Following is a summary of the pro forma adjustment:
<TABLE>
<S> <C>
Goodwill related to purchase of remaining 51% ($6,492,000
amortized over 20 years)
January 1, 1998 through June 30, 1998..................... $162,300
Less: Goodwill previously recorded on the Company's books
January 1, 1998 through June 30, 1998..................... (86,063)
--------
$ 76,237
========
</TABLE>
(d) Eliminate the equity in earnings of Geotrac, which has been reflected
historically on the equity method of accounting.
(e-1) Reflect interest, at a rate of 8.5%, on a $1,500,000 promissory note
issued as partial purchase consideration for the acquisition of the
remaining 51% interest in Geotrac, Inc.
(e-2) Reflect interest, at a rate of 8.5%, on two promissory notes entered into
on April 1, 1998 to fund equipment purchases from affiliated companies.
(f) Represents the income tax effects on the six months ended June 30, 1998
pro forma adjustments, not including the equity in earnings of $485,034
and non-deductible goodwill amortization of $76,237, at the statutory rate
of 40%.
(3) The following is provided for informational purposes only:
Prior to July 31, 1998, the Company, as a wholly-owned subsidiary, was
included in its Parent's consolidated income tax return, subject to a tax
sharing and allocation agreement with its affiliates. As the Company's
Parent now owns less than 80% of the Company's Common Stock, the Company
is a separate tax paying entity. The change in income tax reporting status
does not result in a pro forma adjustment herein as the Company's income
tax provision has historically been determined on a separate return basis.
F-11
<PAGE> 77
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors of
Insurance Management Solutions Group, Inc.
We have audited the accompanying consolidated balance sheets of Insurance
Management Solutions Group, Inc. and subsidiaries as of December 31, 1996 and
1997, and the related consolidated statements of income, shareholders' equity,
and cash flows for each of the three years in the period ended December 31,
1997. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall 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
Insurance Management Solutions Group, Inc. and subsidiaries as of December 31,
1996 and 1997, and the consolidated results of their operations and their cash
flows for each of the three years in the period ended December 31, 1997, in
conformity with generally accepted accounting principles.
GRANT THORNTON LLP
Tampa, Florida
May 29, 1998
(Except for Notes 1 and 3
as to which the date is July 31, 1998)
F-12
<PAGE> 78
INSURANCE MANAGEMENT SOLUTIONS GROUP, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------ JUNE 30,
1996 1997 1998
---------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS
Cash................................................. $ -- $ 115,070 $ 207,243
Accounts receivable, trade........................... 894,323 1,218,741 1,153,074
Due from affiliates.................................. 903,789 8,834,733 8,291,752
Note receivable -- affiliate......................... -- -- 4,950,000
Prepaid expenses and other assets.................... 63,119 108,150 678,722
---------- ----------- -----------
Total current assets......................... 1,861,231 10,276,694 15,280,791
PROPERTY AND EQUIPMENT, net............................ 1,446,376 2,331,336 5,232,442
INVESTMENT IN GEOTRAC, INC............................. -- 6,879,291 7,278,262
OTHER ASSETS
Deferred tax assets.................................. 128,700 -- 160,200
Other................................................ 4,935 44,384 562,533
---------- ----------- -----------
Total assets................................. $3,441,242 $19,531,705 $28,514,228
========== =========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Current portion of long-term debt.................... $ 315,500 $ 1,522,822 $ 1,350,661
Current portion of notes payable -- affiliates....... -- -- 14,238,424
Note payable......................................... 600,000 600,000 600,000
Accounts payable, trade.............................. 53,519 271,165 135,983
Due to affiliates.................................... 26,303 2,889,212 2,526,874
Employee related accrued expenses.................... 570,312 1,850,553 1,809,130
Other accrued expenses............................... 241,257 596,424 1,336,412
Income taxes payable to Parent....................... 472,729 2,239,058 3,471,416
Deferred revenue..................................... 6,811 455,827 133,674
---------- ----------- -----------
Total current liabilities.................... 2,286,431 10,425,061 25,602,574
LONG-TERM DEBT, less current portion................... 894,475 2,186,653 1,667,507
NOTES PAYABLE -- AFFILIATES, less current portion...... -- -- 217,500
COMMITMENTS AND CONTINGENCIES
PREFERRED STOCK OF SUBSIDIARY.......................... -- 6,750,000 --
SHAREHOLDERS' EQUITY
Preferred Stock, $.01 par value; 20,000,000 shares
authorized, no shares issued and outstanding...... -- -- --
Common Stock, $.01 par value; 100,000,000 shares
authorized, 20,000,000 shares issued and
outstanding....................................... 200,000 200,000 200,000
Additional paid-in capital (deficit)................. 60,336 (30,009) (30,009)
Retained earnings.................................... -- -- 856,656
---------- ----------- -----------
Total shareholders' equity................... 260,336 169,991 1,026,647
---------- ----------- -----------
Total liabilities and shareholders' equity... $3,441,242 $19,531,705 $28,514,228
========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
F-13
<PAGE> 79
INSURANCE MANAGEMENT SOLUTIONS GROUP, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
--------------------------------------- -------------------------
1995 1996 1997 1997 1998
----------- ----------- ----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
REVENUES
Outsourcing services -- affiliated...... $ 3,443,628 $ 4,787,772 $29,114,601 $14,032,267 $17,305,258
Outsourcing services.................... -- 337,458 599,443 243,501 448,808
Flood zone determination services....... 4,886,946 7,291,031 7,763,576 3,904,515 4,095,475
Flood zone determination
services -- affiliated................ 239,980 414,209 1,028,359 436,561 547,182
----------- ----------- ----------- ----------- -----------
Total revenues................... 8,570,554 12,830,470 38,505,979 18,616,844 22,396,723
----------- ----------- ----------- ----------- -----------
EXPENSES
Cost of outsourcing services............ 2,954,766 3,895,801 21,988,824 10,805,965 12,794,276
Cost of flood zone determination
services.............................. 3,415,023 5,362,154 4,763,723 2,098,600 2,163,651
Selling, general and administrative..... 804,003 1,121,467 3,026,388 1,499,806 1,983,556
Management services from Parent......... 724,904 1,053,546 2,343,866 1,171,932 1,369,017
Depreciation and amortization........... 184,155 309,188 683,672 242,374 1,036,724
----------- ----------- ----------- ----------- -----------
Total expenses................... 8,082,851 11,742,156 32,806,473 15,818,677 19,347,224
----------- ----------- ----------- ----------- -----------
OPERATING INCOME.......................... 487,703 1,088,314 5,699,506 2,798,167 3,049,499
----------- ----------- ----------- ----------- -----------
EQUITY IN EARNINGS OF GEOTRAC, INC. ...... -- -- 201,009 -- 485,034
----------- ----------- ----------- ----------- -----------
OTHER INCOME (EXPENSE):
Interest income......................... -- -- -- -- 106,356
Interest expense........................ (71,493) (75,350) (378,660) (72,849) (614,433)
----------- ----------- ----------- ----------- -----------
Total other income (expense)..... (71,493) (75,350) (378,660) (72,849) (508,077)
INCOME BEFORE PROVISION FOR INCOME
TAXES................................... 416,210 1,012,964 5,521,855 2,725,318 3,026,456
PROVISION FOR INCOME TAXES................ 162,400 396,000 2,112,200 1,039,600 1,069,800
----------- ----------- ----------- ----------- -----------
NET INCOME................................ $ 253,810 $ 616,964 $ 3,409,655 $ 1,685,718 $ 1,956,656
=========== =========== =========== =========== ===========
NET INCOME PER COMMON SHARE............... $ .01 $ .03 $ .17 $ .08 $ .10
=========== =========== =========== =========== ===========
Weighted average common shares
outstanding............................. 20,000,000 20,000,000 20,000,000 20,000,000 20,000,000
=========== =========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
F-14
<PAGE> 80
INSURANCE MANAGEMENT SOLUTIONS GROUP, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
ADDITIONAL
PAID-IN RETAINED
COMMON CAPITAL EARNINGS
STOCK (DEFICIT) (DEFICIT) TOTAL
-------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
Balance at January 1, 1995...................... $200,000 $ (9,000) $ (66,138) $ 124,862
Capital contribution from Parent.............. -- 150,000 -- 150,000
Net income.................................... -- -- 253,810 253,810
-------- --------- ----------- -----------
Balance at December 31, 1995.................... 200,000 141,000 187,672 528,672
Capital contribution from Parent.............. -- 114,700 -- 114,700
Cash dividends to Parent...................... -- (195,364) (804,636) (1,000,000)
Net income.................................... -- -- 616,964 616,964
-------- --------- ----------- -----------
Balance at December 31, 1996.................... 200,000 60,336 -- 260,336
Cash dividends to Parent...................... -- (90,345) (3,409,655) (3,500,000)
Net income.................................... -- -- 3,409,655 3,409,655
-------- --------- ----------- -----------
Balance at December 31, 1997.................... 200,000 (30,009) -- 169,991
Cash dividends to Parent (unaudited).......... -- -- (1,100,000) (1,100,000)
Net income (unaudited)........................ -- -- 1,956,656 1,956,656
-------- --------- ----------- -----------
Balance at June 30, 1998 (unaudited)............ $200,000 $ (30,009) $ 856,656 $ 1,026,647
======== ========= =========== ===========
</TABLE>
The accompanying notes are an integral part of this consolidated statement.
F-15
<PAGE> 81
INSURANCE MANAGEMENT SOLUTIONS GROUP, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
------------------------------------- ------------------------
1995 1996 1997 1997 1998
--------- ----------- ----------- ----------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income................................. $ 253,810 $ 616,964 $ 3,638,970 $ 1,685,718 $1,956,656
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization............ 184,155 309,188 683,672 242,374 1,036,724
Loss on disposal of property and
equipment.............................. 7,124 72,726 2,329 -- 37,501
Equity in earnings of Geotrac, Inc....... -- -- (201,009) -- (485,034)
Deferred income taxes, net............... (4,200) (119,800) 131,000 70,716 (160,200)
Changes in assets and liabilities:
Accounts receivable.................... (379,694) (179,713) (324,418) (355,991) 65,667
Prepaid expenses and other current
assets.............................. (7,075) (11,751) (45,031) (427,847) (570,572)
Other assets........................... -- (4,935) (40,394) 4,935 (518,149)
Accounts payable, trade................ 290,755 (301,090) 217,646 154,539 (135,182)
Employee related accrued expenses...... 196,858 136,210 1,280,241 475,485 (41,423)
Other accrued expenses................. 147,516 79,591 123,552 (72,357) 739,988
Income taxes payable to Parent......... 137,127 365,515 1,766,329 907,255 1,232,358
Deferred revenue....................... 4,861 (153) 449,016 209,380 121,551
--------- ----------- ----------- ----------- ----------
Net cash provided by operating
activities........................ 831,237 962,752 7,681,903 2,894,207 3,279,885
--------- ----------- ----------- ----------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Investment in Geotrac, Inc................. -- -- (6,750,000) -- --
Purchases of property and equipment........ (464,048) (1,011,807) (1,498,298) (513,210) (723,616)
--------- ----------- ----------- ----------- ----------
Net cash used in investing
activities........................ (464,048) (1,011,807) (8,248,298) (513,210) (723,616)
--------- ----------- ----------- ----------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings under line of credit........ 213,000 -- -- -- --
Proceeds from issuance of Preferred Stock
of Subsidiary............................ -- -- 6,750,000 -- --
Proceeds from the issuance of debt......... -- 1,054,000 2,815,000 -- --
Repayment of debt.......................... (122,000) (122,025) (315,500) (157,750) (1,101,035)
Cash dividends paid to Parent.............. -- (1,000,000) (3,500,000) -- (1,100,000)
Capital contribution from Parent........... 150,000 114,700 -- -- --
Net advances to affiliates................. (573,847) (34,886) (5,068,035) (2,223,247) (263,061)
--------- ----------- ----------- ----------- ----------
Net cash provided by (used in)
financing activities.............. (332,847) 11,789 681,465 (2,380,997) (2,464,096)
--------- ----------- ----------- ----------- ----------
INCREASE (DECREASE) IN CASH.................. 34,342 (37,266) 115,070 -- 92,173
CASH, beginning of year...................... 2,924 37,266 -- -- 115,070
--------- ----------- ----------- ----------- ----------
CASH, end of year............................ $ 37,266 $ -- $ 115,070 $ -- $ 207,243
========= =========== =========== =========== ==========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
ACTIVITIES:
Cash paid for:
Interest................................. $ 71,493 $ 75,350 $ 149,345 $ 72,849 $ 172,527
========= =========== =========== =========== ==========
Income taxes............................. $ 50,000 $ 150,290 $ 214,743 $ -- $ --
========= =========== =========== =========== ==========
SUPPLEMENTAL DISCLOSURE OF NON-CASH
ACTIVITIES:
Purchase of fixed assets by issuance of
debt (including capital lease
obligations)........................... $ -- $ -- $ -- $ -- $3,165,652
========= =========== =========== =========== ==========
Repurchase of Preferred Stock of
Subsidiary for issuance of note........ $ -- $ -- $ -- $ -- $6,750,000
========= =========== =========== =========== ==========
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
F-16
<PAGE> 82
INSURANCE MANAGEMENT SOLUTIONS GROUP, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. DESCRIPTION OF ORGANIZATION AND BUSINESS
Insurance Management Solutions Group, Inc. ("IMSG") is a holding company
that was incorporated in the State of Florida in December 1996 by its parent,
Bankers Insurance Group ("BIG" or the "Parent"), which contributed to IMSG two
of its wholly-owned operating subsidiaries, Insurance Management Solutions, Inc.
("IMS") and Bankers Hazard Determination Services, Inc. ("BHDS"), which were
previously formed in August 1991 and June 1988, respectively. IMSG, IMS and BHDS
are hereinafter collectively known as the "Company". In July 1997, the Company
acquired a 49% interest in Geotrac, Inc. and, in July 1998 acquired the
remaining 51% interest.
On July 31, 1998, BIG sold 4,100,000 shares of the issued and outstanding
common shares it held in IMSG to Venture Capital Corporation, a Cayman Islands
company. See Note 12 for further discussion.
The Company operates in two major business segments: providing outsourcing
services to the property and casualty insurance industry with an emphasis on
flood insurance; and providing flood zone determinations primarily to insurance
companies and financial institutions. The Company's outsourcing services, which
are provided by IMS, include policy and claims administration (policy issuance,
billing and collection functions, claims adjusting and processing) and
information technology services. The Company's flood zone determination services
are provided by Geotrac of America, Inc. (formerly BHDS and Geotrac, Inc.).
Prior to 1997, the Company's outsourcing services principally related to
information technology services provided to BIG and its other affiliates on a
cost reimbursement basis. Commencing in 1997, the Company also provided, on a
fee basis, policy and claims administration services, previously provided by BIG
and its other affiliates, related to flood and homeowners insurance lines
accounting for approximately 55% of total outsourcing revenues for 1997, and 53%
and 98% for the six months ended June 30, 1997 and 1998, respectively. Starting
in 1998, the automobile insurance line has also been added to these services.
During 1997, the Company also provided claims administration services to its
affiliates on all other insurance lines on a cost reimbursement basis accounting
for approximately 29% of total outsourcing revenues. In 1998, the company
receives a fee for claims administration on these insurance lines similar to
that for flood, homeowners and automobile lines. In addition, in 1998,
third-party claims adjustment costs, such as outside appraisers, are recognized
by the Company. In 1997, these costs were paid and absorbed by the Company's
affiliates.
The Company is substantially dependent on the business of its affiliated
insurance companies under the common control of BIG as the Company derives a
substantial portion of its revenue from outsourcing services provided to these
affiliated companies and BIG.
See Notes 2 and 12 for further organization and business information.
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The formation of IMSG as described in Note 1, is reflected in the financial
statements retroactively on a historical cost basis as if the entities under
common control had been consolidated for all years presented. IMSG, IMS and BHDS
have historically maintained separate accounting records as their operations
have generally been on a stand-alone basis in regards to BIG and its other
affiliates.
The Company, under a management agreement with BIG, is charged a management
fee for common costs that are incurred by its Parent on behalf of all affiliated
companies. Management services include human resources, legal, corporate
planning and communications, cash management, certain executive management and
rent. The basis of allocation for the management services is employee head
counts and estimates of time incurred, which management believes to be a
reasonable basis of allocation.
F-17
<PAGE> 83
INSURANCE MANAGEMENT SOLUTIONS GROUP, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)
In January 1998, the Board of Directors increased the amount of the
Company's authorized shares of Common Stock from 1,000,000 to 100,000,000 shares
and changed the Common Stock's par value from $1.00 to $.01 per share. Effective
May 8, 1998, the Company declared a stock dividend of 40,000 shares of Common
Stock for each share of Common Stock then outstanding, resulting in an increase
in the number of outstanding shares of Common Stock from 500 to 20,000,000
shares. This recapitalization has been retroactively reflected in the financial
statements.
Principles of Consolidation
The consolidated financial statements include the accounts of Insurance
Management Solutions Group, Inc. and its wholly-owned subsidiaries. All
significant intercompany accounts and transactions have been eliminated in
consolidation. Prior to July 1998, the Company's investment in Geotrac, Inc. was
accounted for using the equity method since the Company owns less than 50% and
has a significant but not controlling influence (See Note 3).
Use of Estimates
The preparation of the financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosures of contingent assets and liabilities at the date of the financial
statements, as well as the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Cash Equivalents
The Company considers all highly liquid investments with an original
maturity of three months or less to be cash equivalents. There were no cash
equivalents at December 31, 1995, 1996 and 1997, and June 30, 1998.
Prior to June 1998, the Company maintained a zero balance account
arrangement with its Parent. As a result of this funding arrangement, the
Company had a negative cash balance for financial reporting purposes
representing checks that have been issued but that have not yet been presented
to the bank for payment. Such negative cash balances have been reclassified to
accounts payable in the accompanying consolidated balance sheets.
Accounts Receivable, Trade and Concentration of Credit Risk
Accounts receivable, trade represents amounts due from BHDS' customers.
BHDS provides flood zone determination services to insurance companies and
financial institutions. Credit is granted to customers of BHDS based on
management's assessment of their credit worthiness. As the accounts receivable
are considered collectible, no allowance for doubtful accounts is deemed
necessary in the accompanying consolidated financial statements.
Property and Equipment
Property and equipment are stated at cost less accumulated depreciation and
amortization. Depreciation and amortization are provided for using the
straight-line method over the assets' estimated service lives. Accelerated
methods are used for tax purposes.
F-18
<PAGE> 84
INSURANCE MANAGEMENT SOLUTIONS GROUP, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)
Deferred Offering Costs
The Company incurred accounting, legal, printing and other expenses in
connection with its proposed initial public offering of its Common Stock. These
offering costs are being deferred and will be charged to additional paid-in
capital when the proceeds from the initial public offering are received. At June
30, 1998, $557,240 of deferred offering costs is included in other assets in the
consolidated balance sheet. To the extent the Company's initial public offering
is not consummated, the deferred offering costs will be charged to expense.
Impairment of Long-Lived Assets
The Company evaluates the recoverability of its long-lived assets
(including goodwill) in accordance with Statement of Financial Accounting
Standards No. 121, ("SFAS No. 121"), Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed Of. SFAS No. 121 requires
long-lived assets to be reviewed for impairment whenever circumstances indicate
that the carrying amount of an asset may not be recoverable. An impairment is
recognized to the extent the sum of undiscounted estimated future cash flows
expected to result from the use of the asset is less than the carrying value.
Revenue Recognition and Deferred Revenue
Revenue generated from outsourcing and flood zone determination services
are recognized as earned when services are provided.
In 1997, the Company's affiliated service arrangements, as they pertain to
policy administration, resulted in deferred revenue being recorded as the
related fees are billed and payable based on a percentage of the customers'
premiums written which is in advance of a portion of the administrative services
being performed by the Company. In 1998, the service arrangements were changed
so that fees related to policy administration services are billed based on a
percentage of written and earned premiums, which generally eliminates the need
for any deferral. The transition from the 1997 service arrangements to the 1998
service agreements resulted in the Company reclassifying on January 1, 1998
deferred revenue of $443,704 recorded at December 31, 1997 to due to affiliates.
In 1998, the affiliated service agreements as they pertain to claims
administration, resulted in deferred revenue being recorded as the related fees
are billed and payable based on a percentage of the customers' earned premiums
which is in advance of a portion of the total claims expense that will be
incurred by the Company. In 1997, deferred revenue related to claims
administration was not recorded, as the Company was paid, either on a fee or
cost reimbursement basis, as the claims and related expenses were incurred. The
Company, in 1998, estimates the deferred revenue amounts based on several
factors including actual historical claims expense and related development
factors. The transition from the 1997 to the 1998 service agreements resulted in
the Company recording, at January 1, 1998, deferred revenue of approximately
$2,138,000 along with a due from affiliates for the same amount, representing
the Company's estimated future cost of servicing claims associated with premiums
earned prior to December 31, 1997.
Under the affiliated claims service agreements, the payment of claim costs
associated with the litigation of the claims remains the customers'
responsibility. In addition, the agreements contain a catastrophe provision
under which the Company would be reimbursed for costs associated with
independent adjusters and appraisers when indemnity losses from a single event
exceed $2,000,000, subject to a cap of 5% of direct incurred losses from that
storm.
F-19
<PAGE> 85
INSURANCE MANAGEMENT SOLUTIONS GROUP, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)
In connection with the Company's outsourcing and flood zone determination
services, the Company has recorded deferred revenues totaling $2,260,000 at June
30, 1998, of which $2,138,000 represents amounts billed and due from its
affiliates. As such, for financial statement reporting purposes, the $2,138,000
amount has been netted against due from affiliates at June 30, 1998.
Income Taxes
The Company accounts for income taxes on the liability method, as provided
by SFAS No. 109, Accounting for Income Taxes. Deferred tax assets and
liabilities are determined based on the difference between the financial
statement and tax bases of assets and liabilities as measured by the enacted tax
rates which will be in effect when these differences reverse. Deferred tax
expense is the result of changes in deferred tax assets and liabilities. The
Company's results of operations are included in the consolidated federal and
state income tax returns of its Parent. As provided by SFAS No. 109 and in
accordance with the intercompany tax sharing/allocation agreement with its
Parent and affiliates, income taxes are determined by the amount that would have
been due and payable had the Company filed a separate income tax return. Income
taxes payable, in the accompanying consolidated balance sheets, represents
amounts due to the Company's Parent.
As of July 31, 1998, BIG had sold a sufficient number of shares in the
Company such that the Company will no longer file its tax return with Bankers
International Financial Corporation ("BIFC") on a consolidated basis. Effective
as of July 31, 1998, the Company and BIFC entered into a Tax Indemnity Agreement
pursuant to which (i) BIFC agrees to indemnify the Company in the event the
Company incurs a tax liability as a result of taxable income of BIFC or one of
its subsidiaries, and (ii) the Company agrees to indemnify BIFC in the event
BIFC incurs a tax liability as a result of taxable income of the Company or one
of its subsidiaries. Each party also agrees to reimburse the other for certain
tax credits arising on or before July 31, 1998. Under the Tax Indemnity
Agreement, the parties terminated a previous tax allocation agreement which had
been in effect since October 1, 1993.
Net Income Per Common Share
Net income per common share, which represents both basic and diluted
earnings per share ("EPS") since no dilutive securities were outstanding for all
periods presented, is computed by dividing net income by the weighted average
common shares outstanding. The following table reconciles the numerator and
denominator of the basic and dilutive EPS computation:
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
--------------------------------------- -------------------------
1995 1996 1997 1997 1998
----------- ----------- ----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Numerator:
Net income............................... $ 253,810 $ 616,964 $ 3,409,655 $ 1,685,718 $ 1,956,656
=========== =========== =========== =========== ===========
Denominator:
Weighted average number of Common Shares
used in basic EPS...................... 20,000,000 20,000,000 20,000,000 20,000,000 20,000,000
Diluted stock options.................... -- -- -- -- --
----------- ----------- ----------- ----------- -----------
Weighted average number of Common Shares
and diluted potential Common Stock used
in diluted EPS......................... 20,000,000 20,000,000 20,000,000 20,000,000 20,000,000
=========== =========== =========== =========== ===========
</TABLE>
F-20
<PAGE> 86
INSURANCE MANAGEMENT SOLUTIONS GROUP, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)
Fair Value of Financial Instruments
The carrying amount of the Company's financial instruments, which include
cash, accounts receivable, due from affiliates, accounts payable, due to
affiliates and debt, approximate fair value due to the short maturity of those
instruments. The Company considers the fixed and variable rate debt instruments
to be representative of current market interest rates and, accordingly, the
recorded amounts approximate their present fair market value.
New Accounting Pronouncement
In June 1997, the Financial Accounting Standards Board issued SFAS No. 130,
"Reporting of Comprehensive Income," ("SFAS 130") which establishes standards of
reporting and displaying of comprehensive income and its components (revenues,
expenses, gains and losses) in the financial statements. SFAS 130 requires
comprehensive income to be reported with the same prominence as other items in
the financial statements. This statement is effective for fiscal years beginning
after December 15, 1997. Reclassification of financial statements for earlier
periods presented for comparative purposes is required. The adoption of SFAS 130
in 1998 did not have any effect on the consolidated financial statements.
Unaudited Financial Statements
The unaudited financial statements and the related notes thereto for June
30, 1997 and 1998 include all normal and recurring adjustments, which in the
opinion of management are necessary for a fair presentation and are prepared on
the same basis as the audited annual financial statements. The interim results
are not necessarily indicative of the results that may be expected for the full
year.
NOTE 3. INVESTMENT IN GEOTRAC, INC.
On July 31, 1997, the Company, through its subsidiary, BHDS, acquired a 49%
interest in YoSystems, Inc. ("YoSystems"). YoSystems concurrently acquired all
of the issued and outstanding shares of capital stock of SMS Geotrac, Inc. SMS
Geotrac, Inc. merged into YoSystems, with YoSystems becoming the surviving
entity, which then changed its name to Geotrac, Inc. The Company acquired its
49% interest in YoSystems for $6,750,000 in cash. YoSystems entered into a term
note for $8,750,000 to provide additional funds required to fund the total
purchase price of $15,000,000.
F-21
<PAGE> 87
INSURANCE MANAGEMENT SOLUTIONS GROUP, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 3. INVESTMENT IN GEOTRAC, INC. -- (CONTINUED)
The following table represents summarized financial information of Geotrac,
Inc. for the period August 1, 1997 to December 31, 1997 and the six month period
ended June 30, 1998:
<TABLE>
<CAPTION>
FOR THE PERIOD SIX
AUGUST 1, MONTHS
1997 TO ENDED
DECEMBER 31, JUNE 30,
1997 1998
-------------- -----------
(UNAUDITED)
<S> <C> <C>
Condensed Statements of Income:
Total revenues............................................ $ 6,336,025 $ 8,847,653
Operating income.......................................... 1,001,775 1,916,798
Net income................................................ 410,222 927,020
Condensed Balance Sheets:
Current assets............................................ 4,693,232 5,968,680
Noncurrent assets......................................... 13,943,450 13,463,098
Current liabilities....................................... 3,291,024 3,453,093
Non-current liabilities................................... 8,219,856 7,197,794
Shareholders' equity...................................... 7,125,802 8,780,891
</TABLE>
The investment in Geotrac, Inc. includes unamortized goodwill of $3,442,500
recognized on August 1, 1997. Goodwill is being amortized on a straight-line
basis over its estimated economic useful life of 20 years. Accumulated
amortization amounted to $71,718 and $157,781 at December 31, 1997 and June 30,
1998, respectively.
In connection with the acquisition, the Company and Geotrac, Inc. entered
into a Cross-License Agreement in which the flood zone databases of each company
were made available to one another in exchange for specified license fees. In
addition to the use of each Company's database, Geotrac, Inc. is primarily
responsible for the development, modification and maintenance of the respective
databases. Total amounts incurred during 1997 and the six months ended June 30,
1998 for maintenance of the databases amounted to $129,056 and $190,091,
respectively. The Company incurred $125,627 and $154,875 for usage of Geotrac,
Inc.'s database for 1997 and the six months ended June 30, 1998, respectively.
In July 1998, the Company, acquired the remaining 51% of the outstanding
shares of Geotrac, Inc.'s common stock for a total consideration of $7,994,250
consisting of:
<TABLE>
<S> <C>
shares of the Company's common stock valued at
$ per share, the estimated initial public
offering price............................................ $5,766,181
Promissory note............................................. 1,500,000
Cash........................................................ 728,069
----------
$7,994,250
==========
</TABLE>
The shares of the Company's Common Stock to be issued as partial
consideration will be adjusted to reflect the actual initial public offering
price.
This transaction, along with the July 1997 investment in Geotrac, Inc.
resulted in goodwill of approximately $15.3 million being recognized on a
consolidated basis. Goodwill is being amortized using the straight-line method
over a 20 year period. Geotrac, Inc. merged into BHDS, with BHDS as the
surviving company, which simultaneously changed its name to Geotrac of America,
Inc. In addition, the Cross-License Agreement with BHDS, referred to above, has
been terminated along with any amounts due to each other, which were
insignificant.
F-22
<PAGE> 88
INSURANCE MANAGEMENT SOLUTIONS GROUP, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 3. INVESTMENT IN GEOTRAC, INC. -- (CONTINUED)
In addition, the Company entered into a Corporate Governance Agreement with
Geotrac and its president and former majority shareholder (the "former majority
shareholder") setting forth certain terms and conditions upon which Geotrac will
operate following the merger. The Corporate Governance Agreement provides, in
part, that, for so long as the former majority shareholder owns stock in the
Company or Geotrac, or has an option to purchase stock in Geotrac, (i) the
Company will vote all of its shares in Geotrac to fix and maintain the number of
directors on the Geotrac Board of Directors at five, (ii) the Company will vote
its shares in Geotrac to elect as directors of Geotrac two persons designated by
the former majority shareholder, (iii) the termination of the former majority
shareholder as an employee of Geotrac will require the vote of four out of five
members of the Board of Directors, and (iv) certain actions by Geotrac will
require the unanimous approval of the Geotrac Board of Directors, including any
merger or consolidation, the payment of management or similar fees to the
Company or its subsidiaries and affiliates, the sale or issuance of Geotrac
stock, and the sale of Geotrac assets outside the ordinary course of business to
anyone other than an affiliate of Geotrac. The former majority shareholder also
has a right of first refusal to purchase the assets of Geotrac in the event such
assets are to be sold.
NOTE 4. PROPERTY AND EQUIPMENT
Property and equipment consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
LIFE ------------------------ JUNE 30,
(YEARS) 1996 1997 1998
------- ---------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C>
Computer equipment and acquired
software............................... 3-5 $1,475,970 $ 2,864,348 $ 6,390,613
Office furniture and equipment........... 5 545,773 575,940 732,255
Leasehold improvements................... 5 31,673 31,673 106,694
Maps and map database.................... 5 107,633 194,954 194,954
---------- ----------- -----------
2,161,049 3,666,915 7,424,516
Less -- accumulated depreciation and
amortization........................... (714,673) (1,335,579) (2,192,074)
---------- ----------- -----------
$1,446,376 $ 2,331,336 $ 5,232,442
========== =========== ===========
</TABLE>
Depreciation and amortization expense was $184,155, $309,188, and $611,954
in 1995, 1996 and 1997, respectively, and $242,374 and $950,661 for the six
months ended June 30, 1997 and 1998, respectively.
NOTE 5. NOTE PAYABLE
The Company has a revolving line of credit agreement with a bank that
provides for borrowings of up to $600,000 subject to 80% of eligible
receivables, as defined. Interest is payable monthly at the bank's prime rate
plus 1% (9.5% at December 31, 1997). The principal balance plus accrued interest
are due on demand. The note is collateralized by eligible receivables, as
defined. The line of credit was repaid subsequent to June 30, 1998 and the
agreement was terminated.
NOTE 6. NOTES RECEIVABLE AND PAYABLE -- AFFILIATES
On March 31, 1998, the Company entered into a $4,950,000 promissory note
with an affiliate that had previously advanced funds to the Company. The note,
which is included in "notes payable -- affiliates" in the accompanying June 30,
1998 consolidated balance sheet, bears interest at 8.5% per annum and is payable
in full together with accrued interest in April 1999.
F-23
<PAGE> 89
INSURANCE MANAGEMENT SOLUTIONS GROUP, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTES 6. NOTE RECEIVABLE AND PAYABLE -- AFFILIATES -- CONTINUED
On April 1, 1998, the Company entered into a $4,950,000 promissory note
with an affiliate to which the Company had previously advanced funds. The note,
which is reflected as "note receivable -- affiliate" in the accompanying June
30, 1998 consolidated balance sheet, bears interest at 8.5% per annum and is
payable in full together with accrued interest in April 1999.
In May 1998, the Company entered into a sales and assignment agreement with
certain affiliated companies whereby certain assets were transferred and
assigned to the Company, effective April 1998, for use in its business. The
assets, consisting of telephone equipment and computer hardware and software,
were transferred at their net book value as of the date of transfer. The Company
paid consideration consisting of $325,075 in cash and entered into two
promissory notes totaling $2,802,175 ($2,755,924 at June 30, 1998). The notes,
which are included in "notes payable -- affiliates" in the accompanying June 30,
1998 consolidated balance sheet, require monthly installment payments of $10,417
plus accrued interest and mature on April 1, 1999 and December 2000.
NOTE 7. LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------ JUNE 30,
1996 1997 1998
---------- ---------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Note payable to bank, interest at a fixed rate of
8.19%, due in monthly principal and interest
installments of $66,965, with the final payment
due December 2000, collateralized by certain
fixed assets of the Company.................... $ -- $2,131,000 $1,811,623
Note payable to bank, interest at the lender's
base lending rate (8.5% at December 31, 1997),
due in monthly principal installments of
$16,854, plus accrued interest thereon, with
the final payment due December 2000,
collateralized by certain fixed assets of the
Company and guaranteed by the Company's
Parent......................................... 809,000 606,750 505,625
Promissory note to bank, interest at a fixed rate
of 8.19%, due at maturity on February 28, 1998,
collateralized by certain fixed assets of the
Company........................................ -- 500,000 --
Notes payable to banks, interest at both fixed
(8.19%) and at the lender's base lending rate
(8.5% at December 31, 1997), due in monthly
principal installments ranging from $1,000 to
$5,104, with the final payments due ranging
from December 1999 to 2000, collateralized by
certain fixed assets of the Company, with
certain notes guaranteed by the Company's
Parent......................................... 400,975 471,725 387,514
Obligations under capital leases................. -- -- 313,406
---------- ---------- ----------
1,209,975 3,709,475 3,018,168
Less current maturities.......................... 315,500 1,522,822 1,350,661
---------- ---------- ----------
$ 894,475 $2,186,653 $1,667,507
========== ========== ==========
</TABLE>
Certain of the Company's debt agreements contain cross-default provisions
whereby the Company's debt instruments could be in default if any of the
Company's affiliates are in default on debt instruments with the same financial
institution. In the opinion of management, the Company and BIG and its
affiliates were in compliance with their required debt covenants. The Company
anticipates it will repay all of its debt
F-24
<PAGE> 90
INSURANCE MANAGEMENT SOLUTIONS GROUP, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 7. LONG-TERM DEBT -- CONTINUED
instruments containing cross-default provisions from the proceeds received from
the contemplated initial public offering.
Aggregate maturities of long-term debt are as follows for the years ended
December 31:
<TABLE>
<S> <C>
1998........................................................ $1,522,822
1999........................................................ 1,083,819
2000........................................................ 1,102,834
----------
$3,709,475
==========
</TABLE>
During April 1998, the Company assumed various capital leases relating to
computer equipment purchased from the Company's affiliates. At June 30, 1998,
property and equipment includes $408,565 and $72,640 of assets and accumulated
amortization, respectively, recorded under capital leases. At June 30, 1998,
$300,900 of the capital lease obligations are included in "current portion of
long-term debt" and $12,506 is included in "long-term debt, less current
portion" in the accompanying consolidated balance sheet. The leases bear
interest at 3.0% per annum and expire at various dates through September 1999.
NOTE 8. PREFERRED STOCK OF SUBSIDIARY
In connection with the Company's purchase of a 49% interest in Geotrac,
Inc., BHDS issued non-cumulative, 8% Preferred Stock to a corporation owned by
the half-brother of a director of the Company. The related party funded the
Preferred Stock purchase by entering into a note agreement with a bank. The
Preferred Stock served as collateral on the bank note and the Company acts as a
guarantor. In May 1998, IMSG repurchased the outstanding Preferred Stock of BHDS
in exchange for a note in the same amount. The note, which is included in
"current portion of notes payable -- affiliates" in the accompanying June 30,
1998 consolidated balance sheet, is payable in its entirety on December 31, 1998
and accrues interest at 8.5%. Subsequent to May 1998, the Preferred Stock of
BHDS, currently held by IMSG, was exchanged for 675,000 shares of 8 1/2%
cumulative Preferred Stock of BHDS. The non-cumulative 8% Preferred Stock was
then retired. The new Preferred Stock serves as collateral on the bank note held
by the related party. Dividends declared on the Preferred Stock for 1997 and the
six months ended June 30, 1998 were $229,315 and $189,370, respectively, and are
included in "interest expense" in the accompanying consolidated statements of
income as the amounts are insignificant and the preferred stock has certain
characteristics similar to debt.
NOTE 9. SHAREHOLDERS' EQUITY
Long Term Incentive Plan
The Long-Term Incentive Plan (the "Incentive Plan") has been adopted by the
Company's Board of Directors and is expected to be approved by the shareholders
of the Company prior to the consummation of the contemplated initial public
offering. A total of shares of Common Stock may be issued pursuant to the
Incentive Plan. The Incentive Plan provides for the grant of incentive or
nonqualified stock options to purchase shares of Common Stock. Upon the
completion of the contemplated initial public offering, the executive officers
of the Company will be granted options to purchase a total of shares of
Common Stock at the initial public offering price. All such options expire on
the tenth anniversary from the date of grant. Options shall become exercisable
60% after three years, 20% after four years and 20% after five years.
Non-Employee Directors' Stock Option Plan
The Non-Employee Directors' Stock Option Plan (the "Non-Employee Director
Plan") has been adopted by the Company's Board of Directors and is expected to
be approved by the shareholders of the
F-25
<PAGE> 91
INSURANCE MANAGEMENT SOLUTIONS GROUP, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 9. SHAREHOLDERS' EQUITY -- (CONTINUED)
Company prior to the consummation of the contemplated initial public offering.
The Non-Employee Director Plan provides for the grant of nonqualified stock
options to purchase up to 7,200 shares of Common Stock in any three-year period
to members of the Board of Directors who are not employees of the Company. The
Company will initially grant each non-employee director options to purchase
7,200 shares of Common Stock. Non-employee directors receiving such options will
become vested in options for the purchase of 800 shares of Common Stock after
the adjournment of each annual meeting of shareholders of the Company, to the
extent he or she has been granted options that have not yet vested, and provided
that he or she is then a non-employee director of the Company. In addition, each
non-employee director shall become vested in options for the purchase of 400
shares of Common Stock (200 shares in the event the non-employee director is
absent from, arrives late for, or departs early from, such meeting) upon the
adjournment of each regularly scheduled quarterly meeting of the Board of
Directors (other than following the annual meeting of shareholders), to the
extent he or she has been granted options that have not yet vested, and provided
that he or she is then a non-employee director of the Company. All options
granted will have an exercise price equal to the fair market value of the Common
Stock as of the date of grant, will become exercisable upon vesting, and will
expire on the sixth anniversary of the date of grant.
Non-Qualified Stock Option Plan
The Non-Qualified Stock Option Plan (the "Non-Qualified Plan") has been
adopted by the Company's Board of Directors and is expected to be approved by
the shareholders of the Company prior to the consummation of the contemplated
initial public offering. The Non-Qualified Plan provides for the grant of
non-qualified stock options to purchase up to shares of Common Stock.
Upon the completion of the contemplated initial public offering, options to
purchase shares of Common Stock at the initial public offering price will
be granted to certain executive officers of BIG. All of such options expire on
the tenth anniversary from the date of grant. Options shall become exercisable
60% after three years, 20% after four years and 20% after five years.
Preferred Stock
The Company is authorized to issue 20,000,000 shares of Preferred Stock,
$.01 par value per share. The Board of Directors has the authority, without any
further vote or action by the Company's shareholders, to issue Preferred Stock
in one or more series and to fix the number of shares, designations, relative
rights (including voting rights), preferences, and limitations of those series
to the full extent now or hereafter permitted by Florida law. The Company has no
present intention to issue shares of Preferred Stock, although it may determine
to do so in the future.
F-26
<PAGE> 92
INSURANCE MANAGEMENT SOLUTIONS GROUP, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 10. INCOME TAXES
The provision for income taxes is summarized as follows:
<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED DECEMBER 31, ENDED JUNE 30,
-------------------------------- -----------------------
1995 1996 1997 1997 1998
-------- -------- ---------- ---------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Current:
Federal....................... $142,200 $441,600 $1,686,500 $ 774,700 $1,052,200
State......................... 24,400 70,200 294,700 132,600 180,100
-------- -------- ---------- ---------- ----------
166,600 511,800 1,981,200 907,300 1,232,300
-------- -------- ---------- ---------- ----------
Deferred:
Federal....................... (3,600) (98,900) 112,400 113,000 (138,800)
State......................... (600) (16,900) 18,600 19,300 (23,700)
-------- -------- ---------- ---------- ----------
(4,200) (115,800) 131,000 132,300 (162,500)
-------- -------- ---------- ---------- ----------
$162,400 $396,000 $2,112,200 $1,039,600 $1,069,800
======== ======== ========== ========== ==========
</TABLE>
Reconciliation of the federal statutory income tax rate of 34% to the
effective income tax rate is as follows:
<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED DECEMBER 31, ENDED JUNE 30,
-------------------------------- -----------------------
1995 1996 1997 1997 1998
-------- -------- ---------- ---------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Federal income taxes, at
statutory rates............... $141,500 $344,400 $1,877,400 $ 926,600 $1,029,000
State taxes, net of federal
benefit....................... 15,700 35,200 200,400 99,000 109,900
Equity in earnings of Geotrac,
Inc........................... -- -- (68,300) -- (165,000)
Dividends declared on Preferred
Stock of Subsidiary........... -- -- 78,000 -- 64,400
Other, net...................... 5,200 16,400 24,700 14,000 31,500
-------- -------- ---------- ---------- ----------
$162,400 $396,000 $2,112,200 $1,039,600 $1,069,800
======== ======== ========== ========== ==========
</TABLE>
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 corresponding amounts used for income tax reporting purposes.
Significant components of the Company's deferred tax assets and liabilities are
as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------- JUNE 30,
1996 1997 1998
-------- -------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Deferred tax assets
Non-deductible items, principally vacation pay...... $183,900 $172,400 $255,000
Deferred tax liability
Depreciation and fixed asset bases differences...... (55,200) (174,700) (93,300)
Other............................................... -- -- (1,500)
-------- -------- --------
Net deferred tax asset (liability).................... $128,700 $ (2,300) $160,200
======== ======== ========
</TABLE>
F-27
<PAGE> 93
INSURANCE MANAGEMENT SOLUTIONS GROUP, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 11. COMMITMENTS AND CONTINGENCIES
Risks and Uncertainties
The Company derives a substantial portion of its revenues from outsourcing
services provided to its principal shareholder, BIG. The Company has entered
into contracts with BIG pursuant to which it will continue to provide
administrative services to BIG (See Note 12). Any loss of or material decrease
in the business from BIG could have a material adverse effect on the business,
financial condition and results of operations of the Company. The Company's
future financial condition and results of operations will depend to a
significant extent upon the commercial success of BIG and its continued
willingness to utilize the Company's services. Any significant downturn in the
business of BIG or its commitment in utilizing the Company's services could have
a material adverse effect on the Company's business, financial condition and
results of operations.
The Company's business is dependent upon various factors, such as general
economic conditions and weather patterns, that are beyond its control. For
example, the demand for flood zone determinations by lenders and their customers
is directly related to the affordability of mortgage financing and refinancing.
Current interest rates are relatively low and therefore conducive to a higher
volume of mortgage lending and flood zone determinations. An increase in
interest rates would have a negative impact on mortgage lending and consequently
also on the level of flood zone determinations requested. Fluctuations in
interest rates will likely produce fluctuations in the Company's earnings and
operating results. Likewise, natural disasters such as hurricanes, tornadoes and
floods, all of which are unpredictable, directly impact the demand for both the
Company's outsourcing and flood zone determination services.
Legal Proceedings
Bankers Insurance Company ("BIC"), the Company's principal customer and a
wholly-owned subsidiary of BIG, is currently subject to an investigation by the
Florida Department of Insurance (the "DOI") stemming from BIC's use of a private
investigator to gather information on a DOI employee and the private
investigator's unauthorized use of illegal wiretaps in connection therewith. In
addition, BIC and certain officers and employees of BIC and the Company have
been subpoenaed on behalf of the Federal Emergency Management Agency ("FEMA") to
produce documentation or testify in connection with FEMA's investigation of,
among other things, certain cash management practices. The management of BIC and
the Company do not believe the outcome of these investigations will have a
material adverse effect on the business, financial condition or results of
operations of BIC or the Company. Since the investigations are in the early
stages, it is impossible at this time to predict the ultimate outcome of these
investigations.
The Company is involved in various legal actions arising in the ordinary
course of business. Management cannot predict the outcome of these matters. It
is management's belief, after discussion with legal counsel, that the ultimate
resolution of these actions will not have a material adverse effect on the
Company's financial position, results of operations, or liquidity.
Tax Examination
The Company's ultimate parent, Bankers International Financial Corporation,
is currently undergoing an income tax examination by the Internal Revenue
Service related to the years 1995 and 1996; however, no assessment has been
levied. While it is not possible to determine with certainty the outcome of
these matters, in the opinion of management, the eventual resolution of the
examination will not have a material adverse effect on the Company's financial
position, results of operations, or liquidity.
F-28
<PAGE> 94
INSURANCE MANAGEMENT SOLUTIONS GROUP, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 11. COMMITMENTS AND CONTINGENCIES -- (CONTINUED)
Employment Agreements
The Company entered into employment agreements with certain members of its
executive management team, which will be effective on completion of the
contemplated initial public offering. The agreements provide for employment
terms of three years and shall continue indefinitely until terminated by either
party pursuant to the terms of the agreements. In the event an employment
agreement is terminated by the Company without cause, the employee shall be
entitled to earned, but unpaid benefits as well as a "Severance Payment" equal
to the employee's base salary for a period of twelve months, subject to
adjustment as defined. The agreements contain non-compete provisions, which
prevent a terminated employee from soliciting customers, prospective customers
or employees of the Company.
In connection with the acquisition of Geotrac, Inc., the Company entered
into an employment agreement with the President and Chief Executive Officer of
Geotrac, Inc. This agreement provides for an initial term of four years and
shall continue in effect thereafter until terminated by either party upon 90
days prior written notice. The agreement provides for an initial annual base
salary of $150,000 subject to annual review by Geotrac, Inc.'s Board of
Directors. In the event of Mr. White's death or disability, Geotrac, Inc.'s
obligations under the agreement will automatically terminate, except that Mr.
White shall be entitled to severance equal to his then current annual base
salary. The agreement further provides that, in the event of termination by
Geotrac, Inc. without cause (as defined therein) or by Mr. White for good reason
(as defined therein), or in the event the agreement is not renewed for any
reason other than death, disability or for cause, then Geotrac, Inc. shall pay
Mr. White at the rate of his annual base salary then in effect for the longer of
(i) the remainder of the term of the agreement and (ii) one year after such
termination date, subject to a credit of up to 75% of the base salary paid to
Mr. White by his new employer, if any.
NOTE 12. RELATED PARTY TRANSACTIONS
Service and Administrative Agreements
During 1995, 1996 and 1997, the Company provided information technology
services to affiliated entities based generally on actual cost incurred
(including selling, general and administrative expenses), which amounted to
$3,443,628, $4,787,772 and $3,236,255 of the outsourcing revenues for 1995, 1996
and 1997, respectively, and $1,649,973 for the six months ended June 30, 1997.
For the six months ended June 30, 1998, these charges are included in the fee
structure related to the affiliated service agreement discussed below.
In 1997, the Company charged a monthly fee for its policy and claims
administration services based on certain factors under the terms of the 1997
service agreements with BIG and other affiliated companies. For policy and
claims administration, the Company charged a fee based on a percentage of direct
written premiums and a percentage of direct paid losses for certain lines of
business, as defined, respectively. The fee ranged from 8.5% to 9% for services
rendered in connection with policy administration and .5% to 15% for claims
administration related to these policies. Also, in 1997 the Company processed
claims for BIG and its other affiliates related to those lines of business not
covered under the servicing agreement and provided other miscellaneous services
on a cost reimbursement basis. Amounts charged related to this claims processing
and other miscellaneous services amounted to $9,518,525 for 1997 and $4,757,755
for the six months ended June 30, 1997.
Effective January 1, 1998, the Company and BIG, along with its affiliates,
entered into a service agreement which replaced the previous arrangement. For
policy administration, the Company charges a fee, ranging from 8% to 10% of
direct written premiums for certain lines of business, as defined. In 1998, in
addition to policy processing services previously provided under the 1997
service agreements, the Company also provides policy processing related to its
affiliated companies' automobile lines of business. In addition,
F-29
<PAGE> 95
INSURANCE MANAGEMENT SOLUTIONS GROUP, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 12. RELATED PARTY TRANSACTIONS -- (CONTINUED)
claims services that were previously provided on a cost reimbursement basis are
included in its 1998 affiliated servicing agreements. For claims administration,
the Company charges fees ranging from 7% to 12.50% of direct earned premiums,
except for flood related programs which are based on 1% of earned premiums and
1.5% of incurred losses. Also, a service fee of 2% of direct earned premiums is
charged related to information technology services.
Under these service agreements, the Parent Company accounted for
$16,359,821 of total outsourcing revenue in 1997, and $7,624,539 and $17,305,257
for the six months ended June 30, 1997 and 1998, respectively.
The Company has historically been charged a monthly management fee under an
administrative services agreement with BIG for common costs that are incurred by
its Parent and allocated to its affiliated companies. These common costs include
human resources, legal, corporate planning and communications, cash management,
certain executive management and rent. The basis of allocation for the
management services is employee head counts and estimates of time incurred,
which management believes to be a reasonable basis of allocation. Total
management fees in 1995, 1996, 1997 and the six months ended June 30, 1997 were
$724,904, $1,053,546, $2,343,866 and $1,171,932, respectively. Effective January
1, 1998, the Company is being charged for these services, exclusive of rent,
generally based on agreed-upon amounts totaling $864,406 for the six months
ended June 30, 1998. The initial term of the agreement expires on December 31,
1998, but may be renewed by the Company, at its sole option, for two successive
one-year periods. Thereafter, the agreement may be terminated by either party.
Prior to December 31, 1997, the Company was also charged for rental
expenses through the management services allocated from its Parent as discussed
above. Subsequent to this time, the Company entered into specific lease
agreements for its office space. The future minimum lease payments under these
non-cancelable operating leases are $1,150,535 and $1,384,180 for the years
ending December 31, 1998 and 1999, respectively. For financial statement
purposes, rent expense of $504,611 for the six months ended June 30, 1998 is
included in management services from Parent.
The Company leases certain employees, from time to time, that have been
trained in customer service and other areas of property and casualty insurance
from its affiliated companies. The Company has agreed to pay all direct and
indirect expenses in connection with these employees. These charges are included
in cost of outsourcing services and selling, general and administrative expenses
and amounted to $6,635,249 for 1997, and $3,798,482 and $2,553,513 for the six
months ended June 30, 1997 and 1998, respectively.
Effective January 1, 1998, the Company entered into a perpetual license
agreement with BIG and BIC pursuant to which the Company licensed its primary
operating systems from BIG and BIC in exchange for a nominal fee. The license
agreement provides that the Company shall be solely responsible for maintaining
and upgrading the systems and shall have the authority to license such systems
to third parties.
Flood zone determination services performed for affiliated companies
amounted to $239,980, $414,209 and $1,028,358 for 1995, 1996 and 1997,
respectively, and $436,561 and $547,182 for the six months ended June 30, 1997
and 1998, respectively.
Intercompany Accounts
The Company's due from affiliates, including the note
receivable -- affiliate, generally resulted from the zero balance account
arrangement with BIG (See Note 2) whereby the Company's excess cash was swept
into BIG's operating cash account. The Company's due to affiliates, including
the note payable -- affiliate, generally resulted from the Company's affiliates
advancing service fees and paying certain expenses on behalf
F-30
<PAGE> 96
INSURANCE MANAGEMENT SOLUTIONS GROUP, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 12. RELATED PARTY TRANSACTIONS -- (CONTINUED)
of the Company. The Company's income tax payable to Parent represents the
current income tax liability owed to the Parent under the intercompany tax
sharing/allocation agreement.
On July 31, 1998, the Parent sold an approximate 20% interest in the
Company to Venture Capital Corporation ("VCC"), a Cayman Islands corporation.
VCC acquired its interest in the Company directly from the Company's Parent. VCC
is wholly owned by a discretionary charitable trust. The sole trustee of this
trust is a Cayman Islands bank unaffiliated with BIG, the Company or their
respective officers or directors. BIG is indirectly owned by a separate Cayman
Islands corporation which is owned by a separate discretionary charitable trust.
The sole trustee of this trust is a Cayman Islands corporation unaffiliated with
BIG, the Company or their respective officers or directors. The declaration of
each trust provides that the same not-for-profit Cayman Islands corporation
possesses the discretionary power to (i) direct the trustee to appoint the trust
fund to another trust for the benefit of one or more of the beneficiaries of the
trust and (ii) remove the trustee and appoint one or more new trustees outside
the Cayman Islands. The Board of Directors of this entity includes certain
executive officers of BIG and the Company. VCC is selling a portion of its
interest in the Company in the offering, and a subsidiary of VCC has agreed to
loan approximately $ million to BIG in exchange for a subordinated note. A
portion of the funds to be received by BIG will be used to satisfy the due from
affiliates and note receivable -- affiliate balances recorded by the Company.
With the funds, the Company will repay the entire due to affiliate, income taxes
payable to Parent and note payable -- affiliate balances at that time.
Certain officers and directors of the Company also serve as officers and
directors of BIG. Effective as of the completion of the Company's initial public
offering, certain of these officers and directors will resign from their
positions with BIG. However, the Company's Chairman of the Board, President and
Chief Executive Officer will continue to serve as Vice Chairman of the Board of
Directors of BIG, and two other directors of the Company will continue to serve
as executive officers and/or directors of BIG. As the interests of the Company
and BIG may differ, these individuals may face certain conflicts of interests.
In the event that the Company's offering is not completed, the due to
affiliates (including income taxes payable to Parent) and due from affiliates,
which are without any specific terms and are non-interest bearing, will be
satisfied during the ordinary course of business.
This note should also be read in conjunction with the other notes to the
financial statements for additional related party transactions.
NOTE 13. EMPLOYEE BENEFIT PLANS
The Company's employees participate in its Parent company's 401(k) plan.
The Plan covers substantially all employees. Benefits vest based on the number
of years of service. To participate in the plan, employees must be at least 21
years old and have completed twelve months of service. The Company, at its
discretion, can make matching contributions based upon the participant's
deferral depending on the participant's annual salary up to a maximum of 6% of
compensation. The Company's expense related to this plan was approximately
$70,191, $121,390 and $466,096 in 1995, 1996 and 1997, respectively, and
$188,827 and $296,305 for the six months ended June 30, 1997 and 1998,
respectively.
In addition, the Company's employees participate in self-insured medical
and dental plans provided by the Parent. The medical program provides for
specific excess loss reinsurance for individual claims greater than $60,000 for
any one claimant and aggregate claims greater than $1,000,000. The Company
accrues the estimated liabilities for the ultimate costs of both reported claims
and incurred but not reported claims.
F-31
<PAGE> 97
INSURANCE MANAGEMENT SOLUTIONS GROUP, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 14. SEGMENT INFORMATION
The Company primarily operates in two business segments within the United
States; providing policy and claims administration services and flood zone
determinations. No unaffiliated customer accounted for more than 10% of the
Company's total revenues for the periods presented. The following table provides
information about these reportable segments as required by SFAS No. 131
"Disclosures About Segments of an Enterprise and Related Information":
<TABLE>
<CAPTION>
INTERCOMPANY
OUTSOURCING FLOOD ZONE ELIMINATIONS CONSOLIDATED
SERVICES DETERMINATIONS AND OTHER TOTALS
----------- -------------- ------------ ------------
<S> <C> <C> <C> <C>
1995
Operating revenues -- affiliated.......... $ 3,516,704 $ 239,980 $ (73,076) $ 3,683,608
Operating revenues -- unaffiliated........ -- 4,886,946 -- 4,886,946
Operating income.......................... (244,370) 732,073 -- 487,703
Interest expense.......................... 17,527 53,966 -- 71,493
Depreciation and amortization............. 92,597 91,558 -- 184,155
Identifiable assets....................... 613,022 2,036,315 -- 2,649,337
Equity in earnings of Geotrac, Inc........ -- -- -- --
1996
Operating revenues -- affiliated.......... $ 4,819,786 $ 417,949 $ (35,754) $ 5,201,981
Operating revenues -- unaffiliated........ 337,458 7,291,031 -- 7,628,489
Operating income.......................... (78,801) 1,167,115 -- 1,088,314
Interest expense.......................... 11,901 63,449 -- 75,350
Depreciation and amortization............. 171,683 137,505 -- 309,188
Identifiable assets....................... 1,508,426 1,932,816 -- 3,441,242
Equity in earnings of Geotrac, Inc........ -- -- -- --
1997
Operating revenues -- affiliated.......... $30,374,066 $ 1,028,359 $ (1,259,465) $30,142,960
Operating revenues -- unaffiliated........ 599,443 7,763,576 -- 8,363,019
Operating income.......................... 3,290,830 2,408,676 -- 5,699,506
Interest expense.......................... 69,781 308,879 -- 378,660
Depreciation and amortization............. 404,830 278,842 -- 683,672
Identifiable assets....................... 8,178,483 11,353,222 -- 19,531,705
Equity in earnings of Geotrac, Inc........ -- 201,009 -- 201,009
JUNE 30, 1997 -- (UNAUDITED)
Operating revenues -- affiliated.......... $14,554,046 $ 436,561 $ (521,779) $14,468,828
Operating revenues -- unaffiliated........ 243,501 3,904,515 -- 4,148,016
Operating income.......................... 1,301,358 1,496,809 -- 2,798,167
Interest expense.......................... 34,890 37,959 -- 72,849
Depreciation and amortization............. 151,201 91,173 -- 242,374
Identifiable assets....................... 7,050,160 3,258,044 (116,660) 10,191,544
Equity in earnings of Geotrac, Inc........ -- -- -- --
JUNE 30, 1998 -- (UNAUDITED)
Operating revenues -- affiliated.......... $17,992,154 $ 547,182 $ (686,896) $17,852,440
Operating revenues -- unaffiliated........ 448,808 4,095,475 -- 4,544,283
Operating income.......................... 1,260,824 1,788,675 -- 3,049,499
Interest expense.......................... 382,875 231,558 -- 614,433
Depreciation and amortization............. 838,490 198,234 -- 1,036,724
Identifiable assets....................... 18,663,358 13,071,726 (3,220,856) 28,514,228
Equity in earnings of Geotrac, Inc........ -- 485,034 -- 485,034
</TABLE>
F-32
<PAGE> 98
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Board of Directors
Geotrac, Inc.
We have audited the accompanying balance sheets of Geotrac, Inc. (formerly
YoSystems, Inc.) as of December 31, 1996 and 1997, and the related statements of
income, shareholders' equity and cash flows for each of the three years in the
period ended December 31, 1997. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Geotrac, Inc. as of December
31, 1996 and 1997 and the results of its operations and its cash flows for each
of the three years in the period ended December 31, 1997, in conformity with
generally accepted accounting principles.
GRANT THORNTON LLP
Tampa, Florida
May 29, 1998
F-33
<PAGE> 99
GEOTRAC, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------- JUNE 30,
1996 1997 1998
-------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents............................... $ 138 $ 1,897,262 $ 2,797,008
Accounts receivable, net................................ -- 2,227,236 2,413,260
Prepaid expenses........................................ -- 278,734 177,412
Deferred tax assets..................................... -- 290,000 581,000
-------- ----------- -----------
Total current assets............................ 138 4,693,232 5,968,680
PROPERTY AND EQUIPMENT, net............................... -- 3,419,916 3,305,740
OTHER ASSETS
Goodwill, net........................................... -- 8,662,804 8,441,626
Customer contracts, net................................. -- 1,516,667 1,416,667
Deferred tax assets..................................... -- 25,000 4,000
Other................................................... -- 319,063 295,065
-------- ----------- -----------
Total assets.................................... $ 138 $18,636,682 $19,431,778
======== =========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES
Current portion of long-term debt....................... $ -- $ 1,250,000 $ 1,250,000
Current portion of capital lease obligations............ -- 288,952 288,952
Accounts payable........................................ -- 120,754 308,497
Accounts payable -- related party....................... 25,139 -- --
Income taxes payable.................................... -- 297,000 204,000
Deferred compensation................................... -- 705,000 692,461
Other current liabilities............................... -- 629,318 709,183
-------- ----------- -----------
Total current liabilities....................... 25,139 3,291,024 3,453,093
LONG-TERM DEBT, less current portion...................... -- 7,187,500 6,250,000
CAPITAL LEASE OBLIGATIONS, less current portion........... -- 557,356 426,737
DEFERRED REVENUE.......................................... -- 475,000 521,057
COMMITMENTS AND CONTINGENCIES............................. -- -- --
SHAREHOLDERS' EQUITY (DEFICIT)
Common Stock, $.01 par value, 1,000 shares authorized;
490, 1,000 and 1,000 shares issued and outstanding at
December 31, 1996, 1997 and June 30, 1998,
respectively......................................... 5 10 10
Additional paid-in capital.............................. 5,995 6,715,570 7,443,639
Retained earnings (deficit)............................. (31,001) 410,222 1,337,242
-------- ----------- -----------
Total shareholders' equity (deficit)............ (25,001) 7,125,802 8,780,891
-------- ----------- -----------
Total liabilities and shareholders' equity
(deficit)..................................... $ 138 $18,636,682 $19,431,778
======== =========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
F-34
<PAGE> 100
GEOTRAC, INC.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
-------------------------------- ------------
1995 1996 1997 1998
-------- -------- ---------- ------------
(UNAUDITED)
<S> <C> <C> <C> <C>
REVENUES
Flood zone determination services............... $ -- $ -- $6,242,815 $8,718,117
Other revenues.................................. -- -- 93,210 129,536
-------- -------- ---------- ----------
Total revenues.......................... -- -- 6,336,025 8,847,653
-------- -------- ---------- ----------
EXPENSES
Cost of revenues................................ -- -- 2,678,557 3,918,662
Selling, general and administrative expense..... 9,755 29,841 1,319,434 1,556,638
Deferred compensation (non-recurring item)...... -- -- 732,795 728,069
Depreciation and amortization................... -- -- 594,045 727,486
-------- -------- ---------- ----------
Total expenses.......................... 9,755 29,841 5,324,831 6,930,855
-------- -------- ---------- ----------
OPERATING INCOME (LOSS)........................... (9,755) (29,841) 1,011,194 1,916,798
OTHER INCOME (non-recurring item)................. 932,222 -- 1,700,000 --
INTEREST EXPENSE.................................. -- -- (338,391) (371,778)
-------- -------- ---------- ----------
INCOME (LOSS) BEFORE PROVISION FOR INCOME TAXES... 922,467 (29,841) 2,372,803 1,545,020
PROVISION FOR INCOME TAXES........................ -- -- 272,000 618,000
-------- -------- ---------- ----------
NET INCOME (LOSS)................................. $922,467 $(29,841) $2,100,803 $ 927,020
======== ======== ========== ==========
</TABLE>
The accompanying notes are an integral part of these statements.
F-35
<PAGE> 101
GEOTRAC, INC.
STATEMENT OF SHAREHOLDERS' EQUITY (DEFICIT)
<TABLE>
<CAPTION>
ADDITIONAL RETAINED
COMMON PAID-IN EARNINGS
STOCK CAPITAL (DEFICIT) TOTAL
------ ---------- ----------- -----------
<S> <C> <C> <C> <C>
Balance at January 1, 1995....................... $ 5 $ 5,995 $ 78,744 $ 84,744
Dividend paid to shareholder................... -- -- (1,002,371) (1,002,371)
Net income..................................... -- -- 922,467 922,467
--- ---------- ----------- -----------
Balance at December 31, 1995..................... 5 5,995 (1,160) 4,840
Net loss....................................... -- -- (29,841) (29,841)
--- ---------- ----------- -----------
Balance at December 31, 1996..................... 5 5,995 (31,001) (25,001)
Dividend paid to S Corporation shareholder..... -- -- (1,700,000) (1,700,000)
Sale of Common Stock........................... 5 6,749,995 -- 6,750,000
Recapitalization of Company for change from S
Corporation to C Corporation................ (40,420) 40,420 --
Net income..................................... -- -- 2,100,803 2,100,803
--- ---------- ----------- -----------
Balance at December 31, 1997..................... 10 6,715,570 410,222 7,125,802
Contribution of shares from shareholder to
employees for services rendered
(unaudited)................................. -- 728,069 -- 728,069
Net income (unaudited)......................... -- -- 927,020 927,020
--- ---------- ----------- -----------
Balance at June 30, 1998 (unaudited)............. $10 $7,443,639 $ 1,337,242 $ 8,780,891
=== ========== =========== ===========
</TABLE>
The accompanying notes are an integral part of this statement.
F-36
<PAGE> 102
GEOTRAC, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
SIX
MONTHS
YEAR ENDED DECEMBER 31, ENDED
------------------------------------ JUNE 30,
1995 1996 1997 1998
----------- -------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)............................ $ 922,467 $(29,841) $ 2,100,803 $ 927,020
Adjustments to reconcile net income (loss) to
net cash provided by (used in) operating
activities:
Depreciation and amortization............. -- -- 594,045 727,486
Contribution of shares from shareholder to
employees for services rendered......... 728,069
Deferred federal income tax credit........ -- -- (315,000) (270,000)
Changes in assets and liabilities:
Accounts receivable..................... 84,298 -- 8,284 (186,024)
Prepaid expenses and other assets....... -- -- (73,945) 101,923
Accounts payable and other
liabilities.......................... -- 25,139 63,058 267,608
Deferred compensation................... -- -- 705,000 (12,539)
Income taxes payable.................... -- -- 297,000 (93,000)
Deferred revenue........................ -- -- (25,000) 46,057
----------- -------- ----------- ----------
Net cash provided by (used in)
operating activities............... 1,006,765 (4,702) 3,354,245 2,236,600
----------- -------- ----------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment.......... -- -- (153,371) (268,735)
Acquisition of business, net of cash
acquired.................................. -- -- (6,163,057) --
----------- -------- ----------- ----------
Net cash used in investing
activities......................... -- -- (6,316,428) (268,735)
----------- -------- ----------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES
Payment of note payable from shareholder..... -- -- (200,000) --
Proceeds from note payable................... -- -- 447,800 --
Payments on note payable..................... -- -- (312,500) (937,500)
Payments on capital lease obligations........ -- -- (125,993) (130,619)
Dividend paid S corporation shareholder...... (1,002,371) -- (1,700,000) --
Sale of common stock......................... -- -- 6,750,000 --
----------- -------- ----------- ----------
Net cash provided by (used in)
financing activities............... (1,002,371) -- 4,859,307 (1,068,119)
----------- -------- ----------- ----------
INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS............................. 4,394 (4,702) 1,897,124 899,746
CASH AND CASH EQUIVALENTS, beginning of
period....................................... 446 4,840 138 1,897,262
----------- -------- ----------- ----------
CASH AND CASH EQUIVALENTS, end of period....... $ 4,840 $ 138 $ 1,897,262 $2,797,008
=========== ======== =========== ==========
SUPPLEMENT DISCLOSURES OF
CASH FLOW INFORMATION
Cash paid for interest....................... $ -- $ -- $ 155,110 $ 744,666
=========== ======== =========== ==========
Cash paid for income taxes................... $ -- $ -- $ 290,000 $ 981,000
=========== ======== =========== ==========
</TABLE>
F-37
<PAGE> 103
GEOTRAC, INC.
STATEMENTS OF CASH FLOWS -- (CONTINUED)
SUPPLEMENTAL DISCLOSURES OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
During the year ended December 31, 1997, the Company financed the
acquisition of SMS Geotrac, Inc. with $8,250,000 of debt and incurred $337,035
of deferred financing costs.
During the year ended December 31, 1997, the Company acquired $25,398 in
equipment under a capital lease.
Acquisition of Business Net of Cash Acquired:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
1997
------------
<S> <C>
Fair value of assets acquired............................... $17,308,778
Liabilities assumed......................................... (2,308,778)
Debt issued................................................. (8,250,000)
Cash acquired............................................... (586,943)
-----------
$ 6,163,057
===========
</TABLE>
During the six months ended June 30, 1998, the president of Geotrac, Inc.
and his wife contributed 46.45 shares of Geotrac, Inc.'s Common Stock owned by
them to certain employees for prior services rendered. The contribution of
shares to these employees and the corresponding expense recognized by the
Company, totaling $728,069, has been reflected as deferred compensation
(non-recurring item) and additional paid-in capital in the accompanying
financial statements. See Note 7.
The accompanying notes are an integral part of these statements.
F-38
<PAGE> 104
GEOTRAC, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 1. DESCRIPTION OF BUSINESS AND ORGANIZATION
Geotrac, Inc. (the "Company"), formerly YoSystems, Inc., is a provider of
flood zone determination services for financial services companies and
individuals located throughout the United States.
On July 31, 1997, the Company acquired the outstanding stock of SMS
Geotrac, Inc., a wholly-owned subsidiary of Strategic Mortgage Services, Inc.
("SMS"), an unrelated company, for $15,000,000. Prior to the acquisition, the
Company had limited activity and was an S corporation for federal income tax
purposes. The Company's principal activity prior to July 31, 1997 was to receive
contingent earnout payments from the sale of its operating assets during 1994
and to distribute any payments received to its shareholder.
Simultaneous with the acquisition of SMS Geotrac, Inc., the Company sold
49% of its outstanding shares to Bankers Hazard Determination Services, Inc.
("BHDS"), a subsidiary of Insurance Management Solutions Group, Inc. ("IMSG"),
for $6,750,000. Such proceeds of the stock sale together with the proceeds of
$8,250,000 from a bank borrowing were used to acquire SMS Geotrac, Inc.
Subsequent to the acquisition, the Company changed its name from YoSystems, Inc.
to Geotrac, Inc. As of July 31, 1997, the Company became a C corporation for
federal income tax purposes.
On May 12, 1998, the Company, its shareholders (including BHDS), IMSG and
IMSG's parent, Bankers Insurance Group, Inc., executed a definitive agreement
whereby all the shares of common stock held by the Company's president, his wife
and by certain employees representing 51% of the outstanding shares, were
acquired by IMSG and BHDS for total consideration of $7,994,250 consisting of:
<TABLE>
<S> <C>
Shares of IMSG Common Stock................................. $5,766,181
Promissory note............................................. 1,500,000
Cash........................................................ 728,069
----------
$7,994,250
==========
</TABLE>
During July 1998, the transaction was completed with the Company merging
into BHDS, with BHDS as the surviving corporation, which simultaneously changed
its name to Geotrac of America, Inc. The cross-license agreement with BHDS (See
Note 3) was terminated upon completion of the merger.
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Use of Estimates
In preparing the financial statements in conformity with generally accepted
accounting principles, management makes estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosures of contingent
assets and liabilities at the date of the financial statements, as well as the
reported amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates.
Cash Equivalents
The Company considers all highly liquid investments with an original
maturity of three months or less to be cash equivalents.
Concentration of Credit
The Company provides flood zone determination services primarily to
insurance companies and financial institutions throughout the United States.
Credit is extended to customers (primarily financial services
F-39
<PAGE> 105
GEOTRAC, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)
companies) based on management's assessment of their credit worthiness. Customer
deposits are required in certain instances.
Property and Equipment
Property and equipment are stated at cost less accumulated depreciation and
amortization. Depreciation and amortization is provided for using the straight
line method over the estimated useful life of the assets.
Capitalized costs include the cost of purchasing maps as well as the direct
labor cost of converting the maps to digitized computer files. The Company
capitalizes the costs of acquiring and computerizing maps that are used as a
basis for making flood zone determinations.
Impairment of Long-Lived Assets
The Company evaluates the recoverability of its long-lived assets and
intangibles (including goodwill) held whenever adverse events or changes in
business climate indicate that the expected undiscounted future cash flows from
the related asset may be less than previously anticipated. If the net book value
of the related asset exceeds the undiscounted future cash flows of the asset,
the carrying amount would be reduced to the present value of its expected future
cash flows and an impairment loss would be recognized. Management does not
believe that an impairment reserve was required for all periods presented.
Goodwill
Goodwill of $8,847,119 related to the acquisition of SMS Geotrac, Inc., is
being amortized using the straight-line method over twenty years. The
amortization period was determined based on various factors including the nature
of the product or service provided, the Company's strong market position and
historical and projected operating results. Accumulated amortization at December
31, 1997 and June 30, 1998 was $184,315 and $405,493, respectively.
Customer Contracts
In connection with the acquisition of SMS Geotrac, Inc., the Company
estimated the fair value of its customer contracts and allocated $1,600,000 of
the purchase price to such contracts. Customer contracts are being amortized
using the straight-line method over eight years. The amortization period was
determined based on historical and expected contract duration periods as well as
the nature of the product and services provided. Accumulated amortization at
December 31, 1997 and June 30, 1998 was $83,333 and $183,333, respectively.
Revenues
The Company's flood zone revenues are principally derived from flood zone
determination services and life-of-loan monitoring services. Flood zone
determinations involve the Company ascertaining and certifying to a property's
flood zone classification. Each determination is completed within a short period
of time and is performed with a high degree of accuracy. Revenues for these
services are recognized upon completion of each flood zone determination.
The Company receives an up-front fee to provide life of loan monitoring of
flood zone determinations whereby the Company notifies its customers of changes
in previously issued flood zone determinations. The Company defers a portion of
the fee associated with this future obligation and amortizes these amounts using
the straight-line method over the average life of the underlying loan,
approximately 7 years.
F-40
<PAGE> 106
GEOTRAC, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)
Income Taxes
For the year ended December 31, 1996 and through July 31, 1997 the Company
was an S Corporation for federal income tax purposes. Accordingly, federal
income taxes on net income of the Company were payable by the shareholder.
Beginning August 1, 1997, the Company accounts for income taxes on the
asset and liability method. Deferred tax assets and liabilities are determined
based on the difference between the financial statement and tax bases of assets
and liabilities as measured by the enacted tax rates which will be in effect
when these differences reverse. Deferred tax expense is the result of changes in
deferred tax assets and liabilities. At the date of the termination of the S
Corporation election, there were no deferred tax assets or liabilities created.
Deferred Financing Costs
The Company incurred financing costs of approximately $337,000 related to
its bank borrowings. Such costs are being amortized using the straight line
method (approximates the effective yield method) over the term of the loan (see
Note 5).
Fair Value of Financial Instruments
The carrying amount of the Company's financial instruments at December 31,
1997, and June 30, 1998, which includes cash, accounts receivable, accounts
payable and debt, approximates fair value due to the short maturity of those
instruments. The Company considers the fixed rate and variable rate financial
instruments to be representative of current market interest rates and,
accordingly, the recorded amounts approximate their present fair market value.
Unaudited Financial Statements
The unaudited financial statements and the related notes thereto for June
30, 1998 include all normal and recurring adjustments, which in the opinion of
management are necessary for a fair presentation and are prepared on the same
basis as audited annual statements. The interim results are not necessarily
indicative of the results that may be expected for the full year.
Segments and Related Information
The Company adopted SFAS No. 131, "Disclosure about Segments of an
Enterprise and Related Information" ("SFAS 131"), which establishes standards
for the way that public business enterprises report information about operating
segments in annual financial statements and requires that those enterprises
report selected information about operating segments in interim financial
reports issued to shareholders. This statement also establishes standards for
related disclosures about products and geographic service areas, and major
customers. This statement requires the reporting of financial and descriptive
information about an enterprise's reportable operating segments. The Company
only has one operating segment and one principal product or service (See Note
1). All the Company's operations are located within the United States and no
individual customer represents more than 10% of total revenues for all periods
presented herein.
New Accounting Pronouncement
In June 1997, the Financial Accounting Standards Board issued SFAS No. 130,
"Reporting of Comprehensive Income" ("SFAS 130"), which establishes standards
for reporting and display of comprehensive income and its components (revenues,
expense, gains and losses) in a full set of financial statements as components
of comprehensive income be reported in a financial statement that is displayed
with the same
F-41
<PAGE> 107
GEOTRAC, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)
prominence as other financial statements. This statement is effective for fiscal
years beginning after December 15, 1997. Earlier application is permitted.
Reclassification of financial statements for earlier periods provided for
comparative purposes is required. The adoption of SFAS 130 in 1998 did not have
any effect on the financial statements.
NOTE 3. ACQUISITION OF SMS GEOTRAC, INC.
On July 31, 1997 the Company acquired all of the outstanding common stock
of SMS Geotrac, Inc. (Note 1) for a purchase cost of $15,000,000 which was
funded as follows:
<TABLE>
<S> <C>
Cash contributed by BHDS.................................... $ 6,750,000
Bank borrowing.............................................. 8,750,000
Excess cash not required for acquisition.................... (500,000)
-----------
$15,000,000
===========
</TABLE>
The acquisition has been accounted for as a purchase, and accordingly the
net assets acquired on July 31, 1997 were recorded at their estimated fair value
as follows:
<TABLE>
<S> <C>
Current assets.............................................. $ 3,026,152
Property and equipment...................................... 3,547,454
Excess of cost over assets acquired......................... 8,847,119
Customer contracts.......................................... 1,600,000
Other assets................................................ 288,053
Liabilities assumed......................................... (2,308,778)
-----------
$15,000,000
===========
</TABLE>
In addition, BHDS and the Company entered into a cross licensing agreement
whereby the Company is to receive a total of $900,000 for the use of its
database of digitized maps, for the period from the date of acquisition through
June 2000. Further, BHDS will reimburse the Company for fifty percent of its
cost to maintain the database. As of December 31, 1997 and June 30, 1998,
approximately $250,000 and $345,000, respectively have been recorded under this
agreement.
The following unaudited proforma consolidated results of operations for the
years ended December 31, 1996 and 1997 is presented as if the acquisition of SMS
Geotrac, Inc. had been made on January 1, 1996. The
F-42
<PAGE> 108
GEOTRAC, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 3. ACQUISITION OF SMS GEOTRAC, INC. -- (CONTINUED)
unaudited proforma information reflects the additional goodwill amortization and
interest expense that would have been incurred if the Company had purchased SMS
Geotrac, Inc. on January 1, 1996. These pro forma results are not necessarily
indicative of the results of operations that would have occurred had the
purchase been made at January 1, 1996 or the future results of the consolidated
operations:
<TABLE>
<CAPTION>
1996 1997
------- -------
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C>
Revenues.................................................... $13,375 $14,063
Cost of revenues............................................ 6,673 6,043
Selling, general and administrative......................... 3,287 2,900
Deferred compensation (non-recurring item).................. -- 733
Depreciation and amortization............................... 1,639 1,908
------- -------
Total expenses.................................... 11,599 11,584
------- -------
Operating income............................................ 1,776 2,479
Other income (non-recurring item)........................... -- 1,700
Interest expense............................................ (770) (825)
------- -------
Income before income taxes.................................. 1,006 3,354
Provision for income taxes.................................. 421 1,457
------- -------
Net income.................................................. $ 585 $ 1,897
======= =======
</TABLE>
The following table distinguishes the condensed historical results of
operations for the year ended December 31, 1997 by the period before and after
the acquisition of SMS Geotrac, Inc.
<TABLE>
<CAPTION>
AUGUST 1,
JANUARY 1, 1997
1997 THROUGH
THROUGH DECEMBER 31,
JULY 31, 1997 1997 TOTAL
------------- ------------ ----------
<S> <C> <C> <C>
Revenues.......................................... $ -- $6,336,025 $6,336,025
Operating income (loss)........................... (9,419) 1,001,775 1,011,194
Other income (expense)............................ 1,700,000 (338,391) 1,361,609
Net income........................................ 1,690,581 410,222 2,100,803
</TABLE>
NOTE 4. PROPERTY AND EQUIPMENT
Property and equipment consists of the following:
<TABLE>
<CAPTION>
LIFE DECEMBER 31, JUNE 30,
YEARS 1997 1998
------ ------------ -----------
(UNAUDITED)
<S> <C> <C> <C>
Computer equipment..................................... 3-5 $1,343,736 $1,438,209
Furniture and fixtures................................. 7 498,002 510,760
Transportation equipment............................... 5 28,908 28,908
Maps and map database.................................. 3-5 1,855,554 2,016,308
---------- ----------
3,726,200 3,994,185
Less accumulated depreciation and amortization......... (306,284) (688,445)
---------- ----------
$3,419,916 $3,305,740
========== ==========
</TABLE>
Depreciation and amortization expense for the year ended December 31, 1997
and the six month period ended June 30, 1998 was $306,284 and $383,303,
respectively.
F-43
<PAGE> 109
GEOTRAC, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 5. LONG-TERM DEBT
In connection with the purchase of SMS Geotrac, Inc., the Company borrowed
$8,750,000 from a bank. The note is payable in quarterly installments of
$312,500 plus interest, with the final installment due June 30, 2004. Interest
is charged, at the Company's option, at 1) the current prime rate; 2) a seven
year fixed rate; 3) a certain percentage over the LIBOR rate based upon a
formula; or 4) a combination of the above rates. In addition to the quarterly
payments, annual prepayments may be required in an amount equal to fifty percent
of excess cash flow, as defined in the loan agreement. The agreement contains
covenants that require the Company to maintain certain financial ratios (e.g.,
stockholders' equity of at least $6,250,000 through June 30, 1998 increasing by
50% of net income thereafter), limits the dollar value of capital expenditures
and restricts the payment of dividends to 50% of excess cash flows (as defined).
The note is collateralized by substantially all the assets of the Company. The
outstanding balance (and prime interest rate) at December 31, 1997 and June 30,
1998 was $8,437,500 (8.5%) and $7,500,000 (8.5%), respectively.
Scheduled maturities of the note payable to bank at December 31, 1997 are
as follows:
<TABLE>
<S> <C>
1998........................................................ $1,250,000
1999........................................................ 1,250,000
2000........................................................ 1,250,000
2001........................................................ 1,250,000
2002........................................................ 1,250,000
Thereafter.................................................. 2,187,500
----------
$8,437,500
==========
</TABLE>
NOTE 6. OTHER INCOME (NON-RECURRING ITEM)
During 1996 and on July 30, 1997 the Company received contingent earn-out
payments of $932,222 and $1,700,000 (final payment), respectively associated
with the sale of its operating assets during 1994. These amounts are classified
as other income (non-recurring item).
NOTE 7. COMMITMENTS AND CONTINGENCIES
Operating Leases
The Company leases office space and equipment under operating leases with
unexpired terms ranging from a month-to-month basis to seven years. Rent expense
under all operating leases was approximately $186,000 and $221,000 for the year
ended December 31, 1997 and the six month period ended June 30, 1998,
respectively. The Company is currently leasing one of its operating facilities
from its 51 percent shareholder. This lease requires monthly rental payments of
$8,717 through August 1999.
The future minimum lease payments under these operating lease agreements
are as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
- -----------------------
<S> <C>
1998........................................................ 423,792
1999........................................................ 380,650
2000........................................................ 263,368
2001........................................................ 219,331
----------
1,287,141
==========
</TABLE>
F-44
<PAGE> 110
GEOTRAC, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 7. COMMITMENTS AND CONTINGENCIES -- (CONTINUED)
Capital Leases
The Company has capital lease agreements for computer equipment and
furniture and fixtures. At December 31, 1997 and June 30, 1998 property and
equipment includes $695,623 of assets recorded under capital leases and
accumulated amortization of $57,543 and $127,108, respectively.
The future minimum lease payments under these capital lease agreements are
as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
- -----------------------
<S> <C>
1998........................................................ $343,762
1999........................................................ 323,763
2000........................................................ 241,835
2001........................................................ 38,099
--------
Total............................................. 947,459
Less amount representing interest........................... 101,151
--------
Present value of minimum lease payments..................... 846,308
Less amount representing current portion.................... 288,952
--------
Long-term portion......................................... $557,356
========
</TABLE>
Deferred Compensation
On September 11, 1997 the Company's Board of Directors, recognizing SMS
Geotrac, Inc.'s president's nonbinding commitment which originated prior to the
acquisition of SMS Geotrac, approved and granted bonuses to certain current and
former employees of SMS Geotrac. Such bonuses were principally related to prior
services rendered by these employees and resulted in additional compensation of
$732,795 which is separately disclosed in the statement of operations as
deferred compensation (a non-recurring item) of which approximately $362,000 and
371,000 relates to cost of revenues and selling, general and administrative
expenses, respectively. These amounts are to be paid to the individuals on or
before December 31, 1998.
Common Stock Awards
Prior to and at the time of the acquisition of SMS Geotrac, the president
of SMS Geotrac also had a nonbinding commitment to grant to certain former and
current employees options to purchase shares of Geotrac, Inc. (formerly
YoSystems) common stock held by the president and his wife, for prior employee
services rendered. During May 1998, the president and his wife contributed 46.45
shares of their common stock to these individuals, which is recorded as deferred
compensation (non-recurring item) totaling $728,069, in the accompanying June
30, 1998 statement of operations. The valuation of the Company's Common Stock
used to compute the deferred compensation expense was determined by dividing the
purchase price for the remaining 51% of the Company ($7,994,250) by the
remaining shares to be purchased (510).
Risks and Uncertainties
The nature of the Company's business is such that it is dependent upon
various factors such as general economic conditions and weather patterns that
are beyond its control. The demand for flood zone determinations by lenders and
their customers is directly related to the affordability of mortgage financing
and refinancing. Current interest rates are relatively low and therefore
conducive to a higher volume of mortgage lending and flood zone determinations.
An increase in interest rates would have a negative impact on mortgage lending
and consequently on the level of flood zone determinations performed.
Fluctuations in interest rates will likely produce fluctuations in the Company's
operating results. Likewise, natural disasters such as hurricanes, tornadoes,
and floods, all or which are unpredictable, directly impact the demand for the
Company's flood zone determination business.
F-45
<PAGE> 111
GEOTRAC, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 8. INCOME TAXES
The provision for income taxes consists of the following components:
<TABLE>
<CAPTION>
SIX
YEAR MONTHS
ENDED ENDED
DECEMBER 31, JUNE 30,
1997 1998
------------- -----------
(UNAUDITED)
<S> <C> <C>
Federal:
Current................................................... $ 461,000 $690,000
Deferred.................................................. (249,000) (210,000)
--------- --------
212,000 480,000
--------- --------
State:
Current................................................... 126,000 198,000
Deferred.................................................. (66,000) (60,000)
--------- --------
60,000 138,000
--------- --------
Total............................................. $ 272,000 $618,000
========= ========
</TABLE>
A reconciliation of the federal statutory income tax rate of 34% to the
Company's effective income tax rate is as follows:
<TABLE>
<CAPTION>
SIX
YEAR MONTHS
ENDED ENDED
DECEMBER 31, JUNE 30,
1997 1998
------------- ------------
(UNAUDITED)
<S> <C> <C>
Federal income taxes, at statutory rates.................... $ 807,000 $525,000
S corporation earnings not subject to tax................... (575,000) --
State taxes, net............................................ 40,000 93,000
--------- --------
$ 272,000 $618,000
========= ========
</TABLE>
Deferred federal income taxes reflect the net tax effects of temporary
differences between the carrying amounts of assets and liabilities for financial
reporting purposes and the corresponding amounts used for income tax purposes.
Significant components of the Company's deferred tax assets are as follows:
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
1997 1998
------------ -----------
(UNAUDITED)
<S> <C> <C>
Current deferred tax assets (liabilities):
Vacation accrual.......................................... $(18,000) $ (4,000)
Deferred compensation..................................... 303,000 565,000
Allowance for doubtful accounts........................... 5,000 20,000
-------- --------
Net current deferred tax asset............................ $290,000 $581,000
======== ========
Long-term deferred tax asset:
Depreciation and amortization............................. $ 25,000 $ 4,000
======== ========
</TABLE>
NOTE 9. EMPLOYEE BENEFIT PLAN
From August 1, 1997 through December 31, 1997, the Company participated in
a 401(k) plan established by the former parent of SMS Geotrac, Inc. Eligible
full-time employees of the Company made voluntary contributions to the plan. No
Company contributions were made to the plan. Effective January 1, 1998 the
Company established its own 401(k) plan. Any contributions to the new plan by
the Company are discretionary.
F-46
<PAGE> 112
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Board of Directors
SMS Geotrac, Inc.
We have audited the accompanying statements of income, shareholder's equity
and cash flows of SMS Geotrac, Inc. for each of the two years in the period
ended June 30, 1997 and the one month period ended July 31, 1997. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on the financial statements based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the results of its operations its and cash flows of
SMS Geotrac, Inc. for each of the two years in the period ended June 30, 1997
and the one month period ended July 31, 1997, in conformity with generally
accepted accounting principles.
GRANT THORNTON LLP
Tampa, Florida
May 29, 1998
F-47
<PAGE> 113
SMS GEOTRAC, INC.
STATEMENTS OF INCOME
<TABLE>
<CAPTION>
ONE MONTH
ENDED
YEAR ENDED JUNE 30, JULY 31,
------------------------- ----------
1996 1997 1997
----------- ----------- ----------
<S> <C> <C> <C>
REVENUES
Flood zone determination services...................... $12,286,525 $12,313,735 $1,197,314
Other revenues......................................... 203,301 207,772 12,365
----------- ----------- ----------
Total revenues................................. 12,489,826 12,521,507 1,209,679
----------- ----------- ----------
EXPENSES
Cost of revenues....................................... 6,219,142 5,913,800 529,597
Selling, general and administrative expense............ 3,079,377 2,839,433 227,286
Depreciation and amortization.......................... 688,678 1,330,876 103,560
----------- ----------- ----------
Total expenses................................. 9,987,197 10,084,109 860,443
----------- ----------- ----------
OPERATING INCOME......................................... 2,502,629 2,437,398 349,236
INTEREST EXPENSE......................................... (81,495) (78,850) (8,215)
----------- ----------- ----------
INCOME BEFORE PROVISION FOR INCOME TAXES................. 2,421,134 2,358,548 341,021
PROVISION FOR INCOME TAXES............................... 1,046,900 1,079,100 148,000
----------- ----------- ----------
NET INCOME............................................... $ 1,374,234 $ 1,279,448 $ 193,021
=========== =========== ==========
</TABLE>
The accompanying notes are an integral part of these statements.
F-48
<PAGE> 114
SMS GEOTRAC, INC.
STATEMENT OF SHAREHOLDER'S EQUITY
<TABLE>
<CAPTION>
ADDITIONAL
COMMON PAID-IN RETAINED
STOCK CAPITAL EARNINGS TOTAL
------ ---------- ---------- ----------
<S> <C> <C> <C> <C>
Balance at July 1, 1996............................ $1 $1,464,047 $ 326,215 $1,790,263
Capital contribution from parent................. -- 932,222 -- 932,222
Net income....................................... -- -- 1,374,234 1,374,234
-- ---------- ---------- ----------
Balance at June 30, 1996........................... 1 2,396,269 1,700,449 4,096,719
Capital contributions from parent................ -- 2,111,140 -- 2,111,140
Net income....................................... -- -- 1,279,448 1,279,448
-- ---------- ---------- ----------
Balance at June 30, 1997........................... 1 4,507,409 2,979,897 7,487,307
Capital contribution from parent................. -- 1,700,000 -- 1,700,000
Net income....................................... -- -- 193,021 193,021
-- ---------- ---------- ----------
Balance at July 31, 1997........................... $1 $6,207,409 $3,172,918 $9,380,328
== ========== ========== ==========
</TABLE>
The accompanying notes are an integral part of this statement.
F-49
<PAGE> 115
SMS GEOTRAC, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
ONE MONTH
ENDED
YEAR ENDED JUNE 30, JULY 31,
------------------------- -----------
1996 1997 1997
----------- ----------- -----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income.......................................... $ 1,374,234 $ 1,279,448 $ 193,021
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization.................... 688,678 1,330,876 103,560
Deferred federal income tax (credit) expense..... (240,400) 53,100 8,000
Income taxes due to Parent....................... 1,304,440 1,106,539 139,988
Gain on sale of property and equipment........... (1,252) -- --
Provision for bad debts.......................... 385,908 -- --
Changes in assets and liabilities:
Accounts receivable............................ (1,204,784) 517,209 49,514
Prepaid expenses and other assets.............. (99,933) (38,993) (38,223)
Accounts payable and other liabilities......... 241,530 (459,510) (11,793)
Deferred revenue............................... 231,261 157,880 (1,490)
----------- ----------- -----------
Net cash provided by operating activities... 2,679,682 3,946,549 442,577
----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Property and equipment deposit returned............. -- -- 130,670
Purchases of property and equipment................. (1,679,980) (1,457,719) (60,941)
Proceeds from disposal of property and equipment.... 12,400 -- --
----------- ----------- -----------
Net cash provided by (used in) investing
activities................................ (1,667,580) (1,457,719) 69,729
----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Advance from officer................................ -- -- 200,000
Advance to related party............................ -- -- (796,597)
Net repayments on revolving line of credit.......... (283,884) -- --
Repayment of capital lease obligations.............. (146,788) (291,219) (22,433)
Advances to parent.................................. -- (905,780) (1,850,000)
Capital contribution from parent.................... -- 500,000 --
----------- ----------- -----------
Net cash used in financing activities....... (430,672) (696,999) (2,469,030)
----------- ----------- -----------
INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS.................................... 581,430 1,791,831 (1,956,724)
CASH AND CASH EQUIVALENTS, beginning of period........ 170,406 751,836 2,543,667
----------- ----------- -----------
CASH AND CASH EQUIVALENTS, end of period.............. $ 751,836 $ 2,543,667 $ 586,943
=========== =========== ===========
SUPPLEMENT DISCLOSURES OF CASH
FLOW INFORMATION
Cash paid for interest.............................. $ 81,495 $ 78,850 $ 8,215
=========== =========== ===========
</TABLE>
Supplemental disclosures of non-cash investing and financing activities:
During the year ended June 30, 1996 and on July 31, 1997, the Company's
parent made a payment of $932,222 and $1,700,000 to the Company's former owner
in conjunction with the August 1, 1994 purchase of the Company. The amounts were
recorded as an increase to goodwill and an additional capital contribution to
the Company.
During the year ended June 30, 1997, the Company and its parent agreed to
treat $1,611,140 of intercompany obligations as a capital contribution to the
Company.
During the year ended June 30, 1997, the Company entered into capital lease
agreements relating to equipment with a cost of $427,452.
The accompanying notes are an integral part of these statements.
F-50
<PAGE> 116
SMS GEOTRAC, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 1. DESCRIPTION OF BUSINESS AND ORGANIZATION
SMS Geotrac, Inc. (the "Company"), headquartered in Norwalk, Ohio, is
principally a provider of flood zone determination services for insurance
companies and financial institutions located throughout the United States. The
Company is a wholly-owned subsidiary of Strategic Mortgage Services, Inc.
("Parent").
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Use of Estimates
In preparing the financial statements in conformity with generally accepted
accounting principles, management makes estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosures of contingent
assets and liabilities at the date of the financial statements, as well as the
reported amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates.
Cash Equivalents
The Company considers all highly liquid investments with an original
maturity of three months or less to be cash equivalents.
Concentration of Credit
The Company provides professional flood zone determination services for
financial services companies and individuals throughout the United States.
Credit is extended to customers (primarily financed services companies) based on
management's assessment of their credit worthiness. Customer deposits are
required in certain instances.
Depreciation and Amortization of Property and Equipment
Depreciation and amortization is computed using accelerated methods for
financial reporting and federal income tax purposes, over the estimated useful
lives of the assets which range from 3-5 years for computer equipment and 5-7
years for furniture and fixtures, transportation equipment and maps.
Depreciation and amortization for the years ended June 30, 1996 and 1997 were
$594,797 and $1,226,820, respectively and $94,889 for the one month period ended
July 31, 1997.
Goodwill
Goodwill is being amortized using the straight-line method over fifteen
years. Amortization for the years ended June 30, 1996 and 1997 was $93,881 and
$104,056, respectively; and $8,671 for the one month period ended July 31, 1997.
Revenues
The Company's flood zone revenues are principally derived from flood zone
determination services and life of loan monitoring services. Flood zone
determinations involve the Company ascertaining and certifying to a property's
flood zone classification. Each determination is completed within a short period
of time and is performed with a high degree of accuracy. Revenues for these
services are recognized upon completion of each flood zone determination.
The Company receives an up-front fee to provide life of loan monitoring of
flood zone determinations whereby the Company notifies its customers of changes
in previously issued flood zone determinations. The Company defers a portion of
the fee associated with this future obligation and amortizes these amounts using
the straight-line method over the average life of the underlying loan,
approximately 7 years.
F-51
<PAGE> 117
SMS GEOTRAC, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)
Income Taxes
Income taxes are accounted for on the asset and liability method. Deferred
tax assets and liabilities are determined based on the difference between the
financial statement and tax bases of assets and liabilities as measured by the
enacted tax rates which will be in effect when these differences reverse.
Deferred tax expense is the result of changes in deferred tax assets and
liabilities.
Segments and Related Information
The Company adopted SFAS No. 131, "Disclosure about Segments of an
Enterprise and Related Information" ("SFAS 131"), which establishes standards
for the way that public business enterprises report information about operating
segments in annual financial statements and requires that those enterprises
report selected information about operating segments in interim financial
reports issued to shareholders. This statement also establishes standards for
related disclosures about products and services geographic areas, and major
customers. This statement requires the reporting of financial and descriptive
information about an enterprise's reportable operating segments. The Company
only has one operating segment and one principal product or service (See Note
1). All the Company's operations are located within the United States and no
individual customer represents more than 10% of total revenues for all periods
presented herein.
NOTE 3. COMMITMENTS AND CONTINGENCIES
Operating Leases
The Company leases office space and equipment under operating leases with
unexpired terms ranging from a month to month basis to seven years. Rent expense
under all operating leases was approximately $438,000 and $405,000 for the years
ended June 30, 1996 and 1997, respectively and $41,000 for the one month period
ended July 31, 1997. The Company leases one of its operating facilities from a
Company controlled by the President of the Company. This lease requires monthly
rental payments of $8,717 through August 1999.
The future minimum lease payments under these operating lease agreements
are as follows:
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
- -------------------
<S> <C>
1998........................................................ $ 419,400
1999........................................................ 410,159
2000........................................................ 316,359
2001........................................................ 291,600
2002........................................................ 219,399
Thereafter.................................................. 90,280
----------
$1,747,197
==========
</TABLE>
F-52
<PAGE> 118
SMS GEOTRAC, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 3. COMMITMENTS AND CONTINGENCIES -- (CONTINUED)
Capital Leases
The Company has capital lease agreements for computer equipment and
furniture and fixtures. The future minimum lease payments under these capital
lease agreements are as follows:
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
- -------------------
<S> <C>
1998........................................................ $ 356,670
1999........................................................ 316,670
2000........................................................ 316,670
2001........................................................ 105,460
2002........................................................ 4,412
----------
Total............................................. 1,099,882
Less amount representing interest........................... 130,546
----------
Present value of minimum lease payments..................... 969,336
Less amount representing current portion.................... 304,950
----------
Long-term portion........................................... $ 664,386
==========
</TABLE>
Risks and Uncertainties
The nature of the Company's business is such that it is dependent upon
various factors such as general economic conditions and weather patterns that
are beyond its control. The demand for flood zone determinations by lenders and
their customers is directly related to the affordability of mortgage financing
and refinancing. Current interest rates are relatively low and therefore
conducive to a higher volume of mortgage lending and flood zone determinations.
An increase in interest rates would have a negative impact on mortgage lending
and consequently on the level of flood zone determinations performed.
Fluctuations in interest rates will likely produce fluctuations in the Company's
operating results. Likewise, natural disasters such as hurricanes, tornadoes,
and floods, all or which are unpredictable, directly impact the demand for the
Company's flood zone determination business.
NOTE 4. INCOME TAXES
The Company's results of operations are included in the consolidated
federal income tax return of its Parent. Income taxes are determined and
recorded in the amount that would have been due and payable had the Company
filed a separate income tax return on an accrual basis. Federal and state income
taxes payable is included in the amount due to Parent. The provision for income
taxes consists of the following components:
<TABLE>
<CAPTION>
ONE MONTH
ENDED
YEAR ENDED JUNE 30, JULY 31,
----------------------- ---------
1996 1997 1997
---------- ---------- ---------
<S> <C> <C> <C>
Federal:
Current.......................................... $1,016,500 $ 793,000 $111,000
Deferred......................................... (164,700) 37,100 6,000
---------- ---------- --------
851,800 830,100 117,000
---------- ---------- --------
State:
Current.......................................... 270,800 233,000 29,000
Deferred......................................... (75,700) 16,000 2,000
---------- ---------- --------
195,100 249,000 31,000
---------- ---------- --------
Totals................................... $1,046,900 $1,079,100 $148,000
========== ========== ========
</TABLE>
F-53
<PAGE> 119
SMS GEOTRAC, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
A reconciliation of the federal statutory income tax rate to the effective
income tax rate is as follows:
<TABLE>
<CAPTION>
ONE MONTH
ENDED
YEAR ENDED JUNE 30, JULY 31,
----------------------- ---------
1996 1997 1997
---------- ---------- ---------
<S> <C> <C> <C>
Federal income taxes, at statutory rates........... $ 823,000 $ 802,000 $116,000
State taxes........................................ 195,100 249,000 31,000
Other.............................................. 28,800 28,000 1,000
---------- ---------- --------
$1,046,900 $1,079,000 $148,000
========== ========== ========
</TABLE>
NOTE 5. EMPLOYEE BENEFIT PLAN
The Company participates in a 401(k) plan established by its Parent.
Eligible full-time employees of the Company may make voluntary contributions to
the plan. Matching Company contributions to the plan may be made at the
discretion of the Board of Directors. No Company contributions were made during
the years ended June 30, 1996 and 1997 or for the one month ended July 31, 1997.
NOTE 6. RELATED PARTY TRANSACTIONS
During the year ended June 30, 1996 and on July 30, 1997, the Parent made a
payment of $932,222 and $1,700,000 to the Company's former owner (a company
controlled by the President of the Company) in conjunction with the August 1,
1994 purchase of the Company. The amounts were recorded as an increase to
goodwill and an additional capital contribution to the Company.
During the year ended June 30, 1997, the Company and its Parent agreed to
treat all outstanding amounts owed to the Parent, $1,611,140, as an additional
capital contribution. In addition, the Parent contributed $500,000 to the
Company.
During the one month period ended July 31, 1997, the Company advanced
$796,597 to YoSystems, Inc, a company owned by the Company's President.
NOTE 7. SUBSEQUENT EVENT
On July 31, 1997 all of the outstanding stock of the Company was acquired
by YoSystems, Inc., which is owned by the Company's President, for $15 million.
Concurrent with the acquisition of the Company, YoSystems, Inc. sold 49% of its
common stock to Bankers Hazard Determination Services, Inc.
F-54
<PAGE> 120
=============================================================================
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THE OFFER MADE BY THIS PROSPECTUS, AND, IF GIVEN
OR MADE, SUCH INFORMATION AND REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING
BEEN AUTHORIZED BY THE COMPANY, THE SELLING SHAREHOLDER OR THE UNDERWRITERS.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN
OFFER TO BUY, ANY SECURITY OTHER THAN THE SHARES OF COMMON STOCK OFFERED BY THIS
PROSPECTUS, NOR DOES IT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF ANY
OFFER TO BUY THE SHARES OF COMMON STOCK BY ANYONE IN ANY JURISDICTION IN WHICH
SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED, OR IN WHICH THE PERSON MAKING SUCH
OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO, OR TO ANY PERSON TO WHOM IT IS
UNLAWFUL TO MAKE SUCH AN OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS
PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL UNDER ANY CIRCUMSTANCES CREATE ANY
IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY DATE
SUBSEQUENT TO THE DATE HEREOF.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary.................... 1
Risk Factors.......................... 5
Geotrac Acquisition................... 11
Use of Proceeds....................... 11
Dividend Policy....................... 12
Capitalization........................ 13
Dilution.............................. 14
Selected Consolidated Financial Data
of the Company...................... 15
Management's Discussion and Analysis
of Financial Condition and Results
of Operations of the Company........ 17
Selected Consolidated Financial Data
of Geotrac.......................... 24
Management's Discussion and Analysis
of Financial Condition and Results
of Operations of Geotrac............ 25
Business.............................. 29
Management............................ 41
Principal and Selling Shareholders.... 48
Certain Transactions.................. 49
Description of Capital Stock.......... 52
Shares Eligible for Future Sale....... 55
Underwriting.......................... 56
Legal Matters......................... 57
Experts............................... 57
Available Information................. 58
Index to Financial Statements......... F-1
</TABLE>
UNTIL , 1998 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL
DEALERS EFFECTING TRANSACTIONS IN THE COMMON STOCK, WHETHER OR NOT PARTICIPATING
IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS DELIVERY
REQUIREMENT IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS
WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.
====================================================
====================================================
SHARES
[INSURANCE MANAGEMENT SOLUTIONS GROUP, INC. LOGO]
COMMON STOCK
------------------------
PROSPECTUS
------------------------
RAYMOND JAMES & ASSOCIATES, INC.
LEHMAN BROTHERS
ING BARING FURMAN SELZ
, 1998
=====================================================
<PAGE> 121
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
<TABLE>
<S> <C>
Securities and Exchange Commission filing fee............... $23,600
NASD filing fee............................................. 8,500
Nasdaq listing fee..........................................
Transfer agent expenses and fees............................
Printing and engraving......................................
Accountants' fees and expenses..............................
Consultants' fees and expenses..............................
Legal fees and expenses.....................................
Miscellaneous...............................................
-------
Total............................................. $
=======
</TABLE>
- ---------------
* All of the above fees, costs and expenses above will be paid by the Company.
Other than the SEC filing fee and NASD filing fee, all fees and expenses are
estimated.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Florida Business Corporation Act (the "Florida Act") permits a Florida
corporation to indemnify a present or former director or officer of the
corporation (and certain other persons serving at the request of the corporation
in related capacities) for liabilities, including legal expenses, arising by
reason of service in such capacity if such person shall have acted in good faith
and in a manner he reasonably believed to be in or not opposed to the best
interests of the corporation, and in any criminal proceeding if such person had
no reasonable cause to believe his conduct was unlawful. However, in the case of
actions brought by or in the right of the corporation, no indemnification may be
made with respect to any matter as to which such director or officer shall have
been adjudged liable, except in certain limited circumstances.
The Company's Amended and Restated Articles of Incorporation and Amended
and Restated Bylaws provide that the Company shall indemnify directors and
executive officers to the fullest extent now or hereafter permitted by the
Florida Act. In addition, the Company may enter into Indemnification Agreements
with its directors and executive officers in which the Registrant has agreed to
indemnify such persons to the fullest extent now or hereafter permitted by the
Florida Act.
The indemnification provided by the Florida Business Corporation Act and
the Company's Amended and Restated Bylaws is not exclusive of any other rights
to which a director or officer may be entitled. The general effect of the
foregoing provisions may be to reduce the circumstances which an officer or
director may be required to bear the economic burden of the foregoing
liabilities and expense.
The Company may obtain a liability insurance policy for its directors and
officers as permitted by the Florida Act, which policy may extend to, among
other things, liability arising under the Securities Act of 1933, as amended
(the "Securities Act").
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
The Company is a holding company that was incorporated in the State of
Florida on December 26, 1996 by its parent, Bankers Insurance Group, Inc.
("BIG"). On or about December 30, 1996, BIG contributed two of its wholly-owned
operating subsidiaries, Insurance Management Solutions, Inc. and Bankers Hazard
Determination Services, Inc., in exchange for 500 shares of the Company's Common
Stock. The issuance of shares of the Company's Common Stock pursuant to this
transaction is claimed to be exempt from registration under the Securities Act
pursuant to Section 4(2) thereof.
II-1
<PAGE> 122
Effective May 8, 1998, the Company declared a stock dividend of 40,000
shares of Common Stock for each share of Common Stock then outstanding,
resulting in an increase in the outstanding capital stock of the Company to
20,000,000 shares of Common Stock.
On July 31, 1997, the Company acquired a 49% equity interest in Geotrac,
Inc., an Ohio corporation ("Old Geotrac"), for $6.75 million in cash. In July,
1998, the Company acquired the remaining 51% equity interest in Old Geotrac in
exchange for (i) shares of Common Stock (assuming an initial public
offering price of $ per share), (ii) a promissory note in the principal
amount of $1.5 million, and (iii) cash in the amount of $723,069. The
transaction was effected pursuant to the merger of Old Geotrac into a
wholly-owned subsidiary of the Company, with the surviving entity being known as
"Geotrac of America, Inc." The issuance of shares of the Company's Common Stock
pursuant to this merger is claimed to be exempt from registration under the
Securities Act pursuant to Section 4(2) thereof.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT DESCRIPTION
- ------- -------------------
<S> <C> <C>
1.1 -- Proposed Form of Underwriting Agreement.
3.1 -- Amended and Restated Articles of Incorporation of Insurance
Management Solutions Group, Inc.
3.2 -- Amended and Restated Bylaws of Insurance Management
Solutions Group, Inc.
4.1 -- Specimen certificate for the Common Stock of Insurance
Management Solutions Group, Inc.**
5.1 -- Opinion of Foley & Lardner.**
10.1 -- Employment Agreement, dated August 10, 1998, between David
K. Meehan and Insurance Management Solutions Group, Inc.
10.2 -- Insurance Management Solutions Group, Inc. Long Term
Incentive Plan.*
10.3 -- Insurance Management Solutions Group, Inc. Non-Employee
Directors' Stock Option Plan.
10.4 -- Snell Arcade Building Lease, dated May 15, 1996, between
Snell Arcade Limited Company and Bankers Insurance Group,
Inc., as revised and assigned to Insurance Management
Solutions Group, Inc., effective January 1, 1998.*
10.5 -- Bankers Building -- 5th Street North Lease Agreement, dated
January 1, 1997, between Bankers Insurance Group, Inc. and
Insurance Management Solutions Group, Inc.*
10.6 -- Bankers Financial Center Lease Agreement, dated January 1,
1997, between Bankers Insurance Company and Insurance
Management Solutions Group, Inc.*
10.7 -- Lease, dated September 2, 1994, between DanYo LLC (as
successor to Sandan) and SMS Geotrac, Inc.*
10.8 -- Indenture of Lease, dated September 23, 1994, between
Southview Business Center, Ltd., an Ohio limited
partnership, and SMS Geotrac, Inc., including Addendum I,
dated March 20, 1995, and Addendum II, dated December 8,
1995.*
10.9 -- Master Equipment Lease Agreement, dated May 11, 1995, and
executed on May 15, 1995, between National City Leasing
Corporation and SMS Geotrac, Inc.*
10.10 -- Term Lease Master Agreement, dated June 30, 1995, between
IBM Credit Corporation and SMS Geotrac, Inc.*
10.11 -- Employee Leasing Agreement, dated May 19, 1998, between
Bankers Insurance Company and Insurance Management Solutions
Group, Inc.*
10.12 -- Administration Services Agreement, dated January 1, 1998,
between Bankers Insurance Group, Inc. and Insurance
Management Solutions Group, Inc.
</TABLE>
II-2
<PAGE> 123
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT DESCRIPTION
- ------- -------------------
<C> <C> <S>
10.13 -- Service Agreement, dated January 1, 1998, between Insurance
Management Solutions, Inc. and Bankers Insurance Company.*
10.14 -- Service Agreement dated January 1, 1998 between Insurance
Management Solutions, Inc. and Bankers Security Insurance
Company.*
10.15 -- Service Agreement dated January 1, 1998 between Insurance
Management Solutions, Inc. and First Community Insurance
Company.*
10.16 -- Vendor Flood Insurance Agreement, dated January 1, 1996,
between Insurance Management Solutions, Inc. (as successor
to Insurance Management Information Services, Inc.) and
Mobile USA Insurance Company, Inc.*
10.17 -- Vendor Flood Insurance Agreement, dated November 10, 1995,
between AAA Auto Club South Insurance Company and Insurance
Management Information Services, Inc.*
10.18 -- Flood Insurance Program Services Agreement by and among
Insurance Management Information Services, Inc., American
Alternative Insurance Corporation, and Corporate Insurance
Agency Services.*
10.19 -- Loan and Security Agreement, dated July 31, 1997, between
Huntington National Bank, YoSystems, Inc. and SMS Geotrac,
Inc.*
10.20 -- Pledge and Security Agreement, dated May 8, 1998, by
Insurance Management Solutions Group, Inc. in favor of
SouthTrust Bank, N.A.*
10.21 -- Agreement and Plan of Merger, dated May 12, 1998, by and
among Geotrac, Inc., Insurance Management Solutions, Inc.,
Daniel J. and Sandra White, Bankers Insurance Group, Inc.
and Bankers Hazard Determination Services, Inc.*
10.22 -- Employment Agreement, dated July 31, 1998, between Geotrac
of America, Inc. (as successor to Geotrac, Inc.) and Daniel
J. White.
10.23 -- Term Lease Master Agreement, dated August 6, 1996, between
IBM Credit Corporation and Bankers Insurance Company,
assigned by Bankers Insurance Company to Insurance
Management Solutions, Inc., effective April 1, 1998,
pursuant to Sales and Assignment Agreement, dated May 6,
1998.*
10.24 -- Sales and Assignment Agreement, dated May 6, 1998, by and
between Insurance Management Solutions Group, Inc.,
Insurance Management Solutions, Inc., Bankers Insurance
Group, Inc., Bankers Insurance Services, Inc., Bankers Life
Insurance Company, Southern Rental & Leasing Corporation,
Bankers Insurance Company, and Bankers Security Insurance
Company.*
10.25 -- Software Maintenance and Enhancement Agreement, dated
January 7, 1997 between Systems Integration and Imaging
Technologies Incorporated and Insurance Management
Information Services, Inc.*
10.26 -- Corporate Governance Agreement, dated July 31, 1998, between
Geotrac, Inc., Daniel J. White and Insurance Management
Solutions Group, Inc.
10.27 -- Tax Indemnity Agreement dated July 31, 1998 between Bankers
Insurance Group, Inc., Insurance Management Solutions Group,
Inc. and Daniel J. and Sandra White.
10.28 -- Flood Insurance Agreement, dated January 6, 1998, between
First Community Insurance Company and Keystone Insurance
Company.*
10.29 -- Marketing Agreement, dated November 14, 1997, between First
Community Insurance Company and Nobel Insurance Company.*
10.30 -- Flood Insurance Agreement, dated February 11, 1998, between
First Community Insurance Company and Horace Mann Insurance
Company.*
10.31 -- Promissory Note dated April 1, 1998, from Insurance
Management Solutions, Inc. to Bankers Insurance Company in
the principal amount of $2,353,424.42.*
</TABLE>
II-3
<PAGE> 124
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT DESCRIPTION
- ------- -------------------
<C> <C> <S>
10.32 -- Promissory Note dated April 1, 1998, from Insurance
Management Solutions, Inc. to Southern Rental & Leasing
Corporation in the principal amount of $448,749.95.*
10.33 -- Promissory Note dated May 8, 1998, from Insurance Management
Solutions Group, Inc. to Heritage Hotel Holding Company in
the principal amount of $6,750,000, as amended.*
10.34 -- Note dated December 30, 1994, from Insurance Management
Solutions, Inc. (as successor to Bankers Data Center, Inc.)
to First of America Bank -- Florida F.S.B. in the principal
amount of $200,000.*
10.35 -- Loan Agreement dated December 30, 1994, between First of
America Bank -- Florida F.S.B., Geotrac, Inc. (as successor
to National Flood Certification Services, Inc.), Southern
Rental & Leasing Corporation, Insurance Management
Solutions, Inc. (as successor to Bankers Data Center, Inc.)
and Bankers Insurance Group, Inc.*
10.36 -- Security Agreement dated December 30, 1994, by Insurance
Management Solutions, Inc. (as successor to Bankers Data
Center, Inc.) in favor of First of America Bank -- Florida
F.S.B.*
10.37 -- Note dated December 30, 1994, from Geotrac of America, Inc.
(as successor to Geotrac, Inc. and National Flood
Certification Services, Inc.) to First of America
Bank -- Florida F.S.B. in the principal amount of $60,000.*
10.38 -- Security Agreement dated December 30, 1994, by Geotrac of
America, Inc. (as successor to Geotrac, Inc. and National
Flood Certification Services, Inc.) in favor of First of
America Bank -- Florida F.S.B.*
10.39 -- Note dated December 30, 1996, from Geotrac of America, Inc.
(as successor to Bankers Hazard Determination Services,
Inc.) to First of America Bank -- Florida F.S.B. in the
principal amount of $245,000.*
10.40 -- Note dated December 30, 1996, from Insurance Management
Solutions, Inc. (as successor to Insurance Management
Information Services, Inc.) to First of American
Bank -- Florida FSB in the principal amount of $809,000.*
10.41 -- Loan Agreement dated December 30, 1996, between First of
America Bank -- Florida F.S.B., Geotrac of America, Inc. (as
successor to Bankers Hazard Determination Services, Inc.),
Bankers Insurance Group, Inc., Bankers Risk Management
Services, Inc., Bankers Underwriters, Inc., Insurance
Management Solutions, Inc. (as successor to Insurance
Management Information Services, Inc.), Southern Rental &
Leasing Corporation, Bankers Financial Corporation and
Bankers International Financial Corporation.*
10.42 -- Security Agreement dated December 30, 1996, by Geotrac of
America, Inc. (as successor to Bankers Hazard Determination
Services Inc.), in favor of First of America Bank -- Florida
F.S.B. securing $245,000 loan.*
10.43 -- Security Agreement dated December 30, 1996, by Insurance
Management Solutions, Inc. (as successor to Insurance
Management Information Services, Inc.) in favor of First of
America Bank -- Florida F.S.B. securing $809,000 loan.*
10.44 -- Installment Note dated December 30, 1997, from Geotrac of
America, Inc. (as successor to Bankers Hazard Determination
Services, Inc.) to SouthTrust Bank, N.A. in the principal
amount of $184,000.*
10.45 -- Cross-Collateralization and Cross-Default Agreement dated
December 30, 1997, in favor of SouthTrust Bank, N.A. by
Bankers Financial Corporation, Bankers Insurance Group,
Inc., Insurance Management Solutions, Inc. and Geotrac of
America, Inc. (as successor to Bankers Hazard Determination
Services, Inc.).*
10.46 -- Security Agreement dated December 30, 1997, between Geotrac
of America, Inc. (as successor to Bankers Hazard
Determination Services, Inc.), and SouthTrust Bank, N.A.*
</TABLE>
II-4
<PAGE> 125
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT DESCRIPTION
- ------- -------------------
<C> <C> <S>
10.47 -- Revolving Line of Credit Note dated December 27, 1993, from
Geotrac of America, Inc. (as successor to Geotrac, Inc. and
National Flood Certification Services, Inc.) to Marine Bank,
in the amount of $600,000.*
10.48 -- Security Agreement dated December 27, 1993, between Geotrac
of America, Inc. (as successor to Geotrac, Inc. and National
Flood Certification Services, Inc.) and Marine Bank.*
10.49 -- Installment Note dated December, 1997, from Insurance
Management Solutions, Inc. to SouthTrust Bank, N.A. in the
principal amount of $2,131,000.*
10.50 -- Promissory Note dated December 30, 1997, from Insurance
Management Solutions, Inc. to SouthTrust Bank, N.A. in the
principal amount of $500,000.*
10.51 -- Security Agreement dated December 30, 1997, between
Insurance Management Solutions Group, Inc. and SouthTrust
Bank, N.A.*
10.52 -- Flood Compliance Service Agreement dated November 1, 1996,
between Geotrac of America, Inc. (as successor to Geotrac,
Inc. and SMS Geotrac) and Mortgage Corporation of America.*
10.53 -- Flood Compliance Service Agreement dated March 1, 1997,
between Geotrac of America, Inc. (as successor to Geotrac,
Inc. and SMS Geotrac) and CitFed Mortgage Corporation of
America.*
10.54 -- Flood Compliance Service Agreement dated March 1, 1998,
between Geotrac of America, Inc. (as successor to Geotrac,
Inc. and SMS Geotrac), ABN AMRO North American and certain
of its affiliates.*
10.55 -- Flood Compliance Service Agreement dated April 12, 1997,
between Geotrac of America, Inc. (as successor to Geotrac,
Inc. and SMS Geotrac) and Third Federal Savings.*
10.56 -- Flood Compliance Service Agreement dated April 9, 1997,
between Geotrac of America, Inc. (as successor to Geotrac,
Inc. and SMS Geotrac) and MidAm, Inc.*
10.57 -- Flood Compliance Service Agreement dated December 28, 1995,
between Geotrac of America, Inc. (as successor to Geotrac,
Inc.) and Crestar Bank.*
10.58 -- Flood Compliance Service Agreement dated April 1, 1996,
between Geotrac of America, Inc. (as successor to Geotrac,
Inc. and SMS Geotrac) and ReliaStar Mortgage Corporation.*
10.59 -- Flood Zone Determination Agreement dated March 25, 1993,
between Geotrac of America, Inc. (as successor to Geotrac,
Inc. and National Flood Certification Services, Inc.) and
AIG Consultants, Inc.*
10.60 -- Flood Zone Determination Agreement dated December 28, 1995,
between Geotrac of America, Inc. (as successor to Bankers
Hazard Determination Services, Inc.) and SouthTrust
Corporation, as amended on June 3, 1997.*
10.61 -- Flood Zone Determination Agreement dated July 14, 1994,
between Geotrac of America, Inc. (as successor to Geotrac,
Inc. and National Flood Certification Services, Inc.) and
SunBank, N.A.*
10.62 -- Flood Zone Determination Agreement dated November 8, 1993,
between Geotrac of America, Inc. (as successor to Geotrac,
Inc. and National Flood Certification Services, Inc.) and
Royal Indemnity Company.*
10.63 -- Flood Insurance Agreement, dated February 17, 1995, between
First Community Insurance Company and Armed Forces Insurance
Exchange, as amended.*
10.64 -- Flood Insurance Agreement, dated November 17, 1995, between
First Community Insurance Company and Amica Mutual Insurance
Company, as amended.*
10.65 -- Non-Qualified Stock Option Plan.*
10.66 -- Funding Agreement, dated June 19, 1998, by and between
Bankers Insurance Group, Inc. and Insurance Management
Solutions Group, Inc.*
</TABLE>
II-5
<PAGE> 126
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT DESCRIPTION
- ------- -------------------
<C> <C> <S>
10.67 -- Assignment of Registered Service Mark ("Floodwriter"), dated
May 7, 1998, from Bankers Insurance Company to Insurance
Management Solutions, Inc.*
10.68 -- Assignment of Registered Service Mark ("Undercurrents"),
dated May 7, 1998, from Bankers Insurance Company to
Insurance Management Solutions, Inc.*
10.69 -- Registration Rights Agreement, dated July 31, 1998, between
Insurance Management Solutions Group, Inc. and Daniel J. and
Sandra White
10.70 -- Software License Agreement, effective January 1, 1998,
between Insurance Management Solutions, Inc., Bankers
Insurance Group, Inc. and Bankers Insurance Company.
10.71 -- First Amendment to Loan and Security Agreement, dated July
31, 1998, between Geotrac, Inc. and Huntington National
Bank.
10.72 -- Continuing Guaranty Unlimited, dated July 29, 1998, by
Insurance Management Solutions Group, Inc. in favor of
Huntington National Bank.
10.73 -- Subordination Agreement dated July 31, 1998 between Geotrac
of America, Inc., Daniel J. and Sandra White, and Huntington
National Bank.
10.74 -- Subordination Agreement dated July 31, 1998 between Geotrac
of America, Inc., Insurance Management Solutions Group, Inc.
and Huntington National Bank.
10.75 -- Tax Indemnity Agreement dated July 31, 1998 between Bankers
International Financial Corporation and Insurance Management
Solutions Group, Inc.
10.76 -- Tax Allocation Agreement dated July 31, 1998 between
Insurance Management Solutions Group, Inc., Insurance
Management Solutions, Inc. and Geotrac of America, Inc.
10.77 -- Employment Agreement dated June 11, 1998 between Jeffrey S.
Bragg and Insurance Management Solutions Group, Inc.
10.78 -- Employment Agreement dated June 11, 1998 between Kelly K.
King and Insurance Management Solutions Group, Inc.
10.79 -- Articles of Merger filed with the Florida Department of
State relating to the merger between Bankers Hazard
Determination Services, Inc. and Geotrac, Inc.
10.80 -- Certificate of Merger filed with the Ohio Department of
State relating to the merger between Bankers Hazard
Determination Services, Inc. and Geotrac, Inc.
10.81 -- Guaranty of Payment of Debt, dated July 31, 1998, by
Insurance Management Solutions Group, Inc. and Bankers
Insurance Group, Inc. in favor of Daniel J. White and Sandra
White.
10.82 -- Secrecy and Confidentiality Agreement, dated October 8,
1993, between Geotrac of America, Inc. (formerly Geotrac,
Inc.) and Kirloskar Computer Services, Ltd.
21.1 -- List of subsidiaries of Insurance Management Solutions
Group, Inc.
23.1 -- Consent of Foley & Lardner (included in Exhibit (5.1)).
23.2 -- Consent of Grant Thornton LLP.
23.3 -- Consent of Grant Thornton LLP.
23.4 -- Consent of Grant Thornton LLP.
24.1 -- Power of Attorney relating to subsequent amendments.*
27.1 -- Financial Data Schedule (filed for SEC purposes only).
27.2 -- Financial Data Schedule (filed for SEC purposes only).
</TABLE>
- ---------------
* Previously filed.
** To be filed by amendment.
II-6
<PAGE> 127
(b) Financial Statement Schedules.
None.
ITEM 17. UNDERTAKINGS.
The undersigned registrant hereby undertakes to provide to the underwriters
at the closing specified in the underwriting agreement certificates in such
denominations and registered in such names as required by the underwriters to
permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of this registration statement in reliance upon Rule 430A and contained in
a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed a new registration statement relating to the
securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
II-7
<PAGE> 128
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amended Registration Statement to be signed on its behalf
by the undersigned, thereunto duly authorized, in the City of St. Petersburg,
and State of Florida, on this 4th day of September, 1998.
INSURANCE MANAGEMENT SOLUTIONS GROUP,
INC.
By: /s/ JEFFREY S. BRAGG
------------------------------------
Jeffrey S. Bragg
Executive Vice President
and Chief Operating Officer
Pursuant to the requirements of the Securities Act of 1933, this Amended
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
* Chairman of the Board, Chief September 4, 1998
- --------------------------------------------------- Executive Officer and
David K. Meehan Director (Principal
Executive Officer)
/s/ KELLY K. KING Vice President, Chief September 4, 1998
- --------------------------------------------------- Financial Officer and
Kelly K. King Treasurer
/s/ JEFFREY S. BRAGG Director September 4, 1998
- ---------------------------------------------------
Jeffrey S. Bragg
* Director September 4, 1998
- ---------------------------------------------------
Robert M. Menke
* Director September 4, 1998
- ---------------------------------------------------
Robert G. Menke
* Director September 4, 1998
- ---------------------------------------------------
John A. Grant, Jr.
* Director September 4, 1998
- ---------------------------------------------------
William D. Hussey
* Director September 4, 1998
- ---------------------------------------------------
E. Ray Solomon
* Director September 4, 1998
- ---------------------------------------------------
Daniel J. White
Director September , 1998
- ---------------------------------------------------
Alejandro M. Sanchez
*By: /s/ KELLY K. KING
---------------------------------------------
Kelly K. King
Attorney-In-Fact
</TABLE>
II-8
<PAGE> 129
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT DESCRIPTION
- ------- -------------------
<C> <C> <S>
1.1 -- Proposed Form of Underwriting Agreement.
3.1 -- Amended and Restated Articles of Incorporation of Insurance
Management Solutions Group, Inc.
3.2 -- Amended and Restated Bylaws of Insurance Management
Solutions Group, Inc.
4.1 -- Specimen certificate for the Common Stock of Insurance
Management Solutions Group, Inc.**
5.1 -- Opinion of Foley & Lardner.**
10.1 -- Employment Agreement, dated August 10, 1998, between David
K. Meehan and Insurance Management Solutions Group, Inc.
10.2 -- Insurance Management Solutions Group, Inc. Long Term
Incentive Plan.*
10.3 -- Insurance Management Solutions Group, Inc. Non-Employee
Directors' Stock Option Plan.
10.4 -- Snell Arcade Building Lease, dated May 15, 1996, between
Snell Arcade Limited Company and Bankers Insurance Group,
Inc., as revised and assigned to Insurance Management
Solutions Group, Inc., effective January 1, 1998.*
10.5 -- Bankers Building -- 5th Street North Lease Agreement, dated
January 1, 1997, between Bankers Insurance Group, Inc. and
Insurance Management Solutions Group, Inc.*
10.6 -- Bankers Financial Center Lease Agreement, dated January 1,
1997, between Bankers Insurance Company and Insurance
Management Solutions Group, Inc.*
10.7 -- Lease, dated September 2, 1994, between DanYo LLC (as
successor to Sandan) and SMS Geotrac, Inc.*
10.8 -- Indenture of Lease, dated September 23, 1994, between
Southview Business Center, Ltd., an Ohio limited
partnership, and SMS Geotrac, Inc., including Addendum I,
dated March 20, 1995, and Addendum II, dated December 8,
1995.*
10.9 -- Master Equipment Lease Agreement, dated May 11, 1995, and
executed on May 15, 1995, between National City Leasing
Corporation and SMS Geotrac, Inc.*
10.10 -- Term Lease Master Agreement, dated June 30, 1995, between
IBM Credit Corporation and SMS Geotrac, Inc.*
10.11 -- Employee Leasing Agreement, dated May 19, 1998, between
Bankers Insurance Company and Insurance Management Solutions
Group, Inc.*
10.12 -- Administration Services Agreement, dated January 1, 1998,
between Bankers Insurance Group, Inc. and Insurance
Management Solutions Group, Inc.
10.13 -- Service Agreement, dated January 1, 1998, between Insurance
Management Solutions, Inc. and Bankers Insurance Company.*
10.14 -- Service Agreement dated January 1, 1998 between Insurance
Management Solutions, Inc. and Bankers Security Insurance
Company.*
10.15 -- Service Agreement dated January 1, 1998 between Insurance
Management Solutions, Inc. and First Community Insurance
Company.*
10.16 -- Vendor Flood Insurance Agreement, dated January 1, 1996,
between Insurance Management Solutions, Inc. (as successor
to Insurance Management Information Services, Inc.) and
Mobile USA Insurance Company, Inc.*
10.17 -- Vendor Flood Insurance Agreement, dated November 10, 1995,
between AAA Auto Club South Insurance Company and Insurance
Management Information Services, Inc.*
10.18 -- Flood Insurance Program Services Agreement by and among
Insurance Management Information Services, Inc., American
Alternative Insurance Corporation, and Corporate Insurance
Agency Services.*
</TABLE>
E-1
<PAGE> 130
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT DESCRIPTION
- ------- -------------------
<C> <C> <S>
10.19 -- Loan and Security Agreement, dated July 31, 1997, between
Huntington National Bank, YoSystems, Inc. and SMS Geotrac,
Inc.*
10.20 -- Pledge and Security Agreement, dated May 8, 1998, by
Insurance Management Solutions Group, Inc. in favor of
SouthTrust Bank, N.A.*
10.21 -- Agreement and Plan of Merger, dated May 12, 1998, by and
among Geotrac, Inc., Insurance Management Solutions, Inc.,
Daniel J. and Sandra White, Bankers Insurance Group, Inc.
and Bankers Hazard Determination Services, Inc.*
10.22 -- Employment Agreement, dated July 31, 1998, between Geotrac
of America, Inc. (as successor to Geotrac, Inc.) and Daniel
J. White.
10.23 -- Term Lease Master Agreement, dated August 6, 1996, between
IBM Credit Corporation and Bankers Insurance Company,
assigned by Bankers Insurance Company to Insurance
Management Solutions, Inc., effective April 1, 1998,
pursuant to Sales and Assignment Agreement, dated May 6,
1998.*
10.24 -- Sales and Assignment Agreement, dated May 6, 1998, by and
between Insurance Management Solutions Group, Inc.,
Insurance Management Solutions, Inc., Bankers Insurance
Group, Inc., Bankers Insurance Services, Inc., Bankers Life
Insurance Company, Southern Rental & Leasing Corporation,
Bankers Insurance Company, and Bankers Security Insurance
Company.*
10.25 -- Software Maintenance and Enhancement Agreement, dated
January 7, 1997 between Systems Integration and Imaging
Technologies Incorporated and Insurance Management
Information Services, Inc.*
10.26 -- Corporate Governance Agreement, dated July 31, 1998, between
Geotrac, Inc., Daniel J. White and Insurance Management
Solutions Group, Inc.
10.27 -- Tax Indemnity Agreement dated July 31, 1998 between Bankers
Insurance Group, Inc., Insurance Management Solutions Group,
Inc. and Daniel J. and Sandra White.
10.28 -- Flood Insurance Agreement, dated January 6, 1998, between
First Community Insurance Company and Keystone Insurance
Company.*
10.29 -- Marketing Agreement, dated November 14, 1997, between First
Community Insurance Company and Nobel Insurance Company.*
10.30 -- Flood Insurance Agreement, dated February 11, 1998, between
First Community Insurance Company and Horace Mann Insurance
Company.*
10.31 -- Promissory Note dated April 1, 1998, from Insurance
Management Solutions, Inc. to Bankers Insurance Company in
the principal amount of $2,353,424.42.*
10.32 -- Promissory Note dated April 1, 1998, from Insurance
Management Solutions, Inc. to Southern Rental & Leasing
Corporation in the principal amount of $448,749.95.*
10.33 -- Promissory Note dated May 8, 1998, from Insurance Management
Solutions Group, Inc. to Heritage Hotel Holding Company in
the principal amount of $6,750,000, as amended.*
10.34 -- Note dated December 30, 1994, from Insurance Management
Solutions, Inc. (as successor to Bankers Data Center, Inc.)
to First of America Bank -- Florida F.S.B. in the principal
amount of $200,000.*
10.35 -- Loan Agreement dated December 30, 1994, between First of
America Bank -- Florida F.S.B., Geotrac, Inc. (as successor
to National Flood Certification Services, Inc.), Southern
Rental & Leasing Corporation, Insurance Management
Solutions, Inc. (as successor to Bankers Data Center, Inc.)
and Bankers Insurance Group, Inc.*
10.36 -- Security Agreement dated December 30, 1994, by Insurance
Management Solutions, Inc. (as successor to Bankers Data
Center, Inc.) in favor of First of America Bank -- Florida
F.S.B.*
</TABLE>
E-2
<PAGE> 131
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT DESCRIPTION
- ------- -------------------
<C> <C> <S>
10.37 -- Note dated December 30, 1994, from Geotrac of America, Inc.
(as successor to Geotrac, Inc. and National Flood
Certification Services, Inc.) to First of America
Bank -- Florida F.S.B. in the principal amount of $60,000.*
10.38 -- Security Agreement dated December 30, 1994, by Geotrac of
America, Inc. (as successor to Geotrac, Inc. and National
Flood Certification Services, Inc.) in favor of First of
America Bank -- Florida F.S.B.*
10.39 -- Note dated December 30, 1996, from Geotrac of America, Inc.
(as successor to Bankers Hazard Determination Services,
Inc.) to First of America Bank -- Florida F.S.B. in the
principal amount of $245,000.*
10.40 -- Note dated December 30, 1996, from Insurance Management
Solutions, Inc. (as successor to Insurance Management
Information Services, Inc.) to First of American
Bank -- Florida FSB in the principal amount of $809,000.*
10.41 -- Loan Agreement dated December 30, 1996, between First of
America Bank -- Florida F.S.B., Geotrac of America, Inc. (as
successor to Bankers Hazard Determination Services, Inc.),
Bankers Insurance Group, Inc., Bankers Risk Management
Services, Inc., Bankers Underwriters, Inc., Insurance
Management Solutions, Inc. (as successor to Insurance
Management Information Services, Inc.), Southern Rental &
Leasing Corporation, Bankers Financial Corporation and
Bankers International Financial Corporation.*
10.42 -- Security Agreement dated December 30, 1996, by Geotrac of
America, Inc. (as successor to Bankers Hazard Determination
Services Inc.), in favor of First of America Bank -- Florida
F.S.B. securing $245,000 loan.*
10.43 -- Security Agreement dated December 30, 1996, by Insurance
Management Solutions, Inc. (as successor to Insurance
Management Information Services, Inc.) in favor of First of
America Bank -- Florida F.S.B. securing $809,000 loan.*
10.44 -- Installment Note dated December 30, 1997, from Geotrac of
America, Inc. (as successor to Bankers Hazard Determination
Services, Inc.) to SouthTrust Bank, N.A. in the principal
amount of $184,000.*
10.45 -- Cross-Collateralization and Cross-Default Agreement dated
December 30, 1997, in favor of SouthTrust Bank, N.A. by
Bankers Financial Corporation, Bankers Insurance Group,
Inc., Insurance Management Solutions, Inc. and Geotrac of
America, Inc. (as successor to Bankers Hazard Determination
Services, Inc.).*
10.46 -- Security Agreement dated December 30, 1997, between Geotrac
of America, Inc. (as successor to Bankers Hazard
Determination Services, Inc.), and SouthTrust Bank, N.A.*
10.47 -- Revolving Line of Credit Note dated December 27, 1993, from
Geotrac of America, Inc. (as successor to Geotrac, Inc. and
National Flood Certification Services, Inc.) to Marine Bank,
in the amount of $600,000.*
10.48 -- Security Agreement dated December 27, 1993, between Geotrac
of America, Inc. (as successor to Geotrac, Inc. and National
Flood Certification Services, Inc.) and Marine Bank.*
10.49 -- Installment Note dated December, 1997, from Insurance
Management Solutions, Inc. to SouthTrust Bank, N.A. in the
principal amount of $2,131,000.*
10.50 -- Promissory Note dated December 30, 1997, from Insurance
Management Solutions, Inc. to SouthTrust Bank, N.A. in the
principal amount of $500,000.*
10.51 -- Security Agreement dated December 30, 1997, between
Insurance Management Solutions Group, Inc. and SouthTrust
Bank, N.A.*
10.52 -- Flood Compliance Service Agreement dated November 1, 1996,
between Geotrac of America, Inc. (as successor to Geotrac,
Inc. and SMS Geotrac) and Mortgage Corporation of America.*
</TABLE>
E-3
<PAGE> 132
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT DESCRIPTION
- ------- -------------------
<C> <C> <S>
10.53 -- Flood Compliance Service Agreement dated March 1, 1997,
between Geotrac of America, Inc. (as successor to Geotrac,
Inc. and SMS Geotrac) and CitFed Mortgage Corporation of
America.*
10.54 -- Flood Compliance Service Agreement dated March 1, 1998,
between Geotrac of America, Inc. (as successor to Geotrac,
Inc. and SMS Geotrac), ABN AMRO North American and certain
of its affiliates.*
10.55 -- Flood Compliance Service Agreement dated April 12, 1997,
between Geotrac of America, Inc. (as successor to Geotrac,
Inc. and SMS Geotrac) and Third Federal Savings.*
10.56 -- Flood Compliance Service Agreement dated April 9, 1997,
between Geotrac of America, Inc. (as successor to Geotrac,
Inc. and SMS Geotrac) and MidAm, Inc.*
10.57 -- Flood Compliance Service Agreement dated December 28, 1995,
between Geotrac of America, Inc. (as successor to Geotrac,
Inc.) and Crestar Bank.*
10.58 -- Flood Compliance Service Agreement dated April 1, 1996,
between Geotrac of America, Inc. (as successor to Geotrac,
Inc. and SMS Geotrac) and ReliaStar Mortgage Corporation.*
10.59 -- Flood Zone Determination Agreement dated March 25, 1993,
between Geotrac of America, Inc. (as successor to Geotrac,
Inc. and National Flood Certification Services, Inc.) and
AIG Consultants, Inc.*
10.60 -- Flood Zone Determination Agreement dated December 28, 1995,
between Geotrac of America, Inc. (as successor to Bankers
Hazard Determination Services, Inc.) and SouthTrust
Corporation, as amended on June 3, 1997.*
10.61 -- Flood Zone Determination Agreement dated July 14, 1994,
between Geotrac of America, Inc. (as successor to Geotrac,
Inc. and National Flood Certification Services, Inc.) and
SunBank, N.A.*
10.62 -- Flood Zone Determination Agreement dated November 8, 1993,
between Geotrac of America, Inc. (as successor to Geotrac,
Inc. and National Flood Certification Services, Inc.) and
Royal Indemnity Company.*
10.63 -- Flood Insurance Agreement, dated February 17, 1995, between
First Community Insurance Company and Armed Forces Insurance
Exchange, as amended.*
10.64 -- Flood Insurance Agreement, dated November 17, 1995, between
First Community Insurance Company and Amica Mutual Insurance
Company, as amended.*
10.65 -- Non-Qualified Stock Option Plan.*
10.66 -- Funding Agreement, dated June 19, 1998, by and between
Bankers Insurance Group, Inc. and Insurance Management
Solutions Group, Inc.*
10.67 -- Assignment of Registered Service Mark ("Floodwriter"), dated
May 7, 1998, from Bankers Insurance Company to Insurance
Management Solutions, Inc.*
10.68 -- Assignment of Registered Service Mark ("Undercurrents"),
dated May 7, 1998, from Bankers Insurance Company to
Insurance Management Solutions, Inc.*
10.69 -- Registration Rights Agreement, dated July 31, 1998, between
Insurance Management Solutions Group, Inc. and Daniel J. and
Sandra White
10.70 -- Software License Agreement, effective January 1, 1998,
between Insurance Management Solutions, Inc., Bankers
Insurance Group, Inc. and Bankers Insurance Company.
10.71 -- First Amendment to Loan and Security Agreement, dated July
31, 1998, between Geotrac, Inc. and Huntington National
Bank.
10.72 -- Continuing Guaranty Unlimited, dated July 29, 1998, by
Insurance Management Solutions Group, Inc. in favor of
Huntington National Bank.
</TABLE>
E-4
<PAGE> 133
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT DESCRIPTION
- ------- -------------------
<C> <C> <S>
10.73 -- Subordination Agreement dated July 31, 1998 between Geotrac
of America, Inc., Daniel J. and Sandra White, and Huntington
National Bank.
10.74 -- Subordination Agreement dated July 31, 1998 between Geotrac
of America, Inc., Insurance Management Solutions Group, Inc.
and Huntington National Bank.
10.75 -- Tax Indemnity Agreement dated July 31, 1998 between Bankers
International Financial Corporation and Insurance Management
Solutions Group, Inc.
10.76 -- Tax Allocation Agreement dated July 31, 1998 between
Insurance Management Solutions Group, Inc., Insurance
Management Solutions, Inc. and Geotrac of America, Inc.
10.77 -- Employment Agreement dated June 11, 1998 between Jeffrey S.
Bragg and Insurance Management Solutions Group, Inc.
10.78 -- Employment Agreement dated June 11, 1998 between Kelly K.
King and Insurance Management Solutions Group, Inc.
10.79 -- Articles of Merger filed with the Florida Department of
State relating to the merger between Bankers Hazard
Determination Services, Inc. and Geotrac, Inc.
10.80 -- Certificate of Merger filed with the Ohio Department of
State relating to the merger between Bankers Hazard
Determination Services, Inc. and Geotrac, Inc.
10.81 -- Guaranty of Payment of Debt, dated July 31, 1998, by
Insurance Management Solutions Group, Inc. and Bankers
Insurance Group, Inc. in favor of Daniel J. White and Sandra
White.
10.82 -- Secrecy and Confidentiality Agreement, dated October 8,
1993, between Geotrac of America, Inc. (as successor to
Geotrac, Inc.) and Kirloskar Computer Services, Ltd.
21.1 -- List of subsidiaries of Insurance Management Solutions
Group, Inc.
23.1 -- Consent of Foley & Lardner (included in Exhibit (5.1)).
23.2 -- Consent of Grant Thornton LLP.
23.3 -- Consent of Grant Thornton LLP.
23.4 -- Consent of Grant Thornton LLP.
24.1 -- Power of Attorney relating to subsequent amendments.*
27.1 -- Financial Data Schedule (filed for SEC purposes only).
27.2 -- Financial Data Schedule (filed for SEC purposes only).
</TABLE>
- ---------------
* Previously filed.
** To be filed by amendment.
E-5
<PAGE> 1
EXHIBIT 1.1
___________ Shares
INSURANCE MANAGEMENT SOLUTIONS GROUP, INC.
Common Stock
--------------
UNDERWRITING AGREEMENT
St. Petersburg, Florida
_________________, 1998
RAYMOND JAMES & ASSOCIATES, INC.
LEHMAN BROTHERS
ING BARING FURMAN SELZ LLC
As Representatives of the Several Underwriters
c/o Raymond James & Associates, Inc.
880 Carillon Parkway
St. Petersburg, Florida 33716
Ladies and Gentlemen:
Insurance Management Solutions Group, Inc., a Florida corporation (the
"Company") and a majority-owned subsidiary of Bankers Insurance Group, Inc., a
Florida corporation ("BIG"), proposes, subject to the terms and conditions
stated herein, to issue and sell an aggregate of __________ authorized and
unissued shares (the "Company Firm Shares") of the Company's common stock, par
value $.01 per share, to the several Underwriters named in Schedule I hereto
(the "Underwriters"). A certain shareholder of the Company, named in Schedule II
hereto (the "Selling Shareholder"), proposes, subject to the terms and
conditions stated herein, to sell an aggregate of __________ authorized and
outstanding shares (the "Shareholder Firm Shares") of the Company's common
stock, par value $.01 per share, to the Underwriters. The Company Firm Shares
and the Shareholder Firm Shares are hereafter collectively referred to as the
"Firm Shares." In addition, the Company has agreed to sell to the Underwriters,
upon the terms and conditions set forth herein, up to an additional
_______________ authorized and unissued shares of the Company's common stock,
par value $.01 per share (the "Company Additional Shares"), solely to cover
over-allotments by the Underwriters, if any. In addition, the Selling
Shareholder has agreed to sell to the Underwriters, upon the terms and
conditions set forth herein, up to an additional __________ authorized and
outstanding shares of the Company's common stock, par value $.01 per share (the
"Shareholder Additional Shares"), solely to cover over-allotments by the
Underwriters, if any. The Company Additional Shares and the Shareholder
Additional Shares are
1
<PAGE> 2
hereinafter collectively referred to as the "Additional Shares." The Firm Shares
and the Additional Shares are hereinafter collectively referred to as the
"Shares." The Company's common stock, par value $.01 per share, including the
Shares, is hereinafter referred to as the "Common Stock." Raymond James &
Associates, Inc., Lehman Brothers Inc. and ING Baring Furman Selz LLC are acting
as the representatives of the several Underwriters and in such capacity are
hereinafter referred to as the "Representatives."
Each of the Company, BIG and the Selling Shareholder wishes to confirm
as follows its agreement with you and the other several Underwriters, on whose
behalf you are acting, in connection with the several purchases of the Shares
from the Company and the Selling Shareholder.
SECTION 1. REGISTRATION STATEMENT AND PROSPECTUS. The Company has
prepared and filed with the Securities and Exchange Commission (the
"Commission") in accordance with the provisions of the Securities Act of 1933,
as amended, and the rules and regulations of the Commission thereunder
(collectively, the "Act"), a registration statement on Form S-1 (File No.
333-57747), including a prospectus subject to completion, relating to the
Shares. Such registration statement (including all financial schedules and
exhibits), as amended at the time when it became effective and as thereafter
amended by post-effective amendment, together with any registration statement
filed by the Company pursuant to Rule 462(b) under the Act, is referred to in
this Agreement as the "Registration Statement." The term "Prospectus" as used in
this Agreement means (i) the prospectus in the form included in the Registration
Statement, or (ii) if the prospectus included in the Registration Statement
omits information in reliance upon Rule 430A under the Act and such information
is included in a prospectus filed with the Commission pursuant to Rule 424(b)
under the Act or as part of a post-effective amendment to the Registration
Statement after the Registration Statement becomes effective, the prospectus as
so filed, or (iii) if the prospectus included in the Registration Statement
omits information in reliance upon Rule 430A under the Act and such information
is included in a term sheet (as described in Rule 434(c) under the Act) filed
with the Commission pursuant to Rule 424(b) under the Act, the prospectus
included in the Registration Statement and such term sheet, taken together. The
prospectus subject to completion in the form included in the Registration
Statement at the time of the initial filing of such Registration Statement with
the Commission and as such prospectus is amended from time to time until the
date upon which the Registration Statement was declared effective by the
Commission, is referred to in this Agreement as the "Prepricing Prospectus."
SECTION 2. AGREEMENTS TO SELL AND PURCHASE.
Subject to the terms and conditions set forth herein, the Company
agrees to sell the Company Firm Shares, and the Selling Shareholder agrees to
sell the Shareholder Firm Shares, to the Underwriters and, upon the basis of the
representations, warranties and agreements of the Company, BIG and the Selling
Shareholder herein contained and subject to all the terms and conditions set
forth herein, each Underwriter agrees, severally and not jointly, to purchase
from the Company and the Selling Shareholder the aggregate
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number of Firm Shares set forth opposite the name of such Underwriter in
Schedule I hereto (or such number of Firm Shares as adjusted pursuant to Section
10 hereof), at a purchase price of $__________ per Share (the "purchase price
per Share").
The Company also agrees, subject to the terms and conditions set forth
below, to sell to the Underwriters, and upon the basis of the representations,
warranties and agreements of the Company and BIG herein contained and subject to
all the terms and conditions set forth herein, the Underwriters shall have the
right for 30 days from the date upon which the Registration Statement is
declared effective by the Commission to purchase from the Company up to
____________ Company Additional Shares at the purchase price per Share for the
Firm Shares. In addition, subject to the terms and conditions herein contained,
the Selling Shareholder also agrees, subject to the terms and conditions set
forth below, to sell to the Underwriters, and upon the basis of the
representations, warranties and agreements of the Company and the Selling
Shareholder herein contained and subject to all the terms and conditions set
forth herein, the Underwriters shall have the right for 30 days from the date
upon which the Registration Statement is declared effective by the Commission to
purchase from the Selling Shareholder up to __________ Shareholder Additional
Shares, at the purchase price per Share for the Firm Shares. The Additional
Shares shall, if purchased, be purchased solely for the purpose of covering
over-allotments made in connection with the offering of the Firm Shares. If any
Additional Shares are to be purchased, each Underwriter agrees, severally and
not jointly, to purchase the number of Additional Shares (subject to such
adjustments as you may determine to avoid fractional shares) which bears the
same proportion to the number of Additional Shares to be sold as the number of
Firm Shares set forth opposite the name of such Underwriter in Schedule I hereto
(or such number of Firm Shares as adjusted pursuant to Section 10 hereof) bears
to the total number of Firm Shares.
SECTION 3. TERMS OF PUBLIC OFFERING. The Company has been advised by
you that the Underwriters propose to make a public offering of their respective
portions of the Shares as soon after the Registration Statement and this
Agreement have become effective as in our reasonable judgment is advisable and
initially to offer the Shares upon the terms set forth in the Prospectus.
SECTION 4. DELIVERY OF THE SHARES AND PAYMENT THEREFOR. Delivery to the
Underwriters of the Firm Shares and payment therefor shall be made at the
offices of Raymond James & Associates, Inc., 880 Carillon Parkway, St.
Petersburg, Florida, at 10:00 a.m., St. Petersburg, Florida time, four business
days after the date hereof (the "Closing Date"). The place of closing for the
Firm Shares and the Closing Date may be varied by agreement between you and the
Company.
Delivery to the Underwriters of and payment for any Additional Shares to
be purchased by the Underwriters shall be made at the offices of Raymond James &
Associates, Inc., 880 Carillon Parkway, St. Petersburg, Florida, at 10:00 a.m.,
St. Petersburg, Florida time, on such date or dates (the "Additional Closing
Date") (which may be the same as the Closing Date but shall in no event be
earlier than the Closing
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Date nor earlier than three nor later than ten business days after the giving
of the notice hereinafter referred to), as shall be specified in a written
notice from you an behalf of the Underwriters to the Company, of the
Underwriters' determination to purchase a number, specified in such notice, of
Additional Shares. Such notice may be given to the Company by you at any time
within 30 days after the date upon which the Registration Statement is declared
effective by the Commission. The place of closing for the Additional Shares and
the Additional Closing Date may be varied by agreement between you and the
Company.
Certificates for the Firm Shares and for any Additional Shares to be
purchased hereunder shall be registered in such names and such denominations as
you shall request prior to 1:00 p.m., St. Petersburg, Florida time, on the
second full business day preceding the Closing Date or the Additional Closing
Date, as the case may be. Such certificates shall be made available to you in
St. Petersburg, Florida for inspection and packaging not later than 9:30 a.m.,
St. Petersburg, Florida time, on the business day immediately preceding the
Closing Date or the Additional Closing Date, as the case may be. The
certificates evidencing the Firm Shares and any Additional Shares to be
purchased hereunder shall be delivered to you on the Closing Date or the
Additional Closing Date, as the case may be, against payment of the purchase
price therefor by wire transfer or certified or official bank check or checks
payable in same day funds. If the Representatives so elect, delivery of the
Shares may be made by credit through full fast transfer to the accounts at the
Depository Trust Company designated by the Representatives.
The certificates in negotiable form for the Shareholder Firm Shares and
Shareholder Additional Shares have been placed in custody (for delivery under
this Agreement) under the Custody Agreement (as defined below). The Selling
Shareholder agrees that the certificates for the Shares for such Selling
Shareholder so held in custody are subject to the interests of the Underwriters
hereunder, that the arrangements made by such Selling Shareholder for such
custody, including the Power of Attorney (as defined below) is to that extent
irrevocable and that the obligations of such Selling Shareholder hereunder shall
not be terminated by the act of such Selling Shareholder or by operation of law,
whether by the death or incapacity of such Selling Shareholder or the occurrence
of any other event, except as specifically provided herein or in the Custody
Agreement. If the Selling Shareholder should die or be incapacitated, or if any
other such event should occur, before the delivery of the certificates for the
Shares to be sold by such Selling Shareholder hereunder, such Shares, except as
specifically provided herein or in the Custody Agreement, shall be delivered by
the Custodian (as defined below) in accordance with the terms and conditions of
this Agreement as if such death, incapacity or other event had not occurred,
regardless of whether the Custodian shall have received notice of such death or
other event.
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SECTION 5. AGREEMENTS OF THE COMPANY. The Company agrees with the
several Underwriters as follows:
(a) The Company will advise you promptly and, if requested by you, will
confirm such advice in writing (i) when the Registration Statement has become
effective (if not effective as of the time and date of this Agreement) and when
any post-effective amendment to the Registration Statement or any registration
statement filed pursuant to Rule 462(b) under the Act is filed or becomes
effective, (ii) if Rule 430A under the Act is employed, when the Prospectus or
term sheet (as described in Rule 434(b) under the Act) has been timely filed
pursuant to Rule 424(b) under the Act, (iii) of any request by the Commission
for amendments or supplements to the Registration Statement, any Prepricing
Prospectus or the Prospectus or for additional information, (iv) of the issuance
by the Commission of any stop order suspending the effectiveness of the
Registration Statement or of the suspension of qualification of the Shares for
offering or sale in any jurisdiction or the initiation (or threatened
initiation) of any proceeding for such purposes, and (v) within the period of
time referred to in Section 5(e) below, of any change in the Company's condition
(financial or other), business, prospects, properties, net worth or results of
operations, or of any event that comes to the attention of the Company, that
makes any statement made in the Registration Statement or the Prospectus (as
then amended or supplemented) untrue in any material respect or that requires
the making of any additions thereto or changes therein in order to make the
statements therein not misleading in any material respect, or of the necessity
to amend or supplement the Prospectus (as then amended or supplemented) to
comply with the Act of any other law. If at any time the Commission shall issue
any stop order suspending the effectiveness of the Registration Statement, the
Company will make every reasonable effort to obtain the withdrawal of such order
at the earliest possible time.
(b) The Company will furnish to you, without charge, two signed copies
of the Registration Statement as originally filed with the Commission and of
each amendment thereto, including financial statements and all exhibits thereto,
and will also furnish to you, without charge, such number of conformed copies of
the Registration Statement as originally filed and of each amendment thereto as
you may reasonably request.
(c) The Company will not file any amendment to the Registration
Statement, file any registration statement pursuant to Rule 462(b) under the Act
or make any amendment or supplement to the Prospectus of which you shall not
previously have been advised (with a reasonable opportunity to review such
amendment, registration statement or supplement) or to which you have reasonably
objected after being so advised, or which is not in compliance with the Act. The
Company will prepare and file with the Commission any amendments or supplements
to the Registration Statement or Prospectus which, in the opinion of counsel of
the several Underwriters, are reasonably necessary or advisable in connection
with the distribution of the Shares by the Underwriters.
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(d) The Company has delivered or will deliver to you, without charge,
in such quantities as you have requested or may hereafter reasonably request,
copies of each form of the Prepricing Prospectus. The Company consents to the
use, in accordance with the provisions of the Act and with the securities or
Blue Sky laws of the jurisdictions in which the Shares are offered by the
several Underwriters and by dealers, prior to the date of the Prospectus, of
each Prepricing Prospectus so furnished by the Company.
(e) As soon after the execution and delivery of this Agreement as is
practicable and thereafter from time to time for such period as in the
reasonable opinion of counsel for the Underwriters a prospectus is required by
the Act to be delivered in connection with sales by any Underwriter or a dealer,
the Company will deliver to each Underwriter and each dealer, without charge, as
many copies of the Prospectus (and of any amendment or supplement thereto) as
they may reasonably request. The Company consents to the use of the Prospectus
(and of any amendment or supplement thereto) in accordance with the provisions
of the Act and with the securities or Blue Sky laws of the jurisdictions in
which the Shares are offered by the several Underwriters and by all dealers to
whom Shares may be sold, both in connection with the offering and sale of the
Shares and for such period of time thereafter as the Prospectus is required by
the Act to be delivered in connection with sales by any Underwriter or dealer.
If at any time prior to the later of (i) the completion of the distribution of
the Shares pursuant to the offering contemplated by the Registration Statement
or (ii) the expiration of prospectus delivery requirements with respect to the
Shares under Section 4(3) of the Act and Rule 174 thereunder, any event shall
occur that in the judgment of the Company or in the opinion of counsel for the
Underwriters is required to be set forth in the Prospectus (as then amended or
supplemented) or should be set forth therein in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading, or if it is necessary to supplement or amend the Prospectus to
comply with the Act or any other law, the Company will promptly prepare and file
with the Commission an appropriate supplement or amendment thereto, and will
furnish to each Underwriter and to each dealer who has previously requested
Prospectuses, without charge, a reasonable number of copies thereof.
(f) The Company will cooperate with you and counsel for the
Underwriters in connection with the registration or qualification of the Shares
for offering and sale by the several Underwriters and by dealers under the
securities or Blue Sky laws of such jurisdictions as you may reasonably
designate and will file such consents to service of process or other documents
as may be reasonably necessary in order to effect such registration or
qualification for so long as required to complete the distribution of the
Shares, provided that in no event shall the Company be obligated to qualify to
do business in any jurisdiction where it is not now so qualified or to take any
action which would subject it to service of process in suits, in any
jurisdiction where it is not now so subject. In each jurisdiction in which the
Shares shall have been qualified as above provided, the Company will make and
file such statements and reports in each year as are or may be required by the
laws of such jurisdiction. In the event that the qualification of
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the Shares in any jurisdiction is suspended, the Company shall so advise you
promptly in writing.
(g) The Company will make generally available to its security holders a
consolidated earnings statement, which need not be audited, covering a 12-month
period commencing after the effective date of the Registration Statement and
ending not later than 15 months thereafter, as soon as practicable after the end
of such period, which consolidated earnings statement shall satisfy the
provisions of Section 11(a) of the Act and Rule 158 under the Act, and will
advise you in writing when such statement has been so made available.
(h) During the period ending five years from the date hereof, the
Company will furnish to you (i) as soon as available, a copy of each report or
definitive proxy statement of the Company filed with the Commission under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), or mailed to
shareholders, and (ii) from time to time such other information concerning the
Company as you may reasonably request. Until the termination of the offering of
the Shares, the Company will timely file all documents, and any amendments to
previously filed documents, required to be filed by it pursuant to Sections 13,
14 or 15(d) of the Exchange Act.
(i) The Company will apply the net proceeds from the sale of the Shares
to be sold by it hereunder substantially in accordance with the description set
forth under the caption "Use of Proceeds" in the Prospectus.
(j) If Rule 430A under the Act is employed, the Company will timely
file the Prospectus or term sheet (as described in Rule 434(b) under the Act)
pursuant to Rule 424(b) under the Act.
(k) The Company will not sell, contract to sell or otherwise dispose of
any Common Stock or rights to purchase Common Stock until after the date 180
days from the effective date of the Registration Statement, without the prior
written consent of Raymond James & Associates, Inc., except (i) to the
underwriters pursuant to this Agreement, (ii) pursuant to and in accordance with
the Company's stock option plans described in the Prospectus, (iii) pursuant to
the exercise or conversion of warrants, stock options, preferred stock or
convertible debentures issued and outstanding at the time of effectiveness of
the Registration Statement and described in the Registration Statement, or (iv)
pursuant to that certain Agreement and Plan of Merger, dated May 12, 1998, among
Geotrac, Inc., the Company, BIG, Daniel J. White, Sandra White and Bankers
Hazard Determination Services, Inc.
(l) The Company will not, directly or indirectly, take any action that
would constitute or any action designed, or which might reasonably be expected
to cause or result in or constitute, under the Act or otherwise, stabilization
nor manipulation of the price of any security of the Company to facilitate the
sale or resale of the Shares.
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(m) If, during the period commencing on the date on which the
Registration Statement becomes effective and ending upon the later of (i) the
completion of the distribution of the Shares pursuant to the offering
contemplated by the Registration Statement or (ii) the expiration of prospectus
delivery requirements with respect to the Shares under Section 4(3) of the Act
and Rule 174 thereunder, any rumor, publication, or event relating to or
affecting the Company shall occur as a result of which in your opinion the
market price of the Common Stock (including the Shares) has been or is likely to
be materially affected (regardless of whether such rumor, publication, or event
necessitates a supplement to or amendment of the Prospectus), the Company will,
after written notice from you advising the Company to the effect set forth
above, promptly consult with Raymond James & Associates, Inc. concerning the
advisability and substance of, and, if appropriate, disseminate, a press release
or other public statement responding to or commenting on such rumor,
publication, or event.
(n) The Company shall not invest or otherwise use the proceeds received
by the Company from its sale of the Shares, or otherwise conduct its business,
in such a manner as would require the Company or any Subsidiary (as defined
below) to register as an investment company under the Investment Company Act of
1940, as amended.
(o) The Company will maintain a transfer agent and, if necessary under
the jurisdiction of its incorporation or the rules of the Nasdaq National Market
or any national securities exchange on which the Common Stock is then listed, a
registrar (which, if permitted by applicable laws and rules, may be the same
entity as the transfer agent) for its Common Stock.
(p) The Company hereby agrees that this Agreement shall be deemed, for
all purposes, to have been made and entered into in Pinellas County, Florida.
The Company agrees that any dispute hereunder shall be litigated solely in the
Circuit Court of the State of Florida in Pinellas County, Florida or in the
United States District Court for the Middle District of Florida, Tampa Division,
and further agrees to submit itself to the personal jurisdiction of such courts.
SECTION 6. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND BIG. The
Company and BIG, severally and jointly, represent and warrant to each
Underwriter on the date hereof, and shall be deemed to represent and warrant to
each Underwriter on the Closing Date and the Additional Closing Date, that:
(a) The Registration Statement has been declared effective by the
Commission under the Act and no post-effective amendment to the Registration
Statement has been filed as of the date of this Agreement. Each Prepricing
Prospectus included as part of the Registration Statement as originally filed or
as part of any amendment or supplement thereto, or filed pursuant to Rule 424(a)
under the Act, complied when so filed in all material respects with the
provisions of the Act, except that this representation and warranty does not
apply to statements in or omissions from such Prepricing Prospectus (or any
amendment or supplement thereto) made in reliance upon and in conformity with
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<PAGE> 9
information relating to any Underwriter furnished to the Company in writing by
or on behalf of any Underwriter through you expressly for use therein.
(b) The Commission has not issued any order preventing or suspending
the use of any Prepricing Prospectus, and the Prepricing Prospectus included as
part of the Registration Statement declared effective by the Commission complies
as to form in all material respects with the requirements of the Act. The
Registration Statement, in the form in which it became effective and also in
such form as it may be when any post-effective amendment thereto shall become
effective, and any registration statement filed pursuant to Rule 462(b) under
the Act, complies and will comply in all material respects with the provisions
of the Act and does not and will not at any such times contain an untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein not misleading,
except that this representation and warranty does not apply to statements in or
omissions from the Registration Statement (or any amendment or supplement
thereto) made in reliance upon and in conformity with information relating to
any Underwriter furnished to the Company in writing by or on behalf of any
Underwriter through you expressly for use therein. The Prospectus, and any
supplement or amendment thereto, when filed with the Commission under Rule
424(b) under the Act, complies and will comply in all material respects with the
provisions of the Act and does not and will not at any such times contain an
untrue statement of a material fact or omit to state a material fact necessary
in order to make the statements, in the light of the circumstances under which
they were made, not misleading, except that this representation and warranty
does not apply to statements in or omissions from the Prospectus (or any
amendment or supplement thereto) made in reliance upon and in conformity with
information relating to any Underwriter furnished to the Company in writing by
or on behalf of any Underwriter through you expressly for use therein.
(c) The capitalization of the Company is as set forth in the Prospectus
as of the date set forth therein. All the outstanding shares of Common Stock
(including without limitation the Shareholder Firm Shares and the Shareholder
Additional Shares) and other securities of the Company have been duly authorized
and validly issued, are fully paid and nonassessable and are free of any
preemptive or similar rights; all offers and sales of the capital stock,
warrants, options and debt or other securities of the Company and the
Subsidiaries prior to the date hereof (including without limitation the
Shareholder Firm Shares and Shareholder Additional Shares) were made in
compliance with the Act and all other applicable state, federal and foreign laws
or regulations, or any actions under the Act or any state, federal or foreign
laws or regulations in respect of any such offers or sales are effectively
barred by effective waivers or statutes of limitation; the Shares to be issued
and sold to the Underwriters by the Company hereunder have been duly authorized
and, when issued and delivered to the Underwriters against payment therefor in
accordance with the terms hereof, will be validly issued, fully paid and
nonassessable and free of any preemptive or similar rights; and the securities
of the Company conform to the description thereof in the Registration Statement
and the Prospectus (or any amendment or supplement thereto), the form of
certificate for the Shares conforms to the corporate law of the State of
Florida.
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(d) The Company is a corporation duly organized, and its status is
active, under the laws of the State of Florida. The Company has full corporate
power and authority to own, lease and operate its properties and to conduct its
business as presently conducted and as described in the Registration Statement
and the Prospectus (or any amendment or supplement thereto), and is duly
registered or qualified to conduct its business and is in good standing in each
jurisdiction or place where the nature of its properties or the conduct of its
business requires such registration or qualification, except where the failure
to so register or qualify does not have a material adverse effect on the
condition (financial or other), business, properties, net worth or results of
operations of the Company.
(e) Each of Geotrac of America, Inc., a Florida corporation, and
Insurance Management Solutions, Inc., a Florida corporation (individually a
"Subsidiary" and collectively, the "Subsidiaries"), is a corporation duly
organized, and its status is active, under the laws of the State of Florida,
with full corporate power and authority to own, lease and operate its properties
and to conduct its businesses as presently conducted and as described in the
Registration Statement and the Prospectus (and any amendment or supplement
thereto), and is duly registered or qualified to conduct its business and is in
good standing in each jurisdiction or place where the nature of its properties
or the conduct of its business requires such registration or qualification,
except where the failure to so register or qualify does not have a material
adverse effect on the condition (financial or other), business, properties, net
worth or results of operations of the Company and the Subsidiaries, taken as a
whole. All of the outstanding shares of capital stock of each of the
Subsidiaries have been duly authorized and validly issued, are fully paid and
nonassessable, and are owned by the Company directly, free and clear of any
material lien, adverse claim, security interest, equity or other encumbrance.
Except for the Subsidiaries, the Company does not own a material interest in or
control, directly or indirectly, any other corporation, partnership, joint
venture, association, trust or other business organization.
(f) There are no legal or governmental proceedings pending or, to the
knowledge of the Company, threatened, against the Company or any Subsidiary, or
to which the Company or any Subsidiary, or to which its respective properties,
is subject, that are required to be described in the Registration Statement or
the Prospectus (or any amendment or supplement thereto) but are not described as
required. There is no action, suit, inquiry, proceeding, or investigation by or
before any court or governmental or other regulatory or administrative agency or
commission pending or, to the best knowledge of the Company, threatened against
or involving the Company or any Subsidiary (including without limitation any
such action, suit, inquiry, proceeding or investigation relating to any product
alleged to have been manufactured or sold by the Company or any Subsidiary and
alleged to have been unreasonably hazardous, defective, or improperly designed
or manufactured), nor, to the Company's knowledge, is there any basis for any
such action, suit, inquiry, proceeding, or investigation. There are no
agreements, contracts, indentures, leases or other instruments that are required
to be described in the Registration Statement or the Prospectus (or any
amendment or supplement thereto) or to be filed as an exhibit to the
Registration Statement that are not described or filed as required or
incorporated by reference as permitted by the Act. All such contracts to
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which the Company or any Subsidiary is a party have been duly authorized,
executed and delivered by the Company or the respective Subsidiary, constitute
valid and binding agreements of the Company or the respective Subsidiary and are
enforceable against the Company or the respective Subsidiary in accordance with
the terms thereof, except that the validity, binding effect and enforceability
thereof may be limited by bankruptcy, insolvency, reorganization, moratorium or
similar laws generally affecting the rights of creditors and by general
principles of equity, or the availability of specific performance, injunctive
relief and other equitable remedies.
(g) Neither the Company nor any Subsidiary is (i) in violation of (A)
its articles of incorporation or bylaws, or (B) any law, ordinance,
administrative or governmental rule or regulation applicable to the Company or
any Subsidiary or (C) any decree of any court or governmental agency or body
having jurisdiction over the Company or any Subsidiary, or (ii) in default in
any material respect in the performance of any obligation, agreement or
condition contained in any bond, debenture, note or any other evidence of
indebtedness or in any material agreement, indenture, lease or other instrument
to which the Company or any Subsidiary is a party or by which the Company or any
Subsidiary or any of their respective properties may be bound except, in the
case of (i)(B), (i)(C) and (ii) above, where such violation or default would not
have a material adverse effect on the Company and the Subsidiaries, taken as a
whole.
(h) The execution and delivery of this Agreement, and the performance
by the Company of its obligations under this Agreement, have been duly and
validly authorized by the Company, and this Agreement has been duly executed and
delivered by the Company and constitutes the valid and binding agreement of the
Company, enforceable against the Company in accordance with its terms, except
insofar as the indemnification and contribution provisions hereunder may be
limited by applicable law and except as the enforcement hereof may be limited by
bankruptcy, insolvency, reorganization, moratorium or other similar laws
relating to or affecting creditors' rights generally or by general equitable
principles or the availability of specific performance, injunctive relief and
other equitable remedies.
(i) None of the issuance and sale of the Company Firm Shares and
Company Additional Shares, the execution, delivery or performance of this
Agreement by the Company nor the consummation by the Company of the transactions
contemplated hereby (i) requires any consent, approval, authorization or other
order of or registration or filing with, any court, regulatory body,
administrative agency or other governmental body, agency or official (except
such as may be required for the registration of the Shares under the Act and the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), compliance
with the securities or Blue Sky laws of various jurisdictions, or to clear the
offering and the underwriting arrangements with the NASD, all of which will be,
or have been, effected in accordance with this Agreement) or (ii) conflicts or
will conflict with or constitutes or will constitute a breach of, or a default
under, the articles of incorporation or bylaws of the Company or any Subsidiary,
or (iii) conflicts or will conflict with or constitutes a breach of, or a
default under, any agreement, indenture, lease or other instrument to which the
Company or any Subsidiary is a party or by which
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the Company or any Subsidiary or any of their respective properties may be
bound, or violates any statute, law, regulation or filing or judgment,
injunction, order or decree applicable to the Company or any Subsidiary or any
of their respective properties, except where such conflict, breach, violation or
default would not have a material adverse effect on the Company and the
Subsidiaries, taken as a whole.
(j) Except as described in the Prospectus, the Company does not have
outstanding and at the Closing Date (and the Additional Closing Date, if
applicable) will not have outstanding any options to purchase, or any warrants
to subscribe for, or any securities or obligations convertible into, or any
contracts or commitments to issue or sell, any shares of Common Stock or any
such warrants or convertible securities or obligations. Except as referenced in
the Prospectus or as has been complied with or waived, no holder of securities
of the Company or any other person has rights to the registration of any
securities of the Company because of the filing of the Registration Statement.
(k) Grant Thornton LLP, the certified public accountants who have
certified the consolidated financial statements filed as part of the
Registration Statement and the Prospectus (and any amendment or supplement
thereto), are independent public accountants as required by the Act. The
consolidated financial statements of the Company and the financial statements of
Geotrac, Inc. and SMS Geotrac, Inc., together with related schedules and notes,
forming part of the Registration Statement and the Prospectus (and any amendment
or supplement thereto), present fairly the historical consolidated financial
position, results of operations and changes in financial position of such
entities on the bases stated therein at the respective dates or for the
respective periods to which they apply; such statements and related schedules
and notes have been prepared in accordance with generally accepted accounting
principles consistently applied throughout the periods involved and all
adjustments necessary for a fair presentation of the results for such period
have been made; and the other financial information and data set forth in the
Registration Statement and Prospectus (and any amendment or supplement thereto)
is accurately presented and prepared on a basis consistent with such financial
statements and the books and records of the Company. No financial statements or
schedules are required to be included in or incorporated by reference into the
Registration Statement that have not been so included or incorporated.
The pro forma condensed consolidated financial statements and other pro
forma financial information of the Company included in the Registration
Statement and the Prospectus have been prepared in accordance with the
Commission's rules and guidelines with respect to pro forma financial
statements, have been properly compiled on the pro forma basis described
therein, and, in management's opinion, the assumptions used in the preparation
thereof are reasonable and the adjustments used therein are appropriate to give
effect to the transactions or circumstances referred to therein.
(l) Subsequent to the respective dates as of which such information is
given in the Registration Statement and the Prospectus (or any amendment or
supplement thereto), neither the Company nor any Subsidiary has incurred any
liability or obligation, direct or contingent, or entered into any transaction,
whether or not in the ordinary course of business, that is material to the
Company and the Subsidiaries, taken as a whole, and there has not been (i) any
material change in the capital stock, or material increase in the short-term
debt or long-term debt, of the Company or any Subsidiary, or (ii) any material
adverse change, or any development involving or which may reasonably be expected
to involve a potential future material adverse change, in the condition
(financial or other), business, net worth or results of operations of the
Company and the Subsidiaries, taken as
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a whole, except in each case as described in or contemplated by the Prospectus
or Prepricing Prospectus.
(m) The Company and the Subsidiaries have good and marketable title to
all property (real and personal) described in the Registration Statement and the
Prospectus (or any amendment or supplement thereto) as being owned by the
Company or such Subsidiary, free and clear of all liens, claims, security
interests or other encumbrances except such as are described in or contemplated
by the Registration Statement and the Prospectus (or any amendment or supplement
thereto) or such as are not materially burdensome and do not interfere in any
material respect with the use of the property or the conduct of the business of
the Company and the Subsidiaries, taken as a whole, and the real property,
[PERSONAL PROPERTY] and buildings held under lease by the Company or any
Subsidiary, as applicable, is held by them under valid, subsisting and
enforceable leases, except that the validity, binding effect and enforceability
of any such lease may be limited by bankruptcy, insolvency, reorganization,
moratorium, or similar laws generally affecting the rights of creditors and by
general principles of equity, or the availability of specific performance,
injunctive relief and other equitable remedies, and with such exceptions as in
the aggregate are not materially burdensome and do not interfere in any material
respect with the conduct of the business of the Company and the Subsidiaries,
taken as a whole, or as are described in or contemplated by the Registration
Statement and the Prospectus (or any amendment or supplement thereto).
(n) The Company has not distributed and will not distribute prior to
the Closing Date (or the Additional Closing Date, if any) any offering material
in connection with the offering and sale of the Shares other than the Prepricing
Prospectus and the Registration Statement, the Prospectus or other materials
permitted by the Act and distributed with the prior approval of the
Underwriters, The Company has not taken, directly or indirectly, any action
which constituted or any action designed, or which might reasonably be expected
to cause or result in or constitute, under the Act or otherwise, stabilization
or manipulation of the price of any security of the Company to facilitate the
sale or resale of the Shares.
(o) Neither the Company nor any Subsidiary is an "investment company,"
an "affiliated person" of, or "promoter" or "principal underwriter" for an
investment company within the meaning of the Investment Company Act of 1940, as
amended.
(p) The Company and the Subsidiaries have all permits, licenses,
franchises, approvals, consents and authorizations of governmental or regulatory
authorities or private persons or entities (hereinafter "permit" or "permits")
as are necessary to own their respective properties and to conduct their
respective businesses in the manner described in the Registration Statement and
the Prospectus (or any amendment or supplement thereto), subject to such
qualifications as may be set forth therein, except where the failure to have
obtained any such permit has not had and will not have a material adverse effect
upon the condition (financial or other) or the business of the Company and the
Subsidiaries, taken as a whole; the Company and the Subsidiaries have fulfilled
and performed all of their material obligations with respect to each such permit
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<PAGE> 14
and no event has occurred which allows, or after notice or lapse of time would
allow, revocation or termination of any such permit or result in any other
material impairment of the rights of the holder of any such permit, subject in
each case to such qualification as may be set forth in the Prospectus; and,
except as described in the Prospectus, such permits contain no restrictions that
are materially burdensome to the Company and the Subsidiaries, taken as a whole.
(q) The Company and the Subsidiaries are insured by insurers of
recognized financial responsibility against such losses and risks and in such
amounts as are prudent and customary in the business in which they are engaged;
and the Company has no reason to believe that the Company and the Subsidiaries
will not be able to renew their existing insurance coverage as and when such
coverage expires or to obtain similar coverage from similar insurers as may be
necessary to continue their respective businesses at a cost that would not
materially and adversely affect the condition (financial or otherwise), net
worth or results of operations of the Company and the Subsidiaries, taken as a
whole.
(r) The Company and the Subsidiaries maintain a system of internal
accounting controls sufficient to provide reasonable assurances that: (i)
transactions are executed in accordance with management's general or specific
authorizations; (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with generally accepted
accounting principles and to maintain accountability for assets; (iii) access to
assets is permitted only in accordance with management's general or specific
authorizations; and (iv) the recorded accountability for assets is compared with
existing assets at reasonable intervals and appropriate action is taken with
respect to any differences.
(s) Neither the Company nor any Subsidiary has, directly or indirectly,
at any time during the past five years (i) made any unlawful contribution to any
candidate for political office, or failed to disclose fully any contribution in
violation of law, or (ii) made any payment to any federal, state or foreign
governmental official, or other person charged with similar public or
quasi-public duties, other than payments required or permitted by the laws of
the United States or any jurisdiction thereof or applicable foreign
jurisdictions.
(t) Except as set forth in the Registration Statement and the
Prospectus, to the knowledge of the Company neither the Company nor any
Subsidiary has violated any environmental, safety or similar law applicable to
their respective businesses, nor any federal or state law relating to
discrimination in the hiring, promotion or pay of employees nor any applicable
federal or state wages and hours laws, nor any provisions of the Employee
Retirement Income Security Act or the rules and regulations promulgated
thereunder, which in each case might result in any material adverse change in
the business, prospects, financial condition or results of operation of the
Company and the Subsidiaries, taken as a whole. To the best of the Company's and
BIG's knowledge, no labor disturbance by the employees of the Company or any of
the Subsidiaries exists or is imminent; and neither the Company nor BIG is aware
of any existing or imminent
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<PAGE> 15
labor disturbances by its employees that might reasonably be expected to result
in any material adverse change in the condition (financial or otherwise),
earnings, operations, business or business prospects of the Company and the
Subsidiaries, taken as a whole. No collective bargaining agreement exists with
any of the Company's or any Subsidiary's employees and, to the Company's and
BIG's knowledge, no such agreement is imminent. To the knowledge of the Company
and BIG, neither the employment by the Company or any Subsidiary of their key
personnel nor the activities of such individuals at the Company or any
Subsidiary conflicts with, constitutes a breach of, or otherwise violates any
employment, noncompetition, nondisclosure or similar agreement or covenant by
which such individuals may be bound.
(u) The Company and the Subsidiaries own and have full right, title and
interest in and to, or have the right to use, each material trade name,
trademark, service mark, patent, copyright, license, and other rights and all
know-how (including trade secrets and other unpatented and/or proprietary or
confidential information, systems, or procedures) (collectively, "Intellectual
Property Rights") under which the Company and the Subsidiaries conduct all or
any portion of their respective businesses, which Intellectual Property Rights
are adequate to conduct such businesses as conducted or as proposed to be
conducted or as described in the Registration Statement and the Prospectus (or
any amendment or supplement thereto); except as otherwise disclosed in the
Registration Statement and the Prospectus (or any amendment or supplement
thereto) neither the Company nor any Subsidiary has granted any right or license
with respect to, its respective Intellectual Property Rights; to the Company's
knowledge, there is no claim pending against the Company or any Subsidiary with
respect to any of their respective Intellectual Property Rights; neither the
Company nor any Subsidiary has received notice that, nor is the Company or BIG
aware that, any Intellectual Property Right which the Company or any Subsidiary
uses or has used in the conduct of their respective businesses infringed or
infringes upon or conflicted or conflicts with the rights of any third party,
which infringement of conflict could have a material adverse effect upon the
condition (financial or other) of the Company and the Subsidiaries, taken as a
whole; and neither the Company nor BIG is aware of any facts which, with the
passage of time or otherwise, would cause the Company or any Subsidiary to
infringe upon or otherwise violate the Intellectual Property Rights of any third
party.
(v) All federal, state, local and foreign tax returns required to be
filed by or on behalf of the Company and any Subsidiary with respect to all
periods ended prior to the date of this Agreement have been filed (or are the
subject of valid extension) with the appropriate federal, state, local and
foreign authorities (except where such failure to file would not have a material
adverse effect on the Company and the Subsidiaries, taken as a whole) and all
such tax returns, as filed, are accurate in all material respects. All federal,
state, local and foreign taxes (including estimated tax payments) required to be
shown on all such tax returns or claimed to be due from or with respect to the
respective businesses of the Company and the Subsidiaries have been paid or
reflected as a liability on the consolidated financial statements of the Company
for appropriate periods (except for any such tax, the failure of which to pay
would not have a material adverse effect on the Company and the Subsidiaries,
taken as a whole). All deficiencies asserted as a result of
15
<PAGE> 16
any federal, state, local or foreign tax audits have been paid or finally
settled and no issue has been raised in any such audit which, by application of
the same or similar principles, reasonably could be expected to result in a
proposed deficiency for any other period not so audited. No state of facts exist
or has existed which would constitute grounds for the assessment of any tax
liability with respect to the periods that have not been audited by appropriate
federal, state local or foreign authorities. There are no outstanding agreements
or waivers extending the statutory period of limitation applicable to any
federal, state, local or foreign tax return for any period.
(w) The Company and the Subsidiaries are in compliance with all
provisions of Section 1 of Laws of Florida, Chapter 92-198, An Act Relating to
Disclosure of doing Business with Cuba; if the Company or any Subsidiary
commences engaging in business with the government of Cuba or with any person or
affiliate located in Cuba after the date the Registration Statement becomes or
has become effective with the Commission or with the Florida Department of
Banking and Finance (the "Department"), whichever date is later, or if the
information reported or incorporated by reference in the Prospectus, if any,
concerning the business of the Company or any Subsidiary with Cuba or with any
person or affiliate located in Cuba changes in any material way, the Company
will provide the Department notice of such business or change, as appropriate in
a form acceptable to the Department.
SECTION 6A. REPRESENTATIONS AND WARRANTIES OF THE SELLING SHAREHOLDER.
The Selling Shareholder represents and warrants to each Underwriter and the
Company on the date hereof, and shall be deemed to represent and warrant to each
Underwriter and the Company on the Closing Date and the Additional Closing Date,
that:
(a) Such Selling Shareholder has full right, power and authority to
sell, assign, transfer and deliver the Shares to be sold by such Selling
Shareholder hereunder; and upon delivery of such Shares hereunder and payment of
the purchase price as herein contemplated, each of the Underwriters purchasing
such Shares in good faith and without notice of any lien, claim or encumbrance
will obtain valid title to the Shares purchased by it from such Selling
Shareholder, free and clear of any pledge, lien, security interest, encumbrance,
claim or equitable interest, including any liability for estate or inheritance
taxes, or any liability to or claims of any creditor, devisee, legatee or
beneficiary of such Selling Shareholder.
(b) Such Selling Shareholder has duly authorized (if applicable),
executed and delivered, in the form heretofore furnished to the Representatives,
a Power of Attorney (the "Power of Attorney") appointing
___________________________ and _________________ as attorneys-in-fact
(collectively, the "Attorneys" and individually, an "Attorney") and a Letter of
Transmittal and Custody Agreement (the "Custody Agreement") with Firstar Trust
Company, as custodian (the "Custodian"); each of the Power of Attorney and the
Custody Agreement constitutes a valid and binding agreement of such Selling
Shareholder, enforceable against such Selling Shareholder in accordance with its
terms, except as the enforcement thereof may be limited by bankruptcy,
insolvency, reorganization, moratorium or other similar laws relating to or
affecting
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<PAGE> 17
creditors' rights generally or by general equitable principles; and each of such
Selling Shareholder's Attorneys, acting alone, is authorized to execute and
deliver this Agreement and the certificate referred to in Section 9(i) hereof on
behalf of such Selling Shareholder, to determine the purchase price to be paid
by the several Underwriters to such Selling Shareholder as provided in Section 2
hereof, to authorize the delivery of the Shares to be sold by the Selling
Shareholder under this Agreement and to duly endorse (in blank or otherwise) the
certificate or certificates representing such Shares or a stock power or powers
with respect thereto, to accept payment therefor, and otherwise to act on behalf
of such Selling Shareholder in connection with this Agreement. Certificates in
negotiable form for all Shares to be sold by such Selling Shareholder under this
Agreement, together with a stock power or powers duly endorsed in blank by such
Selling Shareholder, have been placed in custody with the Custodian for the
purpose of effecting delivery hereunder.
(c) All authorizations, approvals, consents and orders necessary for
the execution and delivery by such Selling Shareholder of the Power of Attorney
and the Custody Agreement, the execution and delivery by or on behalf of such
Selling Shareholder of this Agreement and the sale and delivery of the Shares to
be sold by the Selling Shareholder under this Agreement (other than such
authorizations, approvals or consents as may be necessary under federal, state
or other securities or Blue Sky laws or to clear the offering and the
underwriting arrangements with the NASD) have been obtained and are in full
force and effect; such Selling Shareholder, if other than a natural person, has
been duly organized and is validly existing and in good standing under the laws
of the jurisdiction of its organization as the type of entity that it purports
to be; and such Selling Shareholder has full right, power, and authority to
enter into and perform its obligations under this Agreement and such Power of
Attorney and Custody Agreement, and to sell, assign, transfer and deliver the
Shares to be sold by such Selling Shareholder under this Agreement.
(d) Such Selling Shareholder will not offer, sell or otherwise dispose
of any shares of Common Stock or any securities convertible into or exercisable
or exchangeable for, or any rights to purchase or acquire, Common Stock, during
the period from the date of this Agreement to the date 180 days following the
effective date of the Registration Statement, inclusive, without the prior
written consent of Raymond James & Associates, Inc.
(e) Certificates in negotiable form for all Shares to be sold by such
Selling Shareholder under this Agreement, together with a stock power or powers
duly endorsed in blank by such Selling Shareholder, have been placed in custody
with the Custodian for the purpose of effecting delivery hereunder.
(f) This Agreement has been duly authorized by the Selling Shareholder
(if it is not a natural person) and has been duly executed and delivered by or
on behalf of such Selling Shareholder and constitutes the valid and binding
agreement of such Selling Shareholder, enforceable against such Selling
Shareholder in accordance with its terms, except insofar as the indemnification
and contribution provisions hereunder may be
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<PAGE> 18
limited by applicable law and except as the enforcement hereof may be limited by
bankruptcy, insolvency, reorganization, moratorium or other similar laws
relating to or affecting creditors' rights generally or by general equitable
principles; and the performance of this Agreement and the consummation of the
transactions herein contemplated will not result in a material breach of or
material default under any material bond, debenture, note or other evidence of
indebtedness, or any material contract, indenture, mortgage, deed of trust, loan
agreement, lease or other agreement or instrument to which such Selling
Shareholder is a party or by which such Selling Shareholder or any Selling
Shareholder Shares hereunder may be bound or, to the best of such Selling
Shareholder's knowledge, result in any violation of any law, order, rule,
regulation, writ, injunction or decree of any court or governmental agency or
body or, if such Selling Shareholder is other than a natural person, result in
any violation of any provisions of the charter, bylaws or other organizational
documents of such Selling Shareholder.
(g) Such Selling Shareholder has not taken and will not take, directly
or indirectly, any action designed to, or which might reasonably be expected to,
cause or result in stabilization or manipulation of the price of the Common
Stock to facilitate the sale or resale of the Shares.
(h) Such Selling Shareholder has not distributed and will not
distribute any prospectus or other offering material in connection with the
offering and sale of the Shares.
(i) All information furnished by or on behalf of such Selling
Shareholder relating to such Selling Shareholder and the Shares to be sold by
such Selling Shareholder under this Agreement that is contained in the
representations and warranties of such Selling Shareholder in such Selling
Shareholder's Power of Attorney or set forth in the Registration Statement or
the Prospectus is, and on the Closing Date will be, true, correct and complete,
and does not, and on the Closing Date will not, contain an untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make such statements not misleading.
(j) Such Selling Shareholder will review the Prospectus and will comply
with all agreements and satisfy all conditions on its part to be complied with
or satisfied pursuant to this Agreement on or prior to the Closing Date and will
advise one of its Attorneys prior to the Closing Date if any statement to be
made on behalf of such Selling Shareholder in the certificate contemplated by
Section 9(i) would be inaccurate if made as of the Closing Date.
(k) Such Selling Shareholder does not have, or has waived prior to the
date hereof, any preemptive right, co-sale right or right of first refusal or
other similar right to purchase any of the Shares that are to be sold by the
Company to the Underwriters pursuant to this Agreement, and such Selling
Shareholder does not own any capital stock of the Company or warrants, options
or similar rights to acquire, and does not have any right or arrangement to
acquire, any capital stock, rights, warrants, options
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or other securities from the Company, other than those described in the
Registration Statement and the Prospectus.
(l) Such Selling Shareholder is not aware (without having conducted any
investigation or inquiry) that any of the representations and warranties of the
Company and BIG set forth in Section 6 is untrue or incorrect.
SECTION 7. EXPENSES. The Company and the Selling Shareholder hereby
agree with the several Underwriters that the Company and the Selling Shareholder
will pay or cause to be paid the costs and expenses associated with the
following: (i) the preparation, printing or reproduction, and filing with the
Commission of the Registration Statement (including financial statements and
exhibits thereto), each Prepricing Prospectus, the Prospectus, each registration
statement filed pursuant to Rule 462(b) under the Act, and each amendment or
supplement to any of them; (ii) the printing (or reproduction) and delivery
(including postage, air freight charges and charges for counting and packaging)
of such copies of the Registration Statement, each Prepricing Prospectus, the
Prospectus, each registration statement filed pursuant to Rule 462(b) under the
Act, and all amendments or supplements to any of them, as may be reasonably
requested for use in connection with the offering and sale of the Shares; (iii)
the preparation, printing, authentication, issuance and delivery of certificates
for the Shares, including any stamp taxes in connection with the offering of the
Shares; (iv) the printing (or reproduction) and delivery of this Agreement, the
preliminary and supplemental Blue Sky Memoranda and all other agreements or
documents printed (or reproduced) and delivered in connection with the offering
of the Shares; (v) the listing of the Shares on the Nasdaq National Market; (vi)
the registration or qualification of the Shares for offer and sale under the
securities or Blue Sky laws of the several states as provided in Section 5(f)
hereof (including the reasonable fees and expenses of counsel for the
Underwriters relating to the preparation, printing or reproduction, and delivery
of the preliminary and supplemental Blue Sky Memoranda and such registration and
qualification), which fees will not exceed, in the aggregate, $5,000 so long as
the Shares qualify for listing on the Nasdaq National Market; (vii) the filing
fees in connection with any filings required to be made with the National
Association of Securities Dealers, Inc, in connection with the offering; (viii)
the transportation and other expenses incurred by or on behalf of
representatives of the Company in connection with the presentations to
prospective purchasers of the Shares; (ix) the fees and expenses of the
Company's accountants and the fees and expenses of counsel (including local and
special counsel) for the Company; (x) the preparation, printing and distribution
of bound volumes for the Representatives and their counsel; and (xi) the
performance by the Company of its other obligations under this Agreement. If the
transactions contemplated hereby are not consummated by reason of any failure,
refusal or inability on the part of the Company or the Selling Shareholder to
perform any agreement on its part to be performed hereunder or to fulfill any
condition of the Underwriters' obligations hereunder, the Company will reimburse
the several Underwriters for all reasonable out-of-pocket expenses (including
fees and disbursements of counsel for the several Underwriters) incurred by the
Underwriters in investigating, preparing to market or marketing the Shares. The
provisions of this Section 7 are intended to relieve the Underwriters from the
payment of the expenses and costs which
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the Selling Shareholder and the Company hereby agree to pay, but shall not
affect any agreement which the Selling Shareholder and the Company may make, or
may have made, for the sharing of such expenses and costs. Such agreements shall
not impair the obligations of the Company and the Selling Shareholder hereunder
to the several Underwriters.
SECTION 8. INDEMNIFICATION AND CONTRIBUTION. Each of the Company and
BIG agrees to indemnify and hold harmless you and each other Underwriter and
each person, if any, who controls any Underwriter within the meaning of Section
15 of the Act or Section 20 of the Exchange Act, from and against any and all
losses, claims, damages, liabilities and expenses (including reasonable
attorneys' fees and reasonable costs of investigation) arising out of or based
upon any breach of any representation, warranty, agreement or covenant of the
Company or BIG contained herein or any untrue statement or alleged untrue
statement of a material fact contained in any Prepricing Prospectus, the
Registration Statement, the Prospectus, any amendment or supplement thereto, or
in any Registration Statement filed pursuant to Rule 462(b) under the Act, or
arising out of or based upon any omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, or arising out of or based upon any untrue statement or
alleged untrue statement of any material fact contained in any audio or visual
materials used in connection with the marketing of the Shares, including,
without limitation, slides, videos, films and tape recordings, except insofar as
such losses, claims, damages, liabilities or expenses arise out of or are based
upon an untrue statement or omission or alleged untrue statement or omission
which has been made therein or omitted therefrom in reliance upon and in
conformity with the information relating to an Underwriter furnished to the
Company by or on behalf of any Underwriter through you for use in connection
therewith or arise out of materials prepared solely by the Underwriters without
the knowledge and approval of the Company or any of its representatives based
upon material information obtained from sources other than, directly or
indirectly, the Company or its representatives; provided, further, that the
indemnity agreement contained in this subsection with respect to any Prepricing
Prospectus and the Prospectus shall not inure to the benefit of any Underwriter
from whom the person asserting any such loss, claim, damage, liability or action
purchased any of the Shares which are the subject thereof if a copy of the
Prospectus (as amended or supplemented, if the Company shall have furnished any
amendment or supplement thereto to such Underwriter which shall correct the
untrue statement or alleged untrue statement or omission or alleged omission
which is the basis of the loss, claim, damage, liability or action for which
indemnification is sought) was not delivered or given to such person at or prior
to the written confirmation of the sale to such person. This indemnification
shall be in addition to any liability that the Company or BIG may otherwise
have.
The Selling Shareholder agrees to indemnify and hold harmless you and
each other Underwriter and each person, if any, who controls any underwriter
within the meaning of Section 15 of the Act or Section 20 of the Exchange Act,
from and against any and all losses, claims, damages, liabilities and expenses
(including reasonable costs of investigation) arising out of or based upon any
breach of any representation, warranty,
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agreement or covenant of such Selling Shareholder contained herein or any untrue
statement or alleged untrue statement of a material fact contained in any
Prepricing Prospectus, the Registration Statement, the Prospectus, any amendment
or supplement thereto, or in any Registration Statement filed pursuant to Rule
462(b) under the Act, or arising out of or based upon any omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, but only with respect
to information relating to the Selling Shareholder that is furnished in writing
by or on behalf of such Selling Shareholder through you expressly for use in the
Registration Statement, the Prospectus or any Prepricing Prospectus, any
amendment or supplement thereto, or any Registration Statement filed pursuant to
Rule 462(b) under the Act. This indemnification shall be in addition to any
liability that the Selling Shareholder may otherwise have.
If any action or claim shall be brought against any Underwriter or any
person controlling any Underwriter in respect of which indemnity may be sought
against the Company, BIG or the Selling Shareholder, such Underwriter or such
controlling person shall promptly notify in writing the party(s) against whom
indemnification is being sought (the "indemnifying party" or "indemnifying
parties"), and such indemnifying party(s) shall be entitled to participate
therein and, to the extent that it shall wish, jointly with any other
indemnifying party(s) similarly notified, to assume the defense thereof,
including the employment of counsel reasonably acceptable to such Underwriter or
such controlling person and payment of all reasonable fees and expenses. After
notice from the indemnifying party(s) to such Underwriter or controlling person
of its election so to assume the defense thereof, the indemnifying party(s)
shall not be liable to such Underwriter or controlling person under such
subsection for any legal expenses of other counsel or any other expenses, in
each case subsequently incurred by such Underwriter or controlling person, in
connection with the defense thereof. Such Underwriter or any such controlling
person shall have the right to employ separate counsel in any such action and
participate in the defense thereof, but the fees and expenses of such counsel
shall be at the expense of such Underwriter or such controlling person unless
(i) the indemnifying party(s) has (have) agreed in writing to pay such fees and
expenses, (ii) the indemnifying party(s) has (have) failed to assume the defense
and employ counsel reasonably acceptable to the Underwriter or such controlling
person, or (iii) the named parties to any such action (including any impleaded
parties) include both such Underwriter or such controlling person and the
indemnifying party(s), and such Underwriter or such controlling person shall
have been advised by its counsel that representation of such indemnified party
and any indemnifying party(s) by the same counsel would be inappropriate under
applicable standards of professional conduct (whether or not such representation
by the same counsel has been proposed) due to actual or potential differing
interests between them (in which case the indemnifying party(s) shall not have
the right to assume the defense of such action on behalf of such Underwriter or
such controlling person). The indemnifying party(s) shall not be liable for any
settlement of any such action effected without its (their) written consent, but
if settled with such written consent, or if there be a final judgment for the
plaintiff in any such action, the indemnifying party(s) agrees to indemnify and
hold harmless any Underwriter and any such controlling person from and against
any loss, claim, damage, liability or expense by reason of such
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settlement or judgment, but in the case of a judgment only to the extent stated
in the immediately preceding paragraph.
Each Underwriter agrees, severally and not jointly, to indemnify and
hold harmless the Company, its directors, its officers who sign the Registration
Statement, and any person who controls the Company within the meaning of Section
15 of the Act or Section 20 of the Exchange Act, and the Selling Shareholder, to
the same extent as the foregoing indemnity from the Company, BIG and the Selling
Shareholder to each Underwriter, but only with respect to information relating
to such Underwriter furnished in writing by or on behalf of such underwriter
through you expressly for use in the Registration Statement, the Prospectus or
any Prepricing Prospectus, any amendment or supplement thereto, or any
Registration Statement filed pursuant to Rule 462(b) under the Act. If any
action or claim shall be brought or asserted against the Company, any of its
directors, any such officers, or any such controlling person or the Selling
Shareholder based on the Registration Statement, the Prospectus or any
Prepricing Prospectus, any amendment or supplement thereto, or any Registration
Statement filed pursuant to Rule 462(b) under the Act, and in respect of which
indemnity may be sought against any Underwriter pursuant to this paragraph, such
Underwriter shall have the rights and duties given to the Company, BIG and the
Selling Shareholder by the preceding paragraph (except that if the Company, BIG
or the Selling Shareholder shall have assumed the defense thereof such
Underwriter shall not be required to do so, but may employ separate counsel
therein and participate in the defense thereof, but the fees and expenses of
such counsel shall be at such Underwriter's expense), and the Company, its
directors, any such officers, and any such controlling persons and the Selling
Shareholder shall have the rights and duties given to the Underwriters by the
immediately preceding paragraph. This indemnification shall be in addition to
any liability the Underwriters or any Underwriter may otherwise have.
If the indemnification provided for in this Section 8 is unavailable to
an indemnified party under the first, second or fourth paragraph hereof in
respect of any losses, claims, damages, liabilities or expenses referred to
therein, then an indemnifying party, in lieu of indemnifying such indemnified
party, shall contribute to the amount paid or payable by such indemnified party
as a result of such losses, claims, damages, liabilities or expenses (i) in such
proportion as is appropriate to reflect the relative benefits received by the
Company, BIG or the Selling Shareholder, as applicable, on the one hand and the
Underwriters on the other hand from the offering of the Shares or (ii) if the
allocation provided by clause (i) above is not permitted by applicable law, in
such proportion as is appropriate to reflect not only the relative benefits
referred to in clause (i) above but also the relative fault of the Company, BIG
or the Selling Shareholder, as applicable, on the one hand and the Underwriters
on the other in connection with the statements or omissions that resulted in
such losses, claims, damages, liabilities or expenses, as well as any other
relevant equitable considerations. The relative benefits received by the
Company, BIG or the Selling Shareholder, as applicable, on the one hand and the
Underwriters on the other hand shall be deemed to be in the same proportion as
the total net proceeds from the offering of the Shares (before deducting
expenses) received by the Company, BIG or the Selling Shareholder, as
applicable, bear to the total
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underwriting discounts and commissions received by the Underwriters, in each
case as set forth in the table on the cover page of the Prospectus; provided
that, in the event that the Underwriters shall have purchased any Additional
Shares hereunder, any determination of the relative benefits received by the
Company, BIG or the Selling Shareholder, as applicable, or the Underwriters from
the offering of the Shares shall include the net proceeds (before deducting
expenses) received by the Company, BIG or the Selling Shareholder, as
applicable, and the underwriting discounts and commissions received by the
Underwriters, from the sale of such Additional Shares, in each case computed on
the basis of the respective amounts set forth in the notes to the table on the
cover page of the Prospectus. The relative fault of the Company, BIG or the
Selling Shareholder, as applicable on the one hand and the Underwriters on the
other hand shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or the omission or alleged
omission to state a material fact or the omission or alleged omission to state a
material fact relates to information supplied by the Company, BIG or the Selling
Shareholder, as applicable, on the one hand or by the Underwriters on the other
hand and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission.
In any event, none of the Company, BIG or the Selling Shareholder will,
without the prior written consent of the Representatives, settle or compromise
or consent to the entry of any judgment in any proceeding or threatened claim,
action, suit or proceeding in respect of which indemnification may be sought
hereunder (whether or not the Representatives or any person who controls the
Representatives within the meaning of Section 15 of the Act or Section 20 of the
Exchange Act is a party to such claim, action, suit or proceeding) unless such
settlement, compromise or consent includes an unconditional release of all
Underwriters and such controlling persons from all liability arising out of such
claim, action, suit or proceeding.
The Company, BIG, the Selling Shareholder and the Underwriters agree
that it would not be just and equitable if contribution pursuant to this Section
8 was determined by a pro rata allocation (even if the Underwriters were treated
as one entity for such purpose) or by any other method of allocation that does
not take account of the equitable considerations referred to in the fifth
paragraph of this Section 8. The amount paid or payable by an indemnified party
as a result of the losses, claims, damages, liabilities and expenses referred to
in the fifth paragraph of this Section 8 shall be deemed to include, subject to
the limitations set forth above, any legal or other expenses reasonably incurred
by such indemnified party in connection with investigating or defending any such
action or claim. Notwithstanding the provisions of this Section 8, no
Underwriter shall be required to contribute any amount in excess of the amount
by which the total price of the Shares underwritten by it and distributed to the
public exceeds the amount of any damages which such Underwriter has otherwise
been required to pay by reason of such untrue or alleged untrue statement or
omission or alleged omission. No person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. The Underwriters' obligations to contribute pursuant to this
Section 8 are several in proportion to the respective number of Firm Shares set
forth opposite their
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names in Schedule I hereto (or such number of Firm Shares increased as set forth
in Section 10 hereof) and not joint.
Notwithstanding the foregoing, the liability of the Selling Shareholder
under the representations and warranties contained in Section 6A hereof and
under the indemnity agreements contained in the provisions of this Section 8
shall be limited to an amount equal to the initial public offering price of the
Shares sold by such Selling Shareholder to the Underwriters minus the amount of
the underwriting discount paid thereon to the Underwriters by such Selling
Shareholder. The Company, BIG, and such Selling Shareholder may agree, as among
themselves and without limiting the rights of the Underwriters under this
Agreement, as to the respective amount of such liability for which they each
shall be responsible.
In any proceeding relating to the Registration Statement, any
Preliminary Prospectus, the Prospectus, any supplement or amendment thereto, or
any registration statement filed pursuant to Section 462(b) of the Act, each
party against whom contribution may be sought under this Section 8 hereby
consents to the jurisdiction of any court having jurisdiction over any other
contributing party, agrees that process issuing from such court may be served
upon him or it by any other contributing party and consents to the service of
such process and agrees that any other contributing party may join him or it as
an additional defendant in any such proceeding in which such other contributing
party is a party.
Any losses, claims, damages, liabilities or expenses for which an
indemnified party is entitled to indemnification or contribution under this
Section 8 shall be paid by the indemnifying party to the indemnified party as
such losses, claims, damages, liabilities or expenses are incurred. The
indemnity and contribution agreements contained in this Section 8 and the
representations and warranties of the Company, BIG and the Selling Shareholder
set forth in this Agreement shall remain operative and in full force and effect,
regardless of (i) any investigation made by or on behalf of any Underwriter or
any person controlling any Underwriter, the Company, its directors or officers
or any person controlling the Company, or the Selling Shareholder, (ii)
acceptance of any Shares and payment therefor hereunder, and (iii) any
termination of this Agreement. A Successor to any Underwriter or any person
controlling any Underwriter, to the Company, its directors or officers, or any
person controlling the Company, or the Selling Shareholder, shall be entitled to
the benefits of the indemnity, contribution and reimbursement agreements
contained in this Section 8.
SECTION 9. CONDITIONS OF UNDERWRITERS' OBLIGATIONS. The obligations of
the several Underwriters to purchase and pay for the Firm Shares hereunder are
subject to the following conditions:
(a) The Registration Statement shall have become effective not later
than 5:00 p.m., New York City time, on the date hereof, or at such later date
and time as shall be consented to in writing by you, and all filings required by
Rules 424(b) and 430A under the Act shall have been timely made; and any request
of the Commission for additional
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<PAGE> 25
information (to be included in the Registration Statement or otherwise) shall
have been disclosed to the Representatives and complied with to their reasonable
satisfaction.
(b) Subsequent to the effective date of the Registration Statement there
shall not have occurred any change, or any development involving, or which might
reasonably be expected to involve, a future material adverse change, in the
condition (financial or other), business, properties, net worth or results of
operations of the Company and the Subsidiaries, taken as a whole, not
contemplated by the Prospectus (or any supplement thereto), that in your
reasonable opinion, as Representatives of the several Underwriters, would
materially and adversely affect the market for the Shares.
(c) You shall have received on the Closing Date (and the Additional
Closing Date, if any) an opinion of Foley & Lardner, counsel for the Company,
dated the Closing Date (and the Additional Closing Date, if any), satisfactory
to you and your counsel, to the effect that:
(i) The Company is a corporation duly incorporated and its
status is active under the laws of the State of Florida. The Company
has corporate power and authority to own or lease its properties and to
conduct its business as described in the Registration Statement and the
Prospectus.
(ii) Each Subsidiary is a corporation duly incorporated and
its standing is active under the laws of the State of Florida. Each
Subsidiary has corporate power and authority to own or lease its
properties and to conduct its business as described in the Registration
Statement and the Prospectus. All issued and outstanding shares of
capital stock of each Subsidiary have been validly issued and are fully
paid and nonassessable. To such counsel's knowledge, the Company does
not own or control, directly or indirectly, any corporation,
association or other entity other than Geotrac of America, Inc. and
Insurance Management Solutions, Inc.;
(iii) The statements set forth under the heading "Description
of Capital Stock" in the Prospectus, insofar as such statements purport
to summarize certain provisions of the capital stock of the Company,
provide a fair summary of such provisions.
(iv) All shares of capital stock of the Company outstanding
immediately prior to the issuance of the Firm Shares to be issued and
sold by the Company hereunder have been duly authorized and validly
issued, are fully paid and nonassessable and, to the actual knowledge
of such counsel, have not been issued in violation of any co-sale
right, registration right, right of first refusal, preemptive right, or
other similar right that is required to be described in the
Registration Statement, the Prepricing Prospectus or the Prospectus.
(v) To such counsel's knowledge, all of the issued shares of
capital stock of the Company immediately prior to the date hereof were
originally issued
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<PAGE> 26
in compliance with the registration provisions of the Act and the
registration provisions of all other applicable state and federal laws
or regulations, or pursuant to applicable exemptions therefrom (or any
actions under the Act, or any state or federal laws or regulations in
respect thereof are effectively barred by effective waivers or statutes
of limitation).
(vi) The Firm Shares to be issued and sold to the Underwriters
by the Company hereunder have been duly authorized by all necessary
corporate action of the Company and, when issued and delivered to the
Underwriters against payment therefor in accordance with the terms
hereof, will be validly issued, fully paid and nonassessable and, to
the actual knowledge of such counsel, will not have been issued in
violation of any co-sale right, registration right, right of first
refusal, preemptive right, or other similar right that is required to
be described in the Registration Statement, the Prepricing Prospectus
or the Prospectus.
(vii) The form of certificate for the Shares complies with the
requirements of the Florida Business Corporation Act.
(viii) The Registration Statement has become effective under
the Act and, to the knowledge of such counsel after reasonable inquiry,
no stop order suspending the effectiveness of the Registration
Statement has been issued and no proceedings for that purpose are
pending before or threatened by the Commission.
(ix) The Company has requisite corporate power and authority
to enter into this Agreement and to issue, sell and deliver the Shares
to be sold by it to the Underwriters as provided herein, and the
execution and delivery of this Agreement have been duly authorized by
all necessary corporate action of the Company. This Agreement has been
duly executed and delivered by the Company and is a valid, legal and
binding agreement of the Company enforceable against the Company,
except as enforceability thereof may be limited by (A) the application
of bankruptcy, reorganization, insolvency and other laws affecting
creditors' rights generally, and (B) equitable principles being applied
at the discretion of a court before which any proceeding may be
brought; provided, however that such counsel may specifically refrain
from opining as to the validity of the indemnification and contribution
provisions hereof insofar as they are or may be held to be violations
of public policy.
(x) To the actual knowledge of such counsel, neither the
Company nor any Subsidiary is in violation of any decree of any court
or governmental agency or body having jurisdiction over the Company or
any Subsidiary except as described in or contemplated by the
Registration Statement or the Prospectus or where such violation does
not and will not have a material adverse effect on the condition
(financial or other), business, properties, net worth or results of
operation of the Company and the Subsidiaries, taken as a whole.
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<PAGE> 27
(xi) To such counsel's knowledge, no contract or other
document is required to be described in the Registration Statement or
the Prospectus or to be filed as an exhibit to the Registration
Statement that is not described therein or filed as required.
(xii) Neither the Company nor any Subsidiary is, nor will any
of them become, solely as a result of the consummation of the
transactions contemplated hereby and the application of the net
proceeds therefrom as set forth in the Registration Statement and the
Prospectus (or any amendment or supplement thereto) under the caption
"Use of Proceeds," an "investment company" or an "affiliated person"
of, or "promoter" or "principal underwriter" for, an "investment
company," as such terms are defined in the Investment Company Act of
1940, as amended.
In rendering such opinion, counsel may rely upon an opinion or
opinions, each dated the Closing Date (and the Additional Closing Date, if
applicable), of other counsel as to the laws of a jurisdiction other than the
State of Florida, provided that (1) each such local counsel is acceptable to
you, (2) each such opinion so relied upon is addressed to counsel and you, (3)
such reliance is expressly authorized by each opinion so relied upon and a copy
of each such opinion is delivered to you and is in form and substance
satisfactory to you, and (4) counsel shall state in their opinion that they
believe that they and you are justified in relying thereon. In rendering such
opinion, local counsel may rely, to the extent they deem such reliance proper,
as to matters of fact upon certificates of officers of the Company and of
government officials. Copies of all such certificates shall be furnished to you
and your counsel on the Closing Date (and the Additional Closing Date, if
applicable).
In rendering such opinion, in each case where such opinion is qualified
by "the knowledge of such counsel after reasonable inquiry," such counsel may
rely as to matters of fact upon certificates of executive and other officers and
employees of the Company as you and such counsel shall deem are appropriate and
such other procedures as you and such counsel shall mutually agree; provided,
however, in each such case, such counsel shall state that it has no knowledge
contrary to the information contained in such certificates or developed by such
procedures and knows of no reason why you should not reasonably rely upon the
information contained in such certificates or developed by such procedures.
In addition to the opinion set forth above, such counsel shall state
that during the course of the preparation of the Registration Statement and the
Prospectus, and any amendments or supplements thereto, no facts have come to the
attention of such counsel which cause it to believe that the Registration
Statement, as of the time it became effective under the Act, the Prospectus or
any amendment or supplement thereto, on the date it was filed pursuant to Rule
424(b), as of the respective dates when such documents were filed with the
Commission, and the Registration Statement and the Prospectus, or any amendment
or supplement thereto, as of the Closing Date (except in each case for the
financial statements and other financial and statistical information contained
therein or
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<PAGE> 28
omitted therefrom as to which no opinion need be expressed), contained an untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary to make the statements therein not misleading. With
respect to such statement, counsel shall state that although such counsel did
not undertake to determine independently the accuracy, completeness and fairness
of the statements contained in the Registration Statement or in the Prospectus
and takes no responsibility therefor (except to the extent specifically set
forth herein), such counsel did participate in discussions and meetings with
officers and other representatives of the Company and discussions with the
auditor for the Company in connection with the preparation of the Registration
Statement and the Prospectus, and it is on the basis of the foregoing (relying
as to certain factual matters on the information provided to such counsel and
not on an independent investigation) that such counsel is making such statement.
(d) You shall have received on the Closing Date (and the Additional
Closing Date, if any) an opinion of G. Kristin Delano or C. Anthony Sexton,
counsel for the Company, dated the Closing Date (and the Additional Closing
Date, if any), satisfactory to you and your counsel, to the effect that:
(i) The Company is duly registered or qualified to transact
its business and is in good standing in each jurisdiction where the
nature of its properties or the conduct of its business requires such
registration or qualification, except where the failure to so register
or qualify does not have a material adverse effect on the financial
condition, business, properties, net worth or results of operation of
the Company and the Subsidiaries, taken as a whole.
(ii) Each Subsidiary is duly registered or qualified to
transact its business and is in good standing in each jurisdiction
where the nature of its properties or the conduct of its business
requires such registration or qualification except where the failure to
so register or qualify does not have a material adverse effect on the
financial condition, business, properties, net worth or results of
operation of the Company and the Subsidiaries, taken as a whole.
(iii) To the knowledge of such counsel after reasonable
inquiry, the Company and the Subsidiaries have such permits, licenses,
franchises, approvals, consents and authorizations of governmental or
regulatory authorities ("permits"), as are necessary to own their
respective properties and to conduct their respective businesses in the
manner described in the Registration Statement and the Prospectus (or
any amendment or supplement thereto), subject to such qualifications as
may be set forth therein; the Company and the Subsidiaries have
fulfilled and performed all of their respective material obligations
with respect to such permits and no event has occurred which allows, or
after notice or lapse of time would allow, revocation or termination
thereof or result in any other material impairment of the rights of the
holder of any such permit, subject in each case to such qualification
as may be set forth in the Registration Statement and the Prospectus
(or any amendment or supplement thereto); and except as described in
the Registration Statement and the Prospectus (or any amendment or
supplement
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thereto), such permits contain no restrictions that are materially
burdensome to the Company and the Subsidiaries, taken as a whole.
(iv) The property described in the Registration Statement and
the Prospectus (or any amendment or supplement thereto) as held under
lease by the Company or any Subsidiary is held under valid, subsisting
and enforceable leases, with only such exceptions as in the aggregate
are not material and do not interfere in any material respect with the
conduct of the business of the Company and the Subsidiaries, taken as a
whole.
(v) The statements under the captions "Risk Factors --
Government Regulation," "-- Shares Eligible for Future Sale," "Business
-- Legal Proceedings," "Description of Capital Stock" and "Shares
Eligible for Future Sale" in the Registration Statement and the
Prospectus, insofar as such statements constitute a summary of
documents referred to therein or matters of law, are accurate summaries
and fairly and correctly summarize and present in all material respects
the information called for with respect to such documents and matters.
Such counsel has no reason to believe that the descriptions in the
Registration Statement and the Prospectus (or any amendment or
supplement thereto) of statutes, regulations or legal or governmental
proceedings are other than accurate or fail to present fairly the
information required to be shown.
(vi) To the knowledge of such counsel after reasonable
inquiry, neither the Company nor any Subsidiary has received written
notice from any third party alleging that their employment of any
individual or the activities of any individual at the Company or any
Subsidiary conflicts with, constitutes a breach of, or otherwise
violates any employment, noncompetition, nondisclosure or similar
agreement or covenant by which such individual may be bound, and such
counsel has no reason to believe that the employment by the Company or
any Subsidiary of any individual or the activities of any individual at
the Company or any Subsidiary conflicts with, constitutes a breach of,
or otherwise violates any employment, noncompetition, nondisclosure or
similar agreement or covenant by which such individual may be bound.
In rendering such opinion, counsel may rely upon an opinion or
opinions, each dated the Closing Date (and the Additional Closing Date, if
applicable), of other counsel as to the laws of a jurisdiction other than the
State of Florida, provided that (1) each such local counsel is acceptable to
you, (2) each such opinion so relied upon is addressed to counsel and you, (3)
such reliance is expressly authorized by each opinion so relied upon and a copy
of each such opinion is delivered to you and is in form and substance
satisfactory to you, and (4) counsel shall state in their opinion that they
believe that they and you are justified in relying thereon. In rendering such
opinion, local counsel may rely, to the extent they deem such reliance proper,
as to matters of fact upon certificates of officers of the Company and of
government officials. Copies of all such certificates shall be furnished to you
and your counsel on the Closing Date (and the Additional Closing Date, if
applicable).
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<PAGE> 30
In rendering such opinion, in each case where such opinion is qualified
by "the knowledge of such counsel after reasonable inquiry," such counsel may
rely as to matters of fact upon certificates of executive and other officers and
employees of the Company as you and such counsel shall deem are appropriate and
such other procedures as you and such counsel shall mutually agree; provided,
however, in each such case, such counsel shall state that it has no knowledge
contrary to the information contained in such certificates or developed by such
procedures and knows of no reason why you should not reasonably rely upon the
information contained in such certificates or developed by such procedures.
In addition to the opinion set forth above, such counsel shall state
that during the course of the preparation of the Registration Statement and the
Prospectus, and any amendments or supplements thereto, no facts have come to the
attention of such counsel which cause it to believe that the Registration
Statement, as of the time it became effective under the Act, the Prospectus or
any amendment or supplement thereto, on the date it was filed pursuant to Rule
424(b), as of the respective dates when such documents were filed with the
Commission, and the Registration Statement and the Prospectus, or any amendment
or supplement thereto, as of the Closing Date (except in each case for the
financial statements and other financial and statistical information contained
therein or omitted therefrom as to which no opinion need be expressed),
contained an untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary to make the statement therein
not misleading. With respect to such statement, counsel shall state that
although such counsel did not undertake to determine independently the accuracy,
completeness and fairness of the statements contained in the Registration
Statement or in the Prospectus and takes no responsibility therefor (except to
the extent specifically set forth herein), such counsel did participate in
discussions and meetings with officers and other representatives of the Company
and discussions with the auditor for the Company in connection with the
preparation of the Registration Statement and the Prospectus, and it is on the
basis of the foregoing (relying as to certain factual matters on the information
provided to such counsel and not on an independent investigation) that such
counsel is making such statement.
(e) You shall have received on the Closing Date (and the Additional
Closing Date, if any) an opinion of Truman Bodden & Company, counsel for the
Selling Shareholder, dated the Closing Date (and the Additional Closing Date, if
any), satisfactory to you and your counsel, to the effect that:
(i) The Selling Shareholder has full right, power and
authority to enter into and to perform its obligations under the Power
of Attorney and Custody Agreement to be executed and delivered by it in
connection with the transactions contemplated herein; the Power of
Attorney and Custody Agreement of the Selling Shareholder has been duly
authorized by such Selling Shareholder and has been duly executed and
delivered by or on behalf of such Selling Shareholder; and the Power of
Attorney and Custody Agreement of such Selling Shareholder constitutes
the valid and binding agreement of such Selling Shareholder,
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enforceable in accordance with its terms, except as the enforcement
thereof may be limited by bankruptcy, insolvency, reorganization,
moratorium or other similar laws relating to or affecting creditors'
rights generally or by general equitable principles;
(ii) The Selling Shareholder has full right, power and
authority to enter into and to perform its obligations under this
Agreement and to sell, transfer, assign and deliver the Shares to be
sold by such Selling Shareholder hereunder;
(iii) This Agreement has been duly authorized by the Selling
Shareholder (if it is not a natural person) and has been duly executed
and delivered by or on behalf of such Selling Shareholder and, assuming
due authorization, execution and delivery by you, is a valid and
binding agreement of such Selling Shareholder, enforceable in
accordance with its terms, except insofar as the indemnification and
contribution provisions hereunder may be limited by applicable law and
except as the enforcement hereof may be limited by bankruptcy,
insolvency, reorganization, moratorium or other similar laws relating
to or affecting creditors' rights generally or by general equitable
principles;
(iv) Upon the delivery of and payment for the Shares as
contemplated in this Agreement, each of the Underwriters will receive
valid marketable title to the Shares purchased by it from such Selling
Shareholder, free and clear of any pledge, lien, security interest,
encumbrance, claim or equitable interest. In rendering such opinion,
such counsel may assume that the Underwriters are without notice of any
defect in the title of such Selling Shareholder to the Shares being
purchased from such Selling Shareholder;
(f) You shall have received on the Closing Date (and the Additional
Closing Date, if any) an opinion of Powell, Goldstein, Frazer & Murphy LLP,
counsel for the Underwriters, dated the Closing Date (and the Additional Closing
Date, if any), with respect to the issuance and sale of the Firm Shares, the
Registration Statement and other related matters as you may reasonably request,
and the Company shall have furnished to your counsel such documents as they may
reasonably request for the purpose of enabling them to pass upon such matters.
(g) You shall have received letters addressed to you and dated the date
hereof and the Closing Date (and the Additional Closing Date, if any) from Grant
Thornton LLP, independent certified public accountants, substantially in the
forms heretofore approved by you.
(h) (i) No stop order suspending the effectiveness of the Registration
Statement shall have been issued and no proceedings for that purpose shall have
been taken or, to the knowledge of the Company, shall be, contemplated by the
Commission at or prior to the Closing Date; (ii) there shall not have been any
change in the capital stock or other securities of the Company nor any material
increase in the short-term or long-term debt of the Company (other than in the
ordinary course of business) from that set
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forth or contemplated in the Registration Statement or the Prospectus (or any
amendment or supplement thereto); (iii) there shall not have been since the
respective dates as of which information is given in the Registration Statement
and the Prospectus (or any amendment or supplement thereto), except as may
otherwise be stated in the Registration Statement and Prospectus (or any
amendment or supplement thereto), any material adverse change in the condition
(financial or other), business properties, net worth or results of operation of
the Company and the Subsidiaries, taken as a whole, and (v) all of the
representations and warranties of the Company and BIG contained in this
Agreement shall be true and correct in all material respects on and as of the
date hereof and on and as of the Closing Date as if made on and as of the
Closing Date, and you shall have received a certificate, dated the Closing Date
and signed by the chief executive officer and the chief financial officer of the
Company and of BIG (or such other officers as are acceptable to you) to the
effect set forth in this Section 9(h) and in Section 9(i) hereof.
(i) The Company shall not have failed in any material respect at or
prior to the Closing Date to have performed or complied with any of its
agreements herein contained and required to be performed or complied with by it
hereunder at or prior to the Closing Date.
(j) You shall be satisfied that, and you shall have received a
certificate dated the Closing Date, from the Attorneys for the Selling
Shareholder to the effect that as of the Closing Date, they have not been
informed that: (i) the representations and warranties made by such Selling
Shareholder herein are not true or correct in any material respect on the
Closing Date; or (ii) such Selling Shareholder has not complied with any
obligation or satisfied any condition which is required to be performed or
satisfied on its part at or prior to the Closing Date.
(k) The Company and the Selling Shareholder shall have furnished or
caused to have been furnished to you such further certificates and documents as
you shall reasonably request.
(l) At or prior to the Closing Date, you shall have received the written
commitment of each of the Company's directors, executive officers and
shareholders set forth on Schedule III hereto, not to offer, sell or otherwise
dispose of any shares of Common Stock or any securities convertible into or
exercisable or exchangeable for, or any rights to purchase or acquire, Common
Stock, during the period from the date of this Agreement to the date 180 days
following the effective date of the Registration Statement, inclusive, without
the prior written consent of Raymond James & Associates, Inc., which commitments
shall be in full force and effect as of the Closing Date (and the Additional
Closing Date, if any).
All such opinions, certificates, letters and other documents will be in
compliance with the provisions hereof only if they are reasonably satisfactory
in form and substance to you and your counsel.
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<PAGE> 33
The several obligations of the Underwriters to purchase Additional
Shares hereunder are subject to the satisfaction on and as of the Additional
Closing Date of the conditions set forth in this Section 9, except that, if the
Additional Closing Date is other than the Closing Date, the certificates,
opinions and letters referred to in paragraphs (c) through (k) shall be dated in
the Additional Closing Date and the opinions and letters referred to in
paragraphs (c) through (g) shall be revised to reflect the sale of Additional
Shares.
SECTION 10. EFFECTIVE DATE OF AGREEMENT. This Agreement shall become
effective upon the later of (a) the execution and delivery hereof by the parties
hereto, or (b) release of notification of the effectiveness of the Registration
Statement by the Commission.
If any one or more of the Underwriters shall fail or refuse to purchase
Firm Shares which it or they have agreed to purchase hereunder, and the
aggregate number of Firm Shares which such defaulting Underwriter or
Underwriters agreed but failed or refused to purchase is not more than one-tenth
of the aggregate number of Firm Shares, each non-defaulting Underwriter shall be
obligated, severally, in the proportion which the number of Firm Shares set
forth opposite its name in Schedule I hereto bears to the aggregate number of
Firm Shares set forth opposite the names of all non-defaulting Underwriters or
in such other proportion as you may specify in the Agreement Among Underwriters,
to purchase the Firm Shares which such defaulting Underwriter or Underwriters
agreed, but failed or refused to purchase. If any Underwriter or Underwriters
shall fail or refuse to purchase Firm Shares and the aggregate number of Firm
Shares with respect to which such default occurs is more than one-tenth of the
aggregate number of Firm Shares and arrangements satisfactory to you and the
Company for the purchase of such Firm Shares are not made within 36 hours after
such default, this Agreement will terminate without liability on the part of any
non-defaulting Underwriter, the Company or the Selling Shareholder. In any such
case that does not result in termination of this Agreement, either you or the
Company shall have the right to postpone the Closing Date, but in no event for
longer than seven (7) days, in order that the required changes, if any, in the
Registration Statement and the Prospectus or any other documents or arrangements
may be effected. Any action taken under this paragraph shall not relieve any
defaulting Underwriter from liability in respect of any such default of any such
Underwriter under this Agreement.
SECTION 11. TERMINATION OF AGREEMENT. This Agreement shall be subject to
termination in your absolute discretion, without liability on the part of any
Underwriter to the Company, by notice to the Company, if prior to the Closing
Date or the Additional Closing Date (if different from the Closing Date and then
only as to the Additional Shares), as the case may be, (i) trading in securities
generally on the New York Stock Exchange, American Stock Exchange or The Nasdaq
Stock Market shall have been suspended or materially limited, (ii) trading of
any securities of the Company, including the Shares, on the New York Stock
Exchange, American Stock Exchange or The Nasdaq Stock Market shall have been
suspended or materially limited, whether as the result of a stop order by the
Commission or otherwise, (iii) a general moratorium on commercial banking
activities in New York or Florida shall have been declared by either federal or
33
<PAGE> 34
state authorities, (iv) there shall have, occurred any outbreak or escalation of
hostilities or other international or domestic calamity, crisis or change in
political, financial or economic conditions or other material event the effect
of which on the financial markets of the United States is such as to make it, in
your reasonable judgment, impracticable or inadvisable to market the Shares or
to enforce contracts for the sale of the Shares, or (v) the Company or any
Subsidiary shall have, in the sole judgment of the Representatives, sustained
any loss or interference, material to the Company and the Subsidiaries, taken as
a whole, with their respective businesses or properties from fire, flood,
hurricane, accident, or other calamity, whether or not covered by insurance, or
from any labor disputes or any legal or governmental proceeding, or there shall
have been any material adverse change (including, without limitation, a material
change in management or control of the Company) in the condition (financial or
otherwise), business prospects, net worth, or results of operations of the
Company and the Subsidiaries, taken as a whole, except in each case as described
in, or contemplated by, the Prospectus (excluding any amendment or supplement
thereto). Notice of such cancellation shall be promptly given to the Company and
its counsel by telegraph, telecopy or telephone and shall be subsequently
confirmed by letter.
All representations, warranties, covenants and agreements of the
Company and the Selling Shareholder herein or in certificates delivered pursuant
hereto, and the indemnity and contribution agreements contained in Section 8
hereof shall remain operative and in full force and effect regardless of any
investigation made by or on behalf of any Underwriter or any controlling person,
or by or on behalf of the Company or the Selling Shareholder, or any of their
officers, directors or controlling persons, and shall survive the delivery of
the Shares to the several Underwriter hereunder or termination of this
Agreement.
SECTION 12. INFORMATION FURNISHED BY THE UNDERWRITERS. The statements
set forth under the caption "Underwriting" in any Prepricing Prospectus and in
the Prospectus, constitute all the information furnished by or on behalf of the
Underwriters through you or on your behalf as such information is referred to in
Sections 6(a), 6(b) and 8 hereof.
SECTION 13. NOTICES; SUCCESSORS AND ASSIGNS. Except as otherwise
provided herein, notice given pursuant to any of the provisions of this
Agreement shall be in writing and shall be delivered (i) if to the Company, at
the office of the Company at 360 Central Avenue, St. Petersburg, Florida 33701,
Attention: Chief Executive Officer (with a copy to Todd B. Pfister, Esq., Foley
& Lardner, 100 N. Tampa Street, Suite 2700, Tampa, Florida 33602-5804 or (ii) if
to you, as the Underwriters, to (A) Raymond James & Associates, Inc., 880
Carillon Parkway, St, Petersburg, Florida 33716, Attention: Charles W. Uhrig,
(B) Lehman Brothers Inc., 3 World Financial Center, New York, New York 10285,
Attention: Stephen I. Robertson; and (C) ING Baring Furman Selz LLC, 230 Park
Avenue, New York, New York 10169, Attention: Scott D. Ketner (with a copy to G.
William Speer, Esq., Powell, Goldstein, Frazer & Murphy LLP, 16th Floor, 191
Peachtree Street, N.E., Atlanta, Georgia 30303); or (iii) if to the Selling
Shareholder, to
34
<PAGE> 35
Venture Capital Corporation or [_________________] as Attorney-in-Fact for the
Selling Shareholder, at __________.
This Agreement has been and is made solely for the benefit of the
several Underwriters, the Company, its directors and officers and the other
controlling persons referred to in Section 8 hereof, and the Selling
Shareholder, and their respective successors and assigns, to the extent provided
herein, and no other person shall acquire or have any right under or by virtue
or this Agreement. Neither of the terms "successor" and "successors and assigns"
as used in this Agreement shall include a purchaser from you of any of the
Shares in his status as such purchaser.
SECTION 14. APPLICABLE LAW; COUNTERPARTS. This Agreement shall be
governed by and construed in accordance with the laws of the State of Florida
without reference to choice of law principles thereunder. This Agreement may be
signed in various counterparts which together shall constitute one and the same
instrument. This Agreement shall be effective when, but only when, at least one
counterpart hereof shall have been executed on behalf of each party hereto.
35
<PAGE> 36
If the foregoing correctly sets forth our understanding, please
indicate your acceptance thereof in the space provided below for that purpose,
whereupon this letter and your acceptance shall constitute a binding agreement
between us.
Very truly yours,
INSURANCE MANAGEMENT
SOLUTIONS GROUP, INC.
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
BANKERS INSURANCE GROUP, INC.
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
SELLING SHAREHOLDER
By:
------------------------------------
Attorney-in-Fact for the Selling
Shareholder named in Schedule II
hereto
CONFIRMED as of the date first above mentioned,
on behalf of itself and the other several Underwriters
named in Schedule I hereto.
RAYMOND JAMES & ASSOCIATES, INC.
LEHMAN BROTHERS INC.
ING BARING FURMAN SELZ LLC
By: RAYMOND JAMES & ASSOCIATES, INC.
By:
----------------------------------
Authorized Representative
36
<PAGE> 37
SCHEDULE I
UNDERWRITERS
Number of
Name Firm Shares
- ---- -----------
Raymond James & Associates Inc.
Lehman Brothers Inc.
ING Baring Furman Selz LLC
TOTAL
============
37
<PAGE> 38
SCHEDULE II
SELLING SHAREHOLDER
Number of
Number of Additional
Name Firm Shares Shares
- ---- ----------- ----------
Venture Capital Corporation
TOTAL
=========== ==========
38
<PAGE> 39
SCHEDULE III
LOCK-UP AGREEMENTS
Name
Bankers Insurance Group, Inc.
Jeffrey S. Bragg
John A. Grant, Jr.
William D. Hussey
Kelly K. King
David K. Meehan
Robert G. Menke
Robert M. Menke
Alejandro M. Sanchez
E. Ray Solomon
Daniel J. White
39
<PAGE> 1
EXHIBIT 3.1
AMENDED AND RESTATED
ARTICLES OF INCORPORATION
OF
INSURANCE MANAGEMENT SOLUTIONS GROUP, INC.
THE UNDERSIGNED, acting on behalf of INSURANCE MANAGEMENT SOLUTIONS GROUP,
INC. (hereinafter, the "Corporation") under the Florida Business Corporation
Act, Chapter 607 of the Florida Statutes, as hereafter amended and modified (the
"FBCA"), hereby adopts the following Amended and Restated Articles of
Incorporation for the Corporation, pursuant to Section 607.1007 of the Florida
Statutes:
ARTICLE 1
Name
The name of the Corporation is: Insurance Management Solutions Group, Inc.
ARTICLE 2
Business and Activities
The Corporation may, and is authorized to, engage in any activity or
business now or hereafter permitted under the laws of the United States and of
the State of Florida.
ARTICLE 3
Capital Stock
3.1 Authorized Shares. The total number of shares of all classes of capital
stock that the Corporation shall have the authority to issue shall be
100,000,000 shares of Common Stock having a par value of $.01 per share ("Common
Stock") and 20,000,000 shares shall be Preferred Stock, $.01 par value per share
("Preferred Stock"). The Board of Directors is expressly authorized, pursuant to
Section 607.0602 of the FBCA, to provide for the classification and
reclassification of any unissued shares of Common Stock or Preferred Stock and
the issuance thereof in one or more classes or series without the approval of
the shareholders of the Corporation, all within the limitations set forth in
Section 607.0601 of the FBCA.
This instrument was prepared
by and return to:
G. Kristin Delano, Esq.
Florida Bar Number 228850
P.O. Box 15707
St. Petersburg, FL 33733
(813) 823-4000 ext. 4416
<PAGE> 2
3.2 Common Stock.
(A) Relative Rights. Except as otherwise provided in these Articles of
Incorporation, each share of Common Stock shall have the same rights as and be
identical in all respects to all the other shares of Common Stock.
(B) Voting Rights. The holders of Common Stock shall be entitled to
vote for the election of directors of the Corporation and for all other
corporate purposes. Upon any such vote, each holder of Common Stock shall,
except as otherwise provided by the FBCA, be entitled to one vote for each share
of Common Stock held by such holder.
(C) Dividends. Whenever there shall have been paid, or declared and set
aside for payment, the holders of record of the Common Stock and any class or
series of stock entitled to participate therewith as to dividends, shall be
entitled to receive dividends, when as, and if declared by the Board of
Directors, out any assets legally available for the payment of dividends
thereon.
(D) Dissolution, Liquidation, Winding Up. In the event of any
dissolution, liquidation, or winding up of the Corporation, whether voluntary or
involuntary, the holders of record of the Common Stock then outstanding, and all
holder of any class or series of stock entitled to participate therewith in
whole or in part, as to the distribution of assets, shall become entitled to
participate in the distribution of assets of the Corporation remaining after the
Corporation shall have paid, or set aside for payment all debts and liabilities
of the Corporation.
3.3 Preferred Stock.
(A) Issuance, Designations, Powers, Etc. The Board of Directors is
expressly authorized, subject to the limitations prescribed by the FBCA and the
provisions of these Articles of Incorporation, to provide, by resolution and by
filing Articles of Amendment to these Articles of Incorporation, which, pursuant
to Section 607.0602(4) of the FBCA shall be effective without shareholder
action, for the issuance from time to time of the number of shares to be
included in each such class or series, and to fix the designations, powers,
preferences and other rights of the shares of each such class or series and to
fix the qualifications, limitations and restrictions thereon, including, but
without limiting the generality of the foregoing, the following:
(1) the number of shares constituting that class or series and
the distinctive designation of that class or series;
(2) the dividend rate on the shares of that class or series,
whether dividends shall be cumulative, noncumulative or
partially cumulative and, if so, from which date or dates,
and the relative rights of priority, if any, of payments of
dividends on shares of that class or series;
2
<PAGE> 3
(3) whether that class or series shall have voting rights, in
addition to the voting rights provided by the FBCA, and, if
so, the terms of that class or series;
(4) whether that class or series shall have conversion
privileges, and, if so, the terms and conditions of such
conversion, including provision for adjustment of the
conversion rate in such events as the Board of Directors
shall determine;
(5) whether or not the shares of that class or series shall be
redeemable, and, if so, the terms and conditions of such
redemption, including the dates upon or after which they
shall be redeemable, and the amount per share payable in
case of redemption, which amount may vary under different
conditions and at different redemption dates;
(6) whether that class or series shall have a sinking fund for
the redemption or purchase of shares of that class or
series, and, if so, the terms and amount of such sinking
fund;
(7) the rights of the shares of that class or series in the
event of voluntary or involuntary liquidation, dissolution,
or winding up of the Corporation, and the relative rights of
priority, if any, of payment of shares of that class or
series; and
(8) any other relative powers, preferences, and rights of that
class or series, and qualifications, limitations or
restrictions on that class or series.
(B) Dissolution, Liquidation, Winding Up. In the event of any
liquidation, dissolution or winding up of the Corporation, whether voluntary or
involuntary, the holders of Preferred Stock of each class or series shall be
entitled to receive only such amount or amounts as shall have been fixed by the
Articles of Amendment to these Articles of Incorporation or by the resolution or
resolutions of the Board of Directors providing for the issuance of such class
or series.
3.4 No Preemptve Rights. Except as the Board of Directors may otherwise
determine, no shareholder of the Corporation shall have any preferential or
preemptive right to subscribe for or purchase from the Corporation any new or
additional shares of capital stock, or securities convertible into shares of
capital stock, of the Corporation, whether now or hereafter authorized.
3
<PAGE> 4
ARTICLE 4
Board of Directors
4.1 Classification. The number of directors of the Corporation shall be as
fixed from time to time by or pursuant to these Articles of incorporation or by
bylaws of the Corporation (the "Bylaws"). The directors shall be classified,
with respect to the time for which they severally hold office, into three
classes, Class I, Class II and Class III, each of which shall be as nearly equal
in number as possible, and shall be adjusted from time to time in the manner
specified in the Bylaws to maintain such proportionality. Each initial director
in Class I shall hold office for a term expiring at the 2000 annual meeting of
the shareholders; each initial director in Class II shall hold office for a term
expiring at the 1999 annual meeting of the shareholders; and each initial
director in Class III shall hold office for a term expiring at the 1998 annual
meeting of the shareholders. Notwithstanding the foregoing provisions of this
Section 4.1 , each director shall serve until such director's successor is duly
elected and qualified or until such director's earlier death, resignation or
removal. At each annual meeting of the shareholders, the successors to the class
of directors whose term expires at that meeting shall be elected to hold office
for a term expiring at the annual meeting of the shareholders held in the third
year following the year of their election and until their successors shall have
been duly elected and qualified or until such director's earlier death,
resignation or removal.
4.2 Removal. Any director or directors may be removed from office at any
time with or without cause by the affirmative vote, at a special meeting of the
shareholders called for such a purpose, of not less than sixty-six and
two-thirds percent (66-2/3%) of the total number of votes of the then
outstanding shares of capital stock of the Corporation entitled to vote
generally in the election of directors, voting together as a single class, but
only if notice of such proposed removal was contained in the notice of such
meeting. At least thirty (30) days prior to such special meeting of
shareholders, written notice shall be sent to the director or directors whose
removal will be considered at such meeting. Any vacancy on the Board of
Directors resulting from such removal or otherwise shall be filled only by vote
of a majority of the directors then in office, although less than a quorum, and
any director so chosen shall hold office until the next election of the class
for which such director shall have been chosen and until his or her successor
shall have been elected and qualified or until any such director's earlier
death, resignation or removal.
4.3 Change of Number of Directors. In the event of any increase or decrease
in the authorized number of directors, the newly created or eliminated
directorships resulting from such increase or decrease shall be apportioned by
the Board of Directors among the three classes of directors so as to maintain
such classes as nearly equal as possible. No decrease in the number of directors
constituting the Board of Directors shall shorten the term of any incumbent
director.
4
<PAGE> 5
4.4 Exercise of Business Judgment. In discharging his or her duties as a
director of the Corporation, a director may consider such factors as the
director considers relevant, including the long-term prospects and interests of
the Corporation and its shareholders, the social, economic, legal, or other
effects of any corporate action or inaction upon the employees, suppliers,
customers of the Corporation or its subsidiaries, the communities and society in
which the Corporation or its subsidiaries operate, and the economy of the State
of Florida and the United States.
4.5 Initial Number of Directors. The number of directors constituting the
initial Board of Directors of the Corporation is nine (9). The number of
directors may be increased or decreased from time to time as provided in the
Bylaws, but in no event shall the number of directors be less than three (3).
ARTICLE 5
Action By Shareholders
5.1 Call For Special Meeting. Special meetings of the shareholders of the
Corporation may be called at any time, but only by (a) the Chairman of the Board
of the Corporation, (b) a majority of the directors in office, although less
than a quorum, and (c) the holders of not less than ten percent (10%) of the
total number of votes of the then outstanding shares of capital stock of the
Corporation entitled to vote generally in the election of directors, voting
together as a single class.
5.2 Shareholder Action By Unanimous Written Consent. Any action required or
permitted to be taken by the shareholders of the Corporation must be effected at
a duly called annual or special meeting of the shareholders, and may not be
effected by any consent in writing by such shareholders, unless such written
consent is unanimous.
ARTICLE 6
Indemnification
6.1 Provision of Indemnification. The Corporation shall, to the fullest
extent permitted or required by the FBCA, including any amendments thereto (but
in the case of any such amendment, only to the extent such amendment permits or
requires the Corporation to provide broader indemnification rights than prior to
such amendment), indemnify its Directors and Executive Officers against any and
all Liabilities, and advance any and all reasonable Expenses, incurred thereby
in any Proceeding to which any such Director or Executive Officer is a Party or
in which such Director or Executive Officer is deposed or called to testify as a
witness because he or she is or was a Director or Executive Officer of the
Corporation. The rights to indemnification granted hereunder shall not be deemed
exclusive of any other rights to indemnification against Liabilities or the
5
<PAGE> 6
advancement of Expenses which a Director or Executive Officer may be entitled
under any written agreement, Board of Directors' resolution, vote of
shareholders, the Act, or otherwise. The Corporation may, but shall not be
required to, supplement the foregoing rights to indemnification against
Liabilities and advancement of Expenses by the purchase of insurance on behalf
of any one or more of its Directors or Executive Officers whether or not the
Corporation would be obligated to indemnify or advance Expenses to such Director
or Executive Officer under this Article. For purposes of this Article, the term
"Directors" includes former directors of the Corporation and any director who is
or was serving at the request of the Corporation as a director, officer,
employee, or agent of another Corporation, partnership, joint venture, trust, or
other enterprise, including, without limitation, any employee benefit plan
(other than in the capacity as an agent separately retained and compensated for
the provision of goods or services to the enterprise, including, without
limitation, attorneys-at-law, accountants, and financial consultants). The term
"Executive Officers" includes those individuals who are or were at any time
"executive officers" of the Corporation as defined in Securities and Exchange
Commission Rule 3b-7 promulgated under the Securities Exchange Act of 1934, as
amended. All other capitalized terms used in this Article 6 and not otherwise
defined herein have the meaning set forth in Section 607.0850, Florida Statutes
(1995). The provisions of this Article 6 are intended solely for the benefit of
the indemnified parties described herein, their heirs and personal
representatives and shall not create any rights in favor of third parties. No
amendment to or repeal of this Article VI shall diminish the rights of
indemnification provided for herein prior to such amendment or repeal.
ARTICLE 7
Amendments
7.1 Articles of Incorporation. Notwithstanding any other provision of these
Articles of Incorporation or the Bylaws of the Corporation (and notwithstanding
that a lesser percentage may be specified by law) the affirmative vote of
sixty-six and two-thirds percent (66-2/3%) of the total number of votes of the
then outstanding shares of the capital stock of the Corporation entitled to vote
generally in the election of directors, voting together as a single class, shall
be required (unless separate voting by classes is required by the FBCA, in which
event the affirmative vote of sixty-six and two-thirds percent (66-2/3%) of the
number of shares of each class or series entitled to vote as a class shall be
required), to amend or repeal, or to adopt any provision inconsistent with the
purpose or intent of, Articles 4, 5, 6 or this Article 7 of these Articles of
Incorporation. Notice of any such proposed amendment, repeal or adoption shall
be contained in the notice of the meeting at which it is to be considered.
Subject to the provisions set forth herein, the Corporation reserves the right
to amend, alter, repeal or rescind any provision contained in these Articles of
Incorporation in the manner now or hereafter prescribed by law.
6
<PAGE> 7
7.2 Bylaws. The shareholders of the Corporation may adopt or amend a bylaw
which fixes a greater quorum or voting requirement for shareholders (or voting
groups of shareholders) than is required by the FBCA. The adoption or amendment
of a bylaw that adds, changes or deletes a greater quorum or voting requirement
for shareholders must meet the same quorum or voting requirement and be adopted
by the same vote and voting groups required to take action under the quorum or
voting requirement then in effect or proposed to be adopted, whichever is
greater.
ARTICLE 8
Initial Registered Office and Agent
The address of the initial Registered Office of the Corporation is 360
Central Avenue, St. Petersburg, Florida 33701 and the initial Registered
Agent at such address is G. Kristin Delano
ARTICLE 9
Principal Office and Mailing Address
The address of the Principal Office of the Corporation and its mailing
address is 360 Central Avenue, St. Petersburg, Florida 33701. The location of
the Principal Office and the mailing address shall be subject to change as may
be provided in the Bylaws.
THESE AMENDED AND RESTATED ARTICLES OF INCORPORATION were unanimously
approved at a joint meeting of the Shareholders and the Board of Directors held
on the 27th day of January, 1998, said adopted Amended and Restated Articles of
Incorporation superseding the original Articles of incorporation and all
amendments to them.
BY: /s/ G. Kristin Delano
---------------------------------
G. Kristin Delano, Secretary
7
<PAGE> 8
ACCEPTANCE OF APPOINTMENT
BY INITIAL REGISTERED AGENT
THE UNDERSIGNED, having been named in Article 8 of the foregoing Articles
of Incorporation as initial Registered Agent at the office designated therein,
hereby accepts such appointment and agrees to act in such capacity. The
undersigned hereby states that he is familiar with, and hereby accepts, the
obligations set forth in Section 607.0505, Florida Statutes, and the undersigned
will further comply with any other provisions of law made applicable to him as
Registered Agent of the Corporation.
DATED this 28th day of January, 1998.
/s/ G. Kristin Delano
-------------------------------------
G. Kristin Delano, Registered Agent
8
<PAGE> 1
EXHIBIT 3.2
AMENDED AND RESTATED
BYLAWS
OF
INSURANCE MANAGEMENT SOLUTIONS GROUP, INC.
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C>
ARTICLE 1
DEFINITIONS
SECTION 1.1 DEFINITIONS ..................................................................................1
ARTICLE 2
OFFICES
SECTION 2.1 PRINCIPAL AND BUSINESS OFFICES ...............................................................1
SECTION 2.2 REGISTERED OFFICE.............................................................................1
ARTICLE 3
SHAREHOLDERS
SECTION 3.1 ANNUAL MEETING...............................................................................
SECTION 3.2 SPECIAL MEETINGS.............................................................................
SECTION 3.3 PLACE OF MEETING.............................................................................
SECTION 3.4 NOTICE OF MEETING............................................................................
SECTION 3.5 WAIVER OF NOTICE.............................................................................
SECTION 3.6 FIXING OF RECORD DATE........................................................................
SECTION 3.7 SHAREHOLDERS' LIST FOR MEETINGS..............................................................
SECTION 3.8 QUORUM.......................................................................................
SECTION 3.9 VOTING OF SHARES.............................................................................
SECTION 3.10 VOTE REQUIRED................................................................................
SECTION 3.11 CONDUCT OF MEETINGS..........................................................................
SECTION 3.12 INSPECTORS OF ELECTION.......................................................................
SECTION 3.13 PROXIES......................................................................................
SECTION 3.14 ACTION BY SHAREHOLDERS WITHOUT MEETING.......................................................
SECTION 3.15 ACCEPTANCE OF INSTRUMENT SHOWING SHAREHOLDER ACTION
ARTICLE 4
BOARD OF DIRECTORS
SECTION 4.1 GENERAL POWERS AND NUMBER....................................................................
SECTION 4.2 QUALIFICATIONS...............................................................................
SECTION 4.3 TERM OF OFFICE...............................................................................
SECTION 4.4 NOMINATIONS OF DIRECTORS.....................................................................
SECTION 4.5 REMOVAL .....................................................................................
SECTION 4.6 RESIGNATION..................................................................................
SECTION 4.7 VACANCIES....................................................................................
SECTION 4.8 COMPENSATION.................................................................................
SECTION 4.9 REGULAR MEETINGS.............................................................................
SECTION 4.10 SPECIAL MEETING..............................................................................
SECTION 4.11 NOTICE.......................................................................................
SECTION 4.12 WAIVER OF NOTICE.............................................................................
SECTION 4.13 QUORUM AND VOTING............................................................................
SECTION 4.14 CONDUCT OF MEETINGS..........................................................................
SECTION 4.15 COMMITTEES...................................................................................
</TABLE>
2
<PAGE> 3
<TABLE>
<S> <C>
SECTION 4.16 ACTION WITHOUT MEETING.......................................................................
ARTICLE 5
OFFICERS
SECTION 5.1 NUMBER.......................................................................................
SECTION 5.2 ELECTION AND TERM OF OFFICE..................................................................
SECTION 5.3 REMOVAL......................................................................................
SECTION 5.4 RESIGNATION..................................................................................
SECTION 5.5 VACANCIES....................................................................................
SECTION 5.6 CHAIRMAN OF THE BOARD........................................................................
SECTION 5.7 PRESIDENT....................................................................................
SECTION 5.8 VICE PRESIDENTS..............................................................................
SECTION 5.9 SECRETARY....................................................................................
SECTION 5.10 TREASURER....................................................................................
SECTION 5.11 ASSISTANT SECRETARIES AND ASSISTANT TREASURERS...............................................
SECTION 5.12 OTHER ASSISTANTS AND ACTING OFFICERS.........................................................
SECTION 5.13 SALARIES.....................................................................................
ARTICLES 6
CONTRACTS, CHECKS AND DEPOSITS; SPECIAL CORPORATE ACTS
SECTION 6.1 CONTRACTS....................................................................................
SECTION 6.2 CHECKS, DRAFTS, ETC..........................................................................
SECTION 6.3 DEPOSITS.....................................................................................
SECTION 6.4 VOTING OF SECURITIES OWNED BY CORPORATION....................................................
ARTICLE 7
CERTIFICATES FOR SHARES; TRANSFER OF SHARES
SECTION 7.1 CONSIDERATION FOR SHARES......................................................................
SECTION 7.2 CERTIFICATES FOR SHARES.......................................................................
SECTION 7.3 TRANSFER OF SHARES............................................................................
SECTION 7.4 RESTRICTION ON TRANSFER.......................................................................
SECTION 7.5 LOST, DESTROYED OR STOLEN CERTIFICATES........................................................
SECTION 7.6 STOCK REGULATIONS.............................................................................
ARTICLE 8
SEAL
SECTION 8.1 SEAL..........................................................................................
ARTICLE 9
BOOKS AND RECORDS
SECTION 9.1 BOOKS AND RECORDS.............................................................................
SECTION 9.2 SHAREHOLDERS' INSPECTION RIGHTS...............................................................
SECTION 9.3 DISTRIBUTION OF FINANCIAL INFORMATION.........................................................
SECTION 9.4 OTHER REPORTS.................................................................................
ARTICLE 10
INDEMNIFICATION
SECTION 10.1 PROVISION OF INDEMNIFICATION.................................................................
</TABLE>
3
<PAGE> 4
<TABLE>
<S> <C>
ARTICLE 11
AMENDMENTS
SECTION 11.1 POWER TO AMEND...............................................................................
</TABLE>
4
<PAGE> 5
ARTICLE 1
DEFINITIONS
Section 1.1 Definitions. The following terms shall have the following
meanings for purposes of these bylaws:
"Act" means the Florida Business Corporation Act, as it may be amended from
time to time, or any successor legislation thereto.
"Corporation" means Insurance Management Solutions Group, Inc., a Florida
corporation.
"Deliver" or "delivery" includes delivery by hand; United States mail;
facsimile, telegraph, teletype or other form of electronic transmission, with
written confirmation or other acknowledgment of receipt; and private mail
carriers handling nationwide mail services.
"Principal office" means the office (within or without the State of
Florida) where the Corporation's principal executive offices are located, as
designated in the Articles of Incorporation until an annual report or an interim
report has been filed with the Florida Department of State, and thereafter as
designated in the annual report.
ARTICLE 2
OFFICES
Section 2.1 Principal and Business Offices. The Corporation may have such
principal and other business offices, either within or without the State of
Florida, as the Board of Directors may designate or as the business of the
Corporation may require from time to time.
Section 2.2 Registered Office. The registered office of the Corporation
required BY the Act to be maintained in the State of Florida may but need not be
identical with the principal office if located in the State of Florida, and the
address of the registered office may be changed from time to time by the Board
of Directors or by the registered agent. The business office of the registered
agent of the Corporation shall be identical to such registered office.
ARTICLE 3
SHAREHOLDERS
Section 3.1 Annual Meeting.
(a) Call by Directors. The annual meeting of shareholders shall be
held within four months after the close of each fiscal year of the Corporation
on a date and at a time and place designated by the Board of Directors, for the
purpose of electing directors and for the transaction of such other business as
may come before the meeting. If the election of directors shall not be held on
the day fixed as herein provided for any annual meeting of shareholders, or at
any adjournment thereof, the Board of Directors shall cause the election to be
held at a special meeting of
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shareholders as soon thereafter as is practicable. The failure to hold the
annual meeting of the shareholders within the time stated in these bylaws shall
not affect the terms of office of the officers or directors of the Corporation
or the validity of any corporate action.
(b) Business At Annual Meeting. At an annual meeting of the
shareholders of the Corporation, only such business shall be conducted as shall
have been properly brought before the meeting. To be properly brought before an
annual meeting, business must be (1) specified in the notice of meeting (or any
supplement thereto) given by or at the direction of the Board of Directors, (2)
otherwise properly brought before the meeting by or at the direction of the
Board of Directors as determined by the Chairman, or (3) otherwise properly
brought before the meeting by a shareholder. For business to be properly brought
before an annual meeting by a shareholder, the shareholder must have given
timely notice thereof in writing to the Secretary of the Corporation. To be
timely, a shareholder's notice shall be received at the principal business
office of the Corporation no later than the date designated for receipt of
shareholders' proposals in a prior public disclosure made by the Corporation. If
there has been no such prior public disclosure, then to be timely, a
shareholder's notice must be delivered to or mailed and received at the
principal business office of the Corporation not less than sixty (60) days nor
more than ninety (90) days prior to the annual meeting of shareholders;
provided, however, that in the event that less than seventy (70) days' notice of
the date of the meeting is given to shareholders by notice or prior public
disclosure, notice by the shareholders, to be timely, must be received by the
Corporation not later than the close of business on the tenth day following the
day on which the Corporation gave notice or made a public disclosure of the date
of the annual meeting of the shareholders. A shareholder's notice to the
Secretary shall set forth as to each matter the shareholder proposes to bring
before the annual meeting (a) a brief description of the business desired to be
brought before the annual meeting and the reasons for conducting such business
at the annual meeting, (b) the name and address, as they appear on the
Corporation's stock books, of the shareholders proposing such business, (c) the
class and number of shares of the Corporation which are beneficially owned by
the shareholder, (d) any material interest of the shareholder in such business,
and (e) the same information required by clauses (b), (c) and (d) above with
respect to any other shareholder that, to the knowledge of the shareholder
proposing such business, supports such proposal. Notwithstanding anything in
these bylaws to the contrary, no business shall be conducted at an annual
meeting except in accordance with the procedures set forth in this Section 3.1
(b). The Chairman of an annual meeting shall, if the facts warrant, determine
and declare to the annual meeting that a matter of business was not properly
brought before the meeting in accordance with the provisions of this Section 3.1
(b), and if the Chairman shall so determine, the Chairman shall so declare at
the meeting and any such business not properly brought before the meeting shall
not be transacted.
Section 3.2 Special Meetings.
(a) Call by Directors or President. Special meetings of
shareholders of the Corporation, for any purpose or purposes, may be called by
the Board of Directors, the Chairman of the Board (if any) or the President.
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(b) Call by Shareholders. The Corporation shall call a special
meeting of shareholders in the event that the holders of at least ten percent
(10%) of all of the votes entitled to be cast on any issue proposed to be
considered at the proposed special meeting sign, date, and deliver to the
Secretary one or more written demands for the meeting describing one or more
purposes for which it is to be held. The Corporation shall give notice of such a
special meeting within sixty days after the date that the demand is delivered to
the Corporation.
Section 3.3 Place of Meeting. The Board of Directors may designate any
place, either within or without the State of Florida, as the place of meeting
for any annual or special meeting of shareholders. If no designation is made,
the place of meeting shall be the principal office of the Corporation.
Section 3.4 Notice of Meeting.
(a) Content and Delivery. Written notice stating the date, time,
and place of any meeting of shareholders and, in the case of a special meeting,
the purpose or purposes for which the meeting is called, shall be delivered not
less than ten days nor more than sixty days before the date of the meeting by or
at the direction of the President or the Secretary, or the officer or persons
duly calling the meeting, to each shareholder of record entitled to vote at such
meeting and to such other persons as required by the Act. If mailed, notice of a
meeting of shareholders shall be deemed to be delivered when deposited in the
United States mail, addressed to the shareholder at his or her address as it
appears on the stock record books of the Corporation, with postage thereon
prepaid.
(b) Notice of Adjourned Meetings. If an annual or special meeting
of shareholders is adjourned to a different date, time, or place, the
Corporation shall not be required to give notice of the new date, time, or place
if the new date, time, or place is announced at the meeting before adjournment;
provided, however, that if a new record date for an adjourned meeting is or must
be fixed, the Corporation shall give notice of the adjourned meeting to persons
who are shareholders as of the new record date who are entitled to notice of the
meeting.
(c) No Notice Under Certain Circumstances. Notwithstanding the
other provisions of this Section, no notice of a meeting of shareholders need be
given to a shareholder if: (1) an annual report and proxy statement for two
consecutive annual meetings of shareholders, or (2) all, and at least two,
checks in payment of dividends or interest on securities during a twelve-month
period have been sent by first-class, United States mail, addressed to the
shareholder at his or her address as it appears on the share transfer books of
the Corporation, and returned undeliverable. The obligation of the Corporation
to give notice of a shareholders' meeting to any such shareholder shall be
reinstated once the Corporation has received a new address for such shareholder
for entry on its share transfer books.
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Section 3.5 Waiver of Notice.
(a) Written Waiver. A shareholder may waive any notice required by
the Act or these bylaws before or after the date and time stated for the meeting
in the notice. The waiver shall be in writing and signed by the shareholder
entitled to the notice, and be delivered to the Corporation for inclusion in the
minutes or filing with the corporate records. Neither the business to be
transacted at nor the purpose of any regular or special meeting of shareholders
need be specified in any written waiver of notice.
(b) Waiver by Attendance. A shareholder's attendance at a meeting,
in person or by proxy, waives objection to all of the following: (1) lack of
notice or defective notice of the meeting, unless the shareholder at the
beginning of the meeting objects to holding the meeting or transacting business
at the meeting; and (2) consideration of a particular matter at the meeting that
is not within the purpose or purposes described in the meeting notice, unless
the shareholder objects to considering the matter when it is presented.
Section 3.6 Fixing of Record Date.
(a) General. The Board of Directors may fix in advance a date as
the record date for the purpose of determining shareholders entitled to notice
of a shareholders' meeting, entitled to vote, or take any other action. In no
event may a record date fixed by the Board of Directors be a date preceding the
date upon which the resolution fixing the record date is adopted or a date more
than seventy days before the date of meeting or action requiring a determination
of shareholders.
(b) Special Meeting. The record date for determining shareholders
entitled to demand a special meeting shall be the close of business on the date
the first shareholder delivers his or her demand to the Corporation.
(c) Shareholder Action by Unanimous Written Consent. If no
prior action is required by the Board of Directors pursuant to the Act, the
record date for determining shareholders entitled to take action without a
meeting shall be the close of business on the date the first signed written
consent with respect to the action in question is delivered to the Corporation,
but if prior action is required by the Board of Directors pursuant to the Act,
such record date shall be the close of business on the date on which the Board
of Directors adopts the resolution taking such prior action unless the Board of
Directors otherwise fixes a record date. Any action of the shareholders of the
Corporation taken without a meeting shall be effected only upon the unanimous
written consent of all shareholders entitled to take such action.
(d) Absence of Board Determination for Shareholders' Meeting. If
the Board of Directors does not determine the record date for determining
shareholders entitled to notice of and to vote at an annual or special
shareholders' meeting, such record date shall be the close of business on the
day before the first notice with respect thereto is delivered to shareholders.
(e) Adjourned Meeting. A record date for determining shareholders
entitled to notice of or to vote at a shareholders' meeting is effective for any
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adjournment of the meeting unless the Board of Directors fixes a new record
date, which it must do if the meeting is adjourned to a date more than 120 days
after the date fixed for the original meeting.
Section 3.7 Shareholders' List for Meetings.
(a) Preparation and Availability. After a record date for a meeting
of shareholders has been fixed, the Corporation shall prepare an alphabetical
list of the names of all of the shareholders entitled to notice of the meeting.
The list shall be arranged by class or series of shares, if any, and show the
address of and number of shares held by each shareholder. Such list shall be
available for inspection by any shareholder for a period of ten days prior to
the meeting or such shorter time as exists between the record date and the
meeting date, and continuing through the meeting, at the Corporation's principal
office, at a place identified in the meeting notice in the city where the
meeting will be held, or at the office of the Corporation's transfer agent or
registrar, if any. A shareholder or his or her agent may, on written demand,
inspect the list, subject to the requirements of the Act, during regular
business hours and at his or her expense, during the period that it is available
for inspection pursuant to this Section. A shareholder's written demand to
inspect the list shall describe with reasonable particularity the purpose for
inspection of the list, and the Corporation may deny the demand to inspect the
list if the Secretary determines that the demand was not made in good faith and
for a proper purpose or if the list is not directly connected with the purpose
stated in the shareholder's demand, all subject to the requirements of Section
607.1 602(3) of the Act. Notwithstanding anything herein to the contrary, the
Corporation shall make the shareholders' list available at any annual meeting or
special meeting of shareholders and any shareholder or his or her agent or
attorney may inspect the list at any time during the meeting or any adjournment
thereof.
(b) Prima Facie Evidence. The shareholders' list is prima facie
evidence of the identity of shareholders entitled to examine the shareholders'
list or to vote at a meeting of shareholders.
(c) Failure to Comply. If the requirements of this Section have not
been substantially complied with, or if the Corporation refuses to allow a
shareholder or his or her agent or attorney to inspect the shareholders' list
before or at the meeting, on the demand of any shareholder, in person or by
proxy, who failed to get such access, the meeting shall be adjourned until such
requirements are complied with.
(d) Validity of Action Not Affected. Refusal or failure to prepare
or make available the shareholders' list shall not affect the validity of any
action taken at a meeting of shareholders.
Section 3.8 Quorum.
(a) What Constitutes a Quorum. Shares entitled to vote as a
separate voting group may take action on a matter at a meeting only if a quorum
of those shares exists with respect to that matter. If the Corporation has only
one class of stock outstanding, such class shall constitute a separate voting
group for purposes of this Section. Except as otherwise provided in the Act, a
majority of the votes entitled to
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be cast on the matter shall constitute a quorum of the voting group for action
on that matter.
(b) Presence of Shares. Once a share is represented for any
purpose at a meeting, other than for the purpose of objecting to holding the
meeting or transacting business at the meeting, it is considered present for
purposes of determining whether a quorum exists for the remainder of the meeting
and for any adjournment of that meeting unless a new record date is or must be
set for the adjourned meeting.
(c) Adjournment in Absence of Quorum. Where a quorum is not
present, the holders of a majority of the shares represented and who would be
entitled to vote at the meeting if a quorum were present may adjourn such
meeting from time to time.
Section 3.9 Voting of Shares. Except as provided in the Articles of
Incorporation or the Act, each outstanding share, regardless of class, is
entitled to one vote on each matter voted on at a meeting of shareholders.
Section 3.10 Vote Required.
(a) Matters Other Than Election of Directors. If a quorum exists,
except in the case of the election of directors, action on a matter shall be
approved by a majority of the votes cast at such meeting, unless the Act or the
Articles of Incorporation require a greater number of affirmative votes.
(b) Election of Directors. Each director shall be elected by a
plurality of the votes cast by the shares entitled to vote in the election of
directors at a meeting at which a quorum is present. Each shareholder who is
entitled to vote at an election of directors has the right to vote the number of
shares owned by him or her for as many persons as there are directors to be
elected. Shareholders do not have a right to cumulate their votes for directors.
Section 3.11 Conduct of Meeting. The Chairman of the Board of Directors,
and if there be none, or in his or her absence, the President, and in his or her
absence, a Vice President in the order provided under the Section of these
bylaws titled "Vice Presidents", and in their absence, any person chosen by the
shareholders present shall call a shareholders' meeting to order and shall act
as presiding officer of the meeting, and the Secretary of the Corporation shall
act as secretary of all meetings of the shareholders, but, in the absence of the
Secretary, the presiding officer may appoint any other person to act as
secretary of the meeting. The presiding officer of the meeting shall have broad
discretion in determining the order of business at a shareholders' meeting. The
presiding officer's authority to conduct the meeting shall include, but in no
way be limited to, recognizing shareholders entitled to speak, calling for the
necessary reports, stating questions and putting them to a vote, calling for
nominations, and announcing the results of voting. The presiding officer also
shall take such actions as are necessary and appropriate to preserve order at
the meeting. The rules of parliamentary procedure need not be observed in the
conduct of shareholders' meetings.
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Section 3.12 Inspectors of Election. Inspectors of election may be
appointed by the Board of Directors to act at any meeting of shareholders at
which any vote is taken. IF inspectors of election are not so appointed, the
presiding officer of the meeting may, and on the request of any shareholder
shall, make such appointment. Each inspector, before entering upon the discharge
of his or her duties, shall take and sign an oath faithfully to execute the
duties of inspector at such meeting with strict impartiality and according to
the best of his or her ability. The inspectors of election shall determine the
number of shares outstanding, the voting rights with respect to each, the shares
represented at the meeting, the existence of a quorum, and the authenticity,
validity, and effect of proxies; receive votes, ballots, consents, and waivers;
hear and determine all challenges and questions arising in connection with the
vote; count and tabulate all votes, consents, and waivers; determine and
announce the result; and do such acts as are proper to conduct the election or
vote with fairness to all shareholders. No inspector, whether appointed by the
Board of Directors or by the person acting as presiding officer of the meeting,
need be a shareholder. The inspectors may appoint and retain other persons or
entities to assist the inspectors in the performance of the duties of the
inspectors. On request of the person presiding at the meeting, the inspectors
shall make a report in writing of any challenge, question or matter determined
by them and execute a certificate of any fact found by them.
Section 3.13 Proxies.
(a) Appointment. At all meetings of shareholders, a shareholder
may vote his or her shares in person or by proxy. A shareholder may appoint a
proxy to vote or otherwise act for the shareholder by signing an appointment
form, either personally or by his or her attorney-in-fact. If an appointment
form expressly provides, any proxy holder may appoint, in writing, a substitute
to act in his or her place. A telegraph, telex, or a cablegram, a facsimile
transmission of a signed appointment form, or a photographic, photostatic, or
equivalent reproduction of a signed appointment form is a sufficient appointment
form.
(b) When Effective. An appointment of a proxy is effective when
received by the Secretary or other officer or agent of the Corporation
authorized to tabulate votes. An appointment is valid for up to eleven (11)
months unless a longer period is expressly provided in the appointment form. An
appointment of a proxy is revocable by the shareholder unless the appointment
form conspicuously states that it is irrevocable and the appointment is coupled
with an interest.
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Section 3.14 Action by Shareholders Without Meeting.
(a) Requirements for Unanimous Written Consent. Any action
required or permitted by the Act to be taken at any annual or special meeting of
shareholders may be taken without a meeting, without prior notice, and without a
vote if one or more written consents describing the action taken shall be signed
and dated by the holders of all (and not less than all) of the outstanding
capital stock of the Corporation entitled to vote thereon. Such consents must be
delivered to the principal office of the Corporation in Florida, the
Corporation's principal place of business, the Secretary, or another officer or
agent of the Corporation having custody of the books in which proceedings of
meetings of shareholders are recorded. No written consent shall be effective to
take the corporate action referred to therein unless, within sixty days of the
date of the earliest dated consent delivered in the manner required herein,
written consents signed by the number of holders required to take action are
delivered to the Corporation by delivery as set forth in this Section.
(b) Revocation of Written Consents. Any written consent may be
revoked prior to the date that the Corporation receives the required number of
consents to authorize the proposed action. No revocation is effective unless in
writing and until received by the Corporation at its principal office in Florida
or its principal place of business, or received by the Secretary or other
officer or agent having custody of the books in which proceedings of meetings of
shareholders are recorded.
(c) Same Effect as Vote at Meeting. A consent signed under this
Section has the effect of a meeting vote and may be described as such in any
document. Whenever action is taken by written consent pursuant to this Section,
the written consent of the shareholders consenting thereto or the written
reports of inspectors appointed to tabulate such consents shall be filed with
the minutes of proceedings of shareholders.
Section 3.15 Acceptance of Instruments Showing Shareholder Action. If the
name signed on a vote, consent, waiver, or proxy appointment corresponds to the
name of a shareholder, the Corporation, if acting in good faith, may accept the
vote, consent, waiver, or proxy appointment and give it effect as the act of a
shareholder. If the name signed on a vote, consent, waiver, or proxy appointment
does not correspond to the name of a shareholder, the Corporation, if acting in
good faith, may accept the vote, consent, waiver, or proxy appointment and give
it effect as the act of the shareholder if any of the following apply:
(a) The shareholder is an entity and the name signed purports to
be that of an officer or agent of the entity;
(b) The name signed purports to be that of a administrator,
executor, guardian, personal representative, or conservator representing the
shareholder and, if the Corporation requests, evidence of fiduciary status
acceptable to the Corporation is presented with respect to the vote, consent,
waiver, or proxy appointment;
(c) The name signed purports to be that of a receiver or trustee
in bankruptcy, or assignee for the benefit of creditors of the shareholder and,
if the Corporation requests, evidence of this status acceptable to the
Corporation is
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presented with respect to the vote, consent, waiver, or proxy appointment;
(d) The name signed purports to be that of a pledgee, beneficial
owner, or attorney-in-fact of the shareholder and, if the Corporation requests,
evidence acceptable to the Corporation of the signatory's authority to sign for
the shareholder is presented with respect to the vote, consent, waiver, or proxy
appointment; or
(e) Two or more persons are the shareholder as covenants or
fiduciaries and the name signed purports to be the name of at least one of the
co-owners and the person signing appears to be acting on behalf of all
co-owners.
The Corporation may reject a vote, consent, waiver, or proxy appointment if the
Secretary or other officer or agent of the Corporation who is authorized to
tabulate votes, acting in good faith, has reasonable basis for doubt about the
validity of the signature on it or about the signatory's authority to sign for
the shareholder.
ARTICLE 4
BOARD OF DIRECTORS
Section 4.1 General Powers and Number. All corporate powers shall be
exercised BY or under the authority of, and the business and affairs of the
Corporation managed under the direction of, the Board of Directors. The
Corporation shall have nine (9) directors initially. The number of directors may
be increased or decreased from time to time by vote of a majority of the Board
of Directors, but shall never be less than three (3) nor more than twenty (20).
Section 4.2 Qualifications. Directors must be natural persons who are
eighteen years of age or older but need not be residents of the State of Florida
or shareholders of the Corporation.
Section 4.3 Term of Office. The directors shall be classified, with respect
to the time for which they severally hold office, into three (3) classes, Class
I, Class II and Class III, each of which shall be as nearly equal in number as
possible. Class I shall be established for a term expiring at the annual meeting
of shareholders to be held in 2000 and shall consist initially of three (3)
directors. Class II shall be established for a term expiring at the annual
meeting of shareholders to be held in 1999 and shall consist initially of three
(3) directors. Class III shall be established for a term expiring at the annual
meeting of shareholders to be held in 1998 and shall consist initially of three
(3) directors. Each director shall hold office until his or her successors are
elected and qualified, or until such director's earlier death, resignation or
removal as hereinafter provided. At each annual meeting of the shareholders of
the Corporation, the successors of the class of directors whose terms expire at
that meeting shall be elected to hold office for a term expiring at the annual
meeting of shareholders held in the third year following the year of their
election. Unless otherwise provided in the Articles of Incorporation, when the
number of directors of the Corporation is changed, the Board of Directors shall
determine the class or classes to which the increased or decreased number of
directors shall be apportioned; provided, however, that no decrease in the
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number of directors shall affect the term of any director then in office.
Section 4.4 Nominations of Directors. Except as otherwise provided pursuant
to the provisions of the Articles of Incorporation or Articles of Amendment
relating to the rights of the holders of any class or series of Preferred Stock,
voting separately by class or series, to elect directors under specified
circumstances, nominations of persons for election to the Board of Directors may
be made by the Chairman of the Board on behalf of the Board of Directors or by
any shareholder of the Corporation entitled to vote for the election of
directors at the annual meeting of the shareholders who complies with the notice
provisions set forth in this Section 4.4. To be timely, a shareholder's notice
shall be received at the principal business office of the Corporation no later
than the date designated for receipt of shareholders' proposals in a prior
public disclosure made by the Corporation. If there has been no such prior
public disclosure, then to be timely, a shareholder's nomination must be
delivered to or mailed and received at the principal business office of the
Corporation not less than sixty (60) days nor more than ninety (90) days prior
to the annual meeting of shareholders; provided, however, that in the event that
less than seventy (70) days' notice of the date of the meeting is given to the
shareholders or prior public disclosure of the date of the meeting is made,
notice by the shareholder to be timely must be so received not later than the
close of business on the tenth day following the day on which such notice of the
date of the annual meeting was mailed or such public disclosure was made. A
shareholder's notice to the Secretary shall set forth (a) as to each person the
shareholder proposes to nominate for election or re-election as a director, (i)
the name, age, business address and residence address of such proposed nominee,
(ii) the principal occupation or employment of such person, (iii) the class and
number of shares of capital stock of the Corporation which are beneficially
owned by such person, and (iv) any other information relating to such person
that is required to be disclosed in solicitations of proxies for election of
directors, or is otherwise required, in each case pursuant to Regulation 14A
under the Securities Exchange Act of 1934, as amended (including without
limitation such person's written consent to being named in the proxy statement
as a nominee and to serving as a director if elected); and (b) as to the
shareholder giving notice: the name and address, as they appear on the
Corporation's books, of the shareholder proposing such nomination, and (ii) the
class and number of shares of stock of the Corporation which are beneficially
owned by the shareholder. No person shall be eligible for election as a director
of the Corporation unless nominated in accordance with the procedures set forth
in this Section 4.4. The Chairman of the meeting shall, if the facts warrant,
determine and declare to the annual meeting that a nomination was not made in
accordance with the provisions of this Section 4.4, and if the Chairman shall so
determine, the Chairman shall so declare at the meeting and the defective
nomination shall be disregarded.
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Section 4.5 Removal.
Except as otherwise provided pursuant to the provisions of the Articles
of Incorporation or Articles of Amendment relating to the rights of the holders
of any class or series of Preferred Stock, voting separately by class or series,
to elect directors under specified circumstances, any director or directors may
be removed from office at any time with or without cause by the affirmative
vote, at a special meeting of the shareholders called for such a purpose, of not
less than sixty-six and two-thirds percent (66-2/3%) of the total number of
votes of the then outstanding shares of capital stock of the Corporation
entitled to vote generally in the election of directors, voting together as a
single class, but only if notice of such proposed removal was contained in the
notice of such meeting. At least thirty (30) days prior to such special meeting
of shareholders, written notice shall be sent to the director or directors whose
removal will be considered at such meeting. Any vacancy on the Board of
Directors resulting from such removal or otherwise shall be filled only by vote
of a majority of the directors then in office, although less than a quorum, and
any director so chosen shall hold office until the next election of the class
for which such directors shall have been chosen and until his or her successor
shall have been elected and qualified or until any such director's earlier
death, resignation or removal.
Section 4.6 Resignation. A director may resign at any time by delivering
written notice to the Board of Directors or its Chairman (if any) or to the
Corporation. A director's resignation is effective when the notice is delivered
unless the notice specifies a later effective date.
Section 4.7 Vacancies.
(a) Who May Fill Vacancies. Except as provided below, whenever any
vacancy occurs on the board of Directors, including a vacancy resulting from an
increase in the number directors, it may be filled by the affirmative vote of a
majority of the remaining directors though less than a quorum of the Board of
Directors. Any director elected in accordance with the preceding sentence shall
not hold office until his or her successor is duly elected and qualified, and
such successor shall complete such director's remaining term.
(b) Directors Electing by Voting Groups. Whenever the holders of
shares of any voting group are entitled to elect a class of one or more
directors by the provisions of the Articles of Incorporation, vacancies in such
class may be filled by holders of shares of that voting group or by a majority
of the directors then in office elected by such voting group or by a sole
remaining directors so selected. If no director elected by such voting group
remains in office, unless the Articles of Incorporation provide otherwise,
directors not elected by such voting group may fill vacancies.
(c) Prospective Vacancies. A vacancy that will occur at a specific
later date, because of a resignation effective at a later date or otherwise, may
be filled before the vacancy occurs, but the new director may not take office
until the vacancy occurs.
Section 4.8 Compensation. The Board of Directors, irrespective of any
personal interest of any of its members, may establish reasonable compensation
of all directors
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for services to the Corporation as directors, officers, or otherwise, or may
delegate such authority to an appropriate committee. The Board of Directors also
shall have authority to provide for or delegate authority to an appropriate
committee to proivde for reasonable pensions, disability or death benefits, and
other benefits or payments, to directors, officers, and employees and to their
families, dependents, estates, or beneficiaries on account of prior service
rendered to the Corporation by such directors, officers and employees.
Section 4.9 Regular Meetings. A regular meeting of the Board of Directors
shall be held without other notice than this bylaw immediately after the annual
meeting of shareholders and each adjourned session thereof. The place of such
regular meeting shall be the same as the place of the meeting of shareholders
which precedes it, or such other suitable place as may be announced at such
meeting of shareholder. The Board of Directors may provide, by resolution, the
date, time and place whether within or without the State of Florida, for the
holding of additional regular meetings of the Board of Directors without notice
other than such resolution.
Section 4.10 Special Meetings. Special meetings of the Board of Directors
may be called by the Chair of the Board (if any), the President or not less than
one third (1/3) of the members of the Board of Directors. The person or persons
calling the meeting may fix any place, whether within or without the State of
Florida, as the place for holding any special meeting of the Board of Director,
and if no other place is fixed the place of the meeting shall be the principal
office of the Corporation in the State of Florida.
Section 4.11 Notice. Special meetings of the Board of Directors must be
preceded by at least two days' notice of the date, time, and place of the
meeting. The notice need not describe the purpose of the special meeting.
Section 4.12 Waiver of Notice. Notice of a meeting of the Board of
Directors need not be given to any director who signs a waiver of notice either
before or after the meeting. Attendance of a director at a meeting shall
constitute a waiver of notice of such meeting and waiver of any and all
objections to the place of the meeting, the time of the meeting, or the manner
in which it has been called or convened, except when a director states, at the
beginning of the meeting or promptly upon arrival at the meeting, any objection
to the transaction of business because the meeting is not lawfully called or
convened.
Section 4.13 Quorum and Voting. A quorum of the Board of Directors consists
of a majority of the number of directors prescribed by these bylaws (or if no
number is prescribed, the number of directors in office immediately before the
meeting begins). If a quorum is present when a vote is taken, the affirmative
vote of a majority of directors present is the act of the Board of Directors. A
director who is present at a meeting of the Board of Directors or a committee of
the Board of Directors when corporate action is taken is deemed to have assented
to the action taken unless: (a) he or she objects at the beginning of the
meeting (or promptly upon his or her arrival) to holding it or transacting
specified business at the meeting; or (b) he or she votes against or abstains
from the action taken.
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Section 4.14 Conduct of Meetings.
(a) Presiding Officer. The Board of Directors may elect from among
its members a Chairman of the Board of Directors, who shall preside at meetings
of the Board of Directors. The Chairman, and if there be none, or in his or her
absence, the President, and in his or her absence, a Vice President in the order
provided under the Section of these bylaws titled "Vice Presidents," and in his
or her absence, any director chosen by the directors present, shall call
meetings of the Board of Directors to order and shall act as presiding officer
of the meeting.
(b) Minutes. The Secretary of the Corporation shall act as
secretary of all meetings of the Board of Directors but in the absence of the
Secretary, the presiding officer may appoint any other person present to act as
secretary of the meeting. Minutes of any regular or special meeting of the Board
of Directors shall be prepared and distributed to each director.
(c) Adjournments. A majority of the directors present, whether or
not a quorum exists, may adjourn any meeting of the Board of Directors to
another time and place. Notice of any such adjourned meeting shall be given to
the directors who are not present at the time of the adjournment and, unless the
time and place of the adjourned meeting are announced at the time of the
adjournment, to the other directors.
(d) Participation by Conference Call or Similar Means. The Board
of Directors may permit any or all directors to participate in a regular or a
special meeting by, or conduct the meeting through the use of, any means of
communication by which all directors participating may simultaneously hear or
communicate with each other during the meeting. A director participating in a
meeting by this means is deemed to be present in person at the meeting.
Section 4.15 Committees. The Board of Directors, by resolution adopted by a
majority of the full Board of Directors, may designate from among its members an
Executive Committee and one or more other committees, which may include, by way
of example and not as a limitation, a Compensation Committee (for the purpose of
establishing and implementing an executive compensation policy) and an Audit
Committee (for the purpose of examining and considering matters relating to the
financial affairs of the Corporation). Each committee shall have two or more
members, who serve at the pleasure of the Board of Directors, provided that the
Compensation Committee and the Audit Committee shall consist of at least two
Independent Directors. For purposes of this section, "Independent Director"
shall mean a person other than an officer or employee of the Corporation or any
subsidiary of the Corporation or any other individual having a relationship
which, in the opinion of the Board of Directors, would interfere with the
exercise of independent judgment in carrying out the responsibilities of a
director. To the extent provided in the resolution of the Board of Directors
establishing and constituting such committees, such committees shall have and
may exercise all the authority of the Board of Directors, except that no such
committee shall have the authority to:
(a) approve or recommend to shareholders actions or proposals
required by the Act to be approved by shareholders;
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(b) fill vacancies on the Board of Directors or any committee
thereof;
(c) adopt, amend, or repeal these bylaws;
(d) authorize or approve the reacquisition of shares unless
pursuant to a general formula or method specified by the Board of Directors; or
(e) authorize or approve the issuance or sale or contract for the
sale of shares, or determine the designation and relative rights, preferences,
and limitations of a voting group except that the Board of Directors may
authorize a committee (or a senior executive officer of the Corporation) to do
so within limits specifically prescribed by the Board of Directors.
The Board of Directors, by resolution adopted in accordance with this Section,
may designate one or more directors as alternate members of any such committee,
who may act in the place and stead of any absent member or members at any
meeting of such committee. The provisions of these bylaws which govern meetings,
notice and waiver of notice, and quorum and voting requirements of the Board of
Directors apply to committees and their members as well.
Section 4.16 Action Without Meeting. Any action required or permitted by
the Act to be taken at a meeting of the Board of Directors or a committee
thereof may be taken without a meeting if the action is taken by all members of
the Board or of the committee. The action shall be evidenced by one or more
written consents describing the action taken, signed by each director or
committee member and retained by the Corporation. Such action shall be effective
when the last director or committee member signs the consent, unless the consent
specifies a different effective date. A consent signed under this Section has
the effect of a vote at a meeting and may be described as such in any document.
ARTICLE 5
OFFICERS
Section 5.1 Number. The principal officers of the Corporation shall be a
Chairman, a President, the number of Vice Presidents, if any, as authorized from
time to time by the Board of Directors, a Secretary, and a Treasurer, each of
whom shall be elected by the Board of Directors. Such other officers and
assistant officers as may be deemed necessary may be elected or appointed by the
Board of Directors. The Board of Directors may also authorize any duly appointed
officer to appoint one or more officers or assistant officers. The same
individual may simultaneously hold more than one office.
Section 5.2 Election and Term of Office. The officers of the Corporation to
be elected by the Board of Directors shall be elected annually by the Board of
Directors at the first meeting of the Board of Directors held after each annual
meeting of the shareholders. If the election of officers shall not be held at
such meeting, such election shall be held as soon thereafter as is practicable.
Each officer shall hold office until his or her successor shall have been duly
elected or until his or her prior death,
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resignation, or removal.
Section 5.3 Removal. The Board of Directors may remove any officer and,
unless restricted by the Board of Directors, an officer may remove any officer
or assistant officer appointed by that officer, at any time, with or without
cause and notwithstanding the contract rights, if any, of the officer removed.
The appointment of an officer does not of itself create contract rights.
Section 5.4 Resignation. An officer may resign at any time by delivering
notice to the Corporation. The resignation shall be effective when the notice is
delivered, unless the notice specifies a later effective date and the
Corporation accepts the later effective date. IF a resignation is made effective
at a later date and the Corporation accepts the future effective date, the
pending vacancy may be filled before the effective date but the successor may
not take office until the effective date.
Section 5.5 Vacancies. A vacancy in any principal office because of death,
resignation, removal, disqualification, or otherwise, shall be filled as soon
thereafter as practicable by the Board of Directors for the unexpired portion of
the term.
Section 5.6 Chairman of the Board. The Chairman of the Board (the
"Chairman") shall be a member of the Board of Directors of the Corporation and
shall preside over all meetings of the Board of Directors and shareholders of
the Corporation. The Chairman shall have authority, subject to such rules as may
be prescribed by the Board of Directors, to appoint such agents and employees of
the Corporation as he or she shall deem necessary, to prescribe their powers,
duties and compensation, and to delegate authority to them. Such agents and
employees shall hold office at the direction of the Chairman. The Chairman shall
have authority to sign certificates for shares of the Corporation the issuance
of which shall have been authorized by resolution of the Board of Directors, and
to execute and acknowledge, on behalf of the Corporation, all deeds, mortgages,
bonds, contracts, leases, reports, and all other documents or instruments
necessary or proper to be executed in the course of the Corporation's regular
business, or which shall be authorized by resolution of the Board of Directors;
and, except as otherwise provided by law or the Board of Directors, the Chairman
may authorize the President or any Vice President or other officer or agent of
the Corporation to execute and acknowledge such documents or instruments in his
or her place and stead. In general, he or she shall perform all duties as may be
prescribed by the Board of Directors from time to time.
Section 5.7 President. The President shall be the chief executive officer
of the Corporation and, subject to the direction of the Board of Directors,
shall in general supervise and control all of the business and affairs of the
Corporation. If the Chairman of the Board is not present, the President shall
preside at all meetings of the Board of Directors and shareholders. The
President shall have authority, subject to such rules as may be prescribed by
the Board of Directors, to appoint such agents and employees of the Corporation
as he or she shall deem necessary, to prescribe their powers, duties and
compensation, and to delegate authority to them. Such agents and employees shall
hold office at the discretion of the President. The President shall have
authority to sign certificates for shares of the Corporation the issuance of
which shall have been authorized by resolution of the Board of Directors, and to
execute and
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acknowledge, on behalf of the Corporation, all deeds, mortgages, bonds,
contracts, leases, reports, and all other documents or instruments necessary or
proper to be executed in the course of the Corporation's regular business, or
which shall be authorized by resolution of the Board of Directors; and, except
as otherwise provided by law or the Board of Directors, the President may
authorize any Vice President or other officer or agent of the Corporation to
execute and acknowledge such documents or instruments in his or her place and
stead. In general he or she shall perform all duties incident to the office of
President and such other duties as may be prescribed by the Board of Directors
from time to time.
Section 5.8 Vice Presidents. In the absence of the President or in the
event of the President's death, inability or refusal to act, or in the event for
any reason it shall be impracticable for the President to act personally, the
Vice President, if any (or in the event there be more than one Vice President,
the Vice Presidents in the order designated by the Board of Directors, or in the
absence of any designation, then in the order of their election), shall perform
the duties of the President, and when so acting, shall have all the powers of
and be subject to all the restrictions upon the President. Any Vice President
may sign certificates for shares of the Corporation the issuance of which shall
have been authorized by resolution of the Board of Directors; and shall perform
such other duties and have such authority as from time to time may be delegated
or assigned to him or her by the President or by the Board of Directors. The
execution of any instrument of the Corporation by any Vice President or
Assistant Vice President shall be conclusive evidence, as to third parties, of
his or her authority to act in the stead of the President. The Corporation may
have one or more Executive Vice Presidents and one or more Senior Vice
Presidents, who shall be Vice Presidents for purposes hereof.
Section 5.9 Secretary. The Secretary shall: (a) keep, or cause to be kept,
minutes of the meetings of the shareholders and of the Board of Directors (and
of committees thereof) in one or more books provided for that purpose (including
records of actions taken by the shareholders or the Board of Directors (or
committees thereof) without a meeting); (b) be custodian of the corporate
records and of the seal of the Corporation, if any, and if the Corporation has a
seal, see that it is affixed to all documents the execution of which on behalf
of the Corporation under its seal is duly authorized; (c) authenticate the
records of the Corporation; (d) maintain a record of the shareholders of the
Corporation, in a form that permits preparation of a list of the names and
addresses of all shareholders, by class or series of shares and showing the
number and class or series of shares held by each shareholder; (e) have general
charge of the stock transfer books of the Corporation; and (f) in general
perform all duties incident to the office of Secretary and have such other
duties and exercise such authority as from time to time may be delegated or
assigned by the President or by the Board of Directors.
Section 5.10 Treasurer. The Treasurer shall: (a) have charge and custody of
and be responsible for all funds and securities of the Corporation; (b) maintain
appropriate accounting records; (c) receive and give receipts for moneys due and
payable to the Corporation from any source whatsoever, and deposit all such
moneys in the name of the Corporation in such banks, trust companies, or other
depositories as shall be selected in accordance with the provisions of these
bylaws; and (d) in general perform all of the duties incident to the office of
Treasurer and have such other duties
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and exercise such other authority as from time to time may be delegated or
assigned by the President or by the Board of Directors. If required by the Board
of Directors, the Treasurer shall give a bond for the faithful discharge of his
or her duties in such sum and with such surety or sureties as the Board of
Directors shall determine.
Section 5.11 Assistant Secretaries and Assistant Treasurers. There shall be
such number of Assistant Secretaries and Assistant Treasurers as the Board of
Directors may from time to time authorize. The Assistant Treasurers shall
respectively, if required by the Board of Directors, give bonds for the faithful
discharge of their duties in such sums and with such sureties as the Board of
Directors shall determine. The Assistant Secretaries and Assistant Treasurers,
in general, shall perform such duties and have such authority as shall from time
to time be delegated or assigned to them by the Secretary or the Treasurer,
respectively, or by the President or the Board of Directors.
Section 5.12 Other Assistants and Acting Officers. The Board of Directors
shall have the power to appoint, or to authorize any duly appointed officer of
the Corporation to appoint, any person to act as assistant to any officer, or as
agent for the Corporation in his or her stead, or to perform the duties of such
officer whenever for any reason it is impracticable for such officer to act
personally, and such assistant or acting officer or other agent so appointed by
the Board of Directors or an authorized officer shall have the power to perform
all the duties of the office to which he or she is so appointed to be an
assistant, or as to which he or she is so appointed to act, except as such power
may be otherwise defined or restricted by the Board of Directors or the
appointing officer.
Section 5.13 Salaries. The salaries of the principal officers shall be
fixed from time to time by the Board of Directors or by a duly authorized
committee thereof, and no officer shall be prevented from receiving such salary
by reason of the fact that he or she is also a director of the Corporation.
ARTICLE 6
CONTRACTS, CHECKS AND DEPOSITS; SPECIAL CORPORATE ACTS
Section 6.1 Contracts. The Board of Directors may authorize any officer or
officers, or any agent or agents to enter into any contract or execute or
deliver any instrument in the name of and on behalf of the Corporation, and such
authorization may be general or confined to specific instances. In the absence
of other designation, all deeds, mortgages, and instruments of assignment or
pledge made by the Corporation shall be executed in the name of the Corporation
by the President or one of the Vice Presidents; the Secretary or an Assistant
Secretary, when necessary or required, shall attest and affix the corporate
seal, if any, thereto; and when so executed no other party to such instrument or
any third party shall be required to make any inquiry into the authority of the
signing officer or officers.
Section 6.2 Checks, Drafts, etc. All checks, drafts or other orders for the
payment of money, notes, or other evidences of indebtedness issued in the name
of the Corporation, shall be signed by such officer or officers, agent or agents
of the Corporation and in such manner as shall from time to time be determined
by or under the authority of a resolution of the Board of Directors.
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Section 6.3 Deposits. All funds of the Corporation not otherwise employed
shall be deposited from time to time to the credit of the Corporation in such
banks, trust companies, or other depositories as may be selected by or under the
authority of a resolution of the Board of Directors.
Section 6.4 Voting of Securities Owned by Corporation. Subject always to
the specific directions of the Board of Directors, (a) any shares or other
securities issued by any other corporation and owned or controlled by the
Corporation may be voted at any meeting of security holders of such other
corporation by the President of the Corporation if he or she be present, or in
his or her absence by any Vice President of the Corporation who may be present,
and (b) whenever, in the judgment of the President, or in his or her absence, of
any Vice President, it is desirable for the Corporation to execute a proxy or
written consent in respect of any such shares or other securities, such proxy or
consent shall be executed in the name of the Corporation by the President or one
of the Vice Presidents of the Corporation, without necessity of any
authorization by the Board of Directors, affixation of corporate seal, if any,
or countersignature or attestation by another officer. Any person or persons
designated in the manner above stated as the proxy or proxies of the Corporation
shall have full right, power, and authority to vote the shares or other
securities issued by such other corporation and owned or controlled by the
Corporation the same as such shares or other securities might be voted by the
Corporation.
ARTICLE 7
CERTIFICATES FOR SHARES; TRANSFER OF SHARES
Section 7.1 Consideration for Shares. The Board of Directors may authorize
shares to be issued for consideration consisting of any tangible or intangible
property or benefit to the Corporation, including cash, promissory notes,
services performed, promises to perform services evidenced by a written
contract, or other securities of the Corporation. Before the Corporation issues
shares, the Board of Directors shall determine that the consideration received
or to be received for the shares to be issued is adequate. The determination of
the Board of Directors is conclusive insofar as the adequacy of consideration
for the issuance of shares relates to whether the shares are validly issued,
fully paid, and nonassessable. The Corporation may place in escrow shares issued
for future services or benefits or a promissory note, or make other arrangements
to restrict the transfer of the shares, and may credit distributions in respect
of the shares against their purchase price, until the services are performed,
the note is paid, or the benefits are received. If the services are not
performed, the note is not paid, or the benefits are not received, the
Corporation may cancel, in whole or in part, the shares escrowed or restricted
and the distributions credited.
Section 7.2 Certificates for Shares. Every holder of shares in the
Corporation shall be entitled to have a certificate representing all shares to
which he or she is entitled unless the Board of Directors authorizes the
issuance of some or all shares without certificates. Any such authorization
shall not affect shares already represented by certificates until the
certificates are surrendered to the Corporation. If the Board of Directors
authorizes the issuance of any shares without certificates, within a reasonable
time after the issue or transfer of any such shares, the Corporation shall send
the
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shareholder a written statement of the information required by the Act or the
Articles of Incorporation to be set forth on certificates, including any
restrictions on transfer. Certificates representing shares of the Corporation
shall be in such form, consistent with the Act, as shall be determined by the
Board of Directors. Such certificates shall be signed (either manually or in
facsimile) by the President or any Vice President or any other persons
designated by the Board of Directors and may be sealed with the seal of the
Corporation or a facsimile thereof. All certificates for shares shall be
consecutively numbered or otherwise identified. The name and address of the
person to whom the shares represented thereby are issued, with the number of
shares and date of issue, shall be entered on the stock transfer books of the
Corporation. Unless the Board of Directors authorizes shares without
certificates, all certificates surrendered to the Corporation for transfer shall
be canceled and no new certificate shall be issued until the former certificate
for a like number of shares shall have been surrendered and canceled, except as
provided in these bylaws with respect to lost, destroyed, or stolen
certificates. The validity of a share certificate is not affected if a person
who signed the certificate (either manually or in facsimile) no longer holds
office when the certificate is issued.
Section 7.3 Transfer of Shares. Prior to due presentment of a certificate
for shares for registration of transfer, the Corporation may treat the
registered owner of such shares as the person exclusively entitled to vote, to
receive notifications, and otherwise to have and exercise all the rights and
power of an owner. Where a certificate for shares is presented to the
Corporation with a request to register a transfer, the Corporation shall not be
liable to the owner or any other person suffering loss as a result of such
registration of transfer if (a) there were on or with the certificate the
necessary endorsements, and (b) the Corporation had no duty to inquire into
adverse claims or has discharged any such duty. The Corporation may require
reasonable assurance that such endorsements are genuine and effective and
compliance with such other regulations as may be prescribed by or under the
authority of the Board of Directors.
ARTICLE 8
SEAL
Section 8.1 Seal. The Board of Directors may provide for a corporate seal
for the Corporation.
ARTICLE
BOOKS AND RECORDS
Section 9.1 Books and Records.
(a) The Corporation shall keep as permanent records minutes of all
meetings of the shareholders and Board of Directors, a record of all
actions taken by the shareholders or Board of Directors without a
meeting, and a record of all actions taken by a committee of the Board
of Directors on behalf of the Corporation.
(b) The Corporation shall maintain accurate accounting records.
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(c) The Corporation or its agent shall maintain a record of the
shareholders in a form that permits preparation of a list of the names
and addresses of all shareholders in alphabetical order by class of
shares showing the number and series of shares held by each.
(d) The Corporation shall keep a copy of all written communications within
the preceding three years to all shareholders generally or to all
shareholders of a class or series, including the financial statements
required to be furnished by the Act, and a copy of its most recent
annual report delivered to the Department of State.
Section 9.2 Shareholder's Inspection Rights. Shareholders are entitled to
inspect and copy records of the Corporation as permitted by the Act.
Section 9.3 Distribution of Financial Information. The Corporation shall
prepare and disseminate financial statements to shareholders as required by the
Act.
Section 9.4 Other Reports. The Corporation shall disseminate such other
reports to shareholders as are required by the Act, including reports regarding
indemnification in certain circumstances and reports regarding the issuance or
authorization for issuance of shares in exchange for promises to render services
in the future.
ARTICLE 10
INDEMNIFICATION
Section 10.1 Provision of Indemnification. The Corporation shall, to the
fullest extent permitted or required by the Act, including any amendments
thereto (but in the case of any such amendment, only to the extent such
amendment permits or requires the Corporation to provide broader indemnification
rights than prior to such amendment), indemnify its Directors and Executive
Officers against any and all Liabilities, and advance any and all reasonable
Expenses, incurred thereby in any Proceeding to which any such Director or
Executive Officer is a Party or in which such Director or Executive Officer is
deposed or called to testify as a witness because he or she is or was a Director
or Executive Officer of the Corporation. The rights to indemnification granted
hereunder shall not be deemed exclusive of any other rights to indemnification
against Liabilities or the advancement of Expenses which a Director or Executive
Officer may be entitled under any written agreement, Board of Directors'
resolution, vote of shareholders, the Act, or otherwise. The Corporation may,
but shall not be required to, supplement the foregoing rights to indemnification
against Liabilities and advancement of Expenses by the purchase of insurance on
behalf of any one or more of its Directors or Executive Officers whether or not
the Corporation would be obligated to indemnify or advance Expenses to such
Director or Executive Officer under this Article. For purposes of this Article,
the term "Directors" includes former directors of the Corporation and any
director who is or was serving at the request of the Corporation as a director,
officer, employee, or agent of another Corporation, partnership, joint venture,
trust, or other enterprise, including, without limitation, any employee benefit
plan (other than in the capacity as an agent separately retained and compensated
for the provision of goods or services to the enterprise, including, without
limitation, attorneys-at-law, accountants, and financial consultants). The term
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"Executive Officers" includes those individuals who are or were at any time
"executive officers" of the Corporation as defined in Securities and Exchange
Commission Rule 3b-7 promulgated under the Securities Exchange Act of 1934, as
amended. All other capitalized terms used in this Article 10 and not otherwise
defined herein have the meaning set forth in Section 607.0850, Florida Statutes
(1995). The provisions of this Article 10 are intended solely for the benefit
of the indemnified parties described herein, their heirs and personal
representatives and shall not create any rights in favor of third parties. No
amendment to or repeal of this Article 10 shall diminish the rights of
indemnification provided for herein prior to such amendment or repeal.
ARTICLE 11
AMENDMENTS
Section 11.1 Power to Amend. These bylaws may be amended or repealed by
either the Board of Directors or the shareholders, unless the Act reserves the
power to amend these bylaws generally or any particular bylaw provision, as the
case may be, exclusively to the shareholders or unless the shareholders, in
amending or repealing these bylaws generally or any particular bylaw provision,
provide expressly that the Board of Directors may not amend or repeal these
bylaws or such bylaw provision, as the case may be. The shareholders of the
Corporation may adopt or amend a bylaw provision which fixes a greater quorum or
voting requirement for shareholders (or voting groups of shareholders) than is
required by the Act. The adoption or amendment of a bylaw provision that adds,
changes or deletes a greater quorum or voting requirement for shareholders must
meet the same quorum or voting requirement and be adopted by the same vote and
voting groups required to take action under the quorum or voting requirement
then in effect or proposed to be adopted, whichever is greater.
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EXHIBIT 10.1
EMPLOYMENT AGREEMENT
AGREEMENT made effective this 10 day of August, 1998 between INSURANCE
MANAGEMENT SOLUTIONS GROUP, INC., a Florida corporation, which corporation,
together with its subsidiary companies, shall hereinafter be referred to as
"Company" and David Meehan, of St. Petersburg, Florida, hereinafter referred to
as "Employee".
R E C I T A L S :
1. Company is engaged in the business of providing comprehensive
outsourcing services to the property and casualty insurance industry with an
emphasis on providing full third party administration outsourcing services for
flood insurers and is also a provider of flood zone determination and ancillary
services primarily to insurance companies and financial institutions throughout
the State of Florida and such other states as the Company shall deem
appropriate.
2. The Company's business requires secrecy in connection with the methods
and systems employed, and, for the proper protection of the Company, it is
absolutely necessary and essential (which necessity Employee expressly
recognizes) that all matters connected with, arising out of, or pertaining to
the business of the Company, its methods and systems and the names of its
customers be kept secret and confidential as goodwill belonging to the Company.
3. The Company will sustain great loss and damage, if during the term of
this Agreement, or for a period of two (2) years immediately following its
termination for any reason whatsoever, the Employee should, for himself or
herself, or on behalf of any other person, persons, company, partnership or
corporation, call upon the customers or clientele of the Company for the purpose
of soliciting, selling or servicing any of the programs or services of the
Company as described in Section 1 hereof, or the solicitation of any Company
employee for the purpose of hiring such employee, for which loss and damage, by
reason of his or her financial circumstances, Employee could not be compelled by
law to respond to damages in any action at law.
NOW, THEREFORE, Company and Employee, in consideration of the covenants and
agreements herein contained and in further consideration of the benefits and
advantages flowing from each to the other, covenant and agree as follows:
SECTION 1. EMPLOYMENT OF EMPLOYEE. Company hereby agrees to employ Employee
as CEO.
SECTION 2. EMPLOYEE'S BEST EFFORTS. Employee hereby accepts employment by
Company, and agrees to devote his or her entire time and best efforts to this
employment. Employee agrees to perform such other duties as are customarily
performed by one holding such position in other, same or similar businesses as
that engaged in by Company, and shall also render such other and unrelated
services and duties as may be assigned to him or her from time to time by
Company.
<PAGE> 2
SECTION 3. TERMS OF EMPLOYMENT.
(a) Company and Employee understand and agree that the term of employment
of this Agreement shall be for a period of three years from the date hereof and
thereafter shall continue indefinitely until terminated by either party pursuant
to the terms herein.
(b) Said employment may be terminated with cause, and no notice or
severance is owed. Involuntary termination with cause is defined as a dismissal
at any time based on failure to conform to the conditions of employment,
material breach of this Agreement, gross misconduct or willful violation of
Company policy or procedure as outlined in Section 2.12 on Involuntary
Termination contained in the Company's Human Resources Policies and Procedures
Manual, as amended from time to time.
(c) In the event this Agreement is terminated without cause, then the
Employee shall be entitled to any payments payable under Section 4 which have
been earned but not yet paid,and in addition, Employee shall be entitled to
severance pay equal to Employee's then current salary payable in accordance with
the Company's usual payroll practices for a period equal to twelve (12) months
(the "Severance Payment"). In the event that Employee is entitled to a Severance
Payment pursuant to this Section 3(c) and Employee secures employment at any
time during the twelve (12) months following termination (the "Severance
Period"), then the Company shall be entitled to a credit against its obligations
to make the Severance Payment in the amount up to seventy-five percent (75%) of
Employee's base salary during the Severance Period paid to him by his new
employer.
(d) Notwithstanding anything contained herein to the contrary, in the event
Company shall discontinue operating its business, then this Agreement shall
terminate as of the last day of the month on which Company ceases operations
with the same force and effect as if such last day of the month were originally
set as the termination date hereof.
SECTION 4. EMPLOYEE'S COMPENSATION AND EXPENSES.
(a) As compensation for the service to be performed by Employee under this
Agreement, Company shall pay Employee, and Employee shall accept from Company, a
base salary of 245,000 dollars ($245,000) per annum paid on a bi-weekly
basis.
(b) In addition to the base salary, some employees shall be entitled to
earn additional compensation pursuant to a bonus plan, and an employee stock
option plan. If Employee is eligible for either a bonus plan or the stock option
plan, copies of the plan will be provided to Employee.
(c) The Employee shall be provided the same benefits and on the same basis
as other employees of the Company including, but not limited to, the 401(k)
plan, life insurance, disability insurance and health insurance.
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(d) Employee's salary, bonuses and allowances may be modified, as agreed
upon between Employee and Company, from time to time, and any such modifications
made during the term of this Agreement shall be incorporated as part of the
Agreement.
(e) Company shall reimburse Employee for all other reasonable, ordinary and
necessary expenses incurred by Employee on Company's behalf pursuant to
Company's directions and subject to Company's restrictions and requirements.
SECTION 5. FUNDS COLLECTED BY EMPLOYEE. Employee does explicitly understand and
agree that all funds received by him on behalf of Company, as may be authorized
by Company from time to time, shall be held in trust by Employee and shall
immediately be remitted to Company by Employee. Additionally, Employee shall be
responsible for any and all technical data, books, equipment, or other property
of Company which may come into his possession by reason of his or her
employment. In the event this employment is terminated for any reason
whatsoever, Employee shall immediately turn in to Company and account for all
such funds, equipment and property which may be in the possession of Employee at
such termination.
SECTION 6. RESTRICTIVE COVENANTS.
(a) Covenant not to Compete. The Employee hereby expressly covenants and
agrees, which covenants and agreements are of the essence of this contract, that
he or she will not, during the term of this Agreement and for a period of two
(2) years immediately following the termination of this Agreement, for any
reason whatsoever, directly or indirectly, for himself or herself, or on behalf
of, or in conjunction with, any other person, persons, company, partnership or
corporation:
(1) call upon any customer or customers of Company solicited or contacted
by Employee while at the Companyor whose account was serviced by
Employee while at the Company, pursuant to his or her employment
hereunder, for the purpose of soliciting, selling or servicing any
programs or services of the type sold and serviced by Company during
the term hereof within the state of Florida and such other states in
which the Company shall conduct business;
(2) nor will Employee divert, solicit or take away any customer or
customers of Company or the business or patronage of any such
customers of the Company for the purpose of selling or servicing any
programs or services of the type sold and serviced by Company during
the term hereof,
(3) nor will Employee call upon any prospective customer or customers of
the Company, solicited or contacted by Employee or Employee's staff
pursuant to his or her employment hereunder, for the purpose of
soliciting, selling or servicing programs or services of the type sold
and serviced by Company during the term hereof within the State of
Florida and such other states in which the Company shall conduct
business. For purposes of this Agreement, it is agreed between the
parties hereto that prospective customers are defined as those called
upon by Employee or by Employee's staff two (2) times or more during
any part of the six (6) month period next preceding the termination of
this Agreement for any reasons whatsoever, or those prospective
customers as listed by Employee or by Employee's staff as active
potential prospects on Employee's weekly or monthly
3
<PAGE> 4
sales call reports submitted to Company during any part of the six (6)
month period next preceding the termination of this Agreement for any
reasons whatsoever;
(4) nor upon termination of Employee's employment from Company, whether by
resignation, discharge, or otherwise, and for a period of two (2)
years from the date of termination, shall Employee, directly or
indirectly, for himself or herself or on behalf of, or in conjunction
with, any other person, persons, company, partnership or corporation:
solicit, approach, or call upon any Company employee for the purpose
of retaining or hiring the Company employee in any capacity. In the
event of a breach or threatened breach by Employee of the provisions
of this paragraph, Company shall be entitled to an injunction
restraining Employee from directly or indirectly soliciting,
approaching, or calling upon any Company employee for the purpose of
retaining or hiring the Company employee in any capacity and/or in
fact hiring the Company employee in any capacity; and, in addition to
obtaining an injunction, Company shall be entitled to recover damages
from Employee. In the event any Court determines the specified time
period to be unreasonable, arbitrary, or against public policy, a
lesser time period which is determined to be reasonable, non-arbitrary
and not against public policy may be enforced against Employee by
injunction, as well as by all other legal remedies available to
Company. In the event of any legal action in connection with this
agreement, the prevailing party shall be entitled to recover all of
its legal expenses, including reasonable attorney's fees and costs,
whether the same are incurred in connection with trial or during an
appeal and to have the same awarded as part of the judgment in the
proceeding in which such legal expenses and attorney's fees were
incurred.
(b) Nondisclosure. Employee recognizes and acknowledges that the list of
the Company's customers, trade secrets, data processing systems, computer
software, computer programs, or other systems, data, methods, or procedures
developed or used by the Company, as they may exist from time to time, are
valuable, special and unique assets of the Company's business. The Employee will
not, during or after the term of his or her employment without the prior written
consent of the Company, which consent may be arbitrarily withheld, and except to
the extent necessary to accomplish assignments on behalf of the Company in which
the Employee is, at any given time during the term of Employee's tenure with the
Company, currently and actively engaged, possess, transmit, copy, reproduce, or
disclose the list of the Company's customers or any part thereof or any of the
Company's present or future trade secrets, or any data processing systems,
computer software, computer programs or other systems, data, methods, or
procedures to any person, firm, corporation, association, or any other entity
for any reason or purpose whatsoever, nor will the undersigned assist anyone
else to do so. In the event of a breach or threatened breach by Employee of the
provisions hereof, the Company shall be entitled to an injunction restraining
Employee from disclosing, in whole or in part, the list of the Company's
customers or the Company's trade secrets, or from rendering any services to any
person, firm, corporation, association, or other entity to whom such list or
such trade secrets, in whole or in part, has been disclosed or is threatened to
be disclosed and requiring the return to the Company of all copies of customer
lists, manuals, data, software,
4
<PAGE> 5
computer programs, or written procedures in the possession of Employee. Nothing
herein shall be construed as prohibiting the Company from pursuing any other
remedies available to it for such breach or threatened breach, including the
recovery of damages from the Employee. The existence of any claim or cause of
action of Employee against the Company shall not constitute a defense to the
enforcement by the Company of this covenant. No failure of the Company to
exercise any right given hereunder shall be taken or construed as a waiver of
its right to seek any remedies by reason of any past, present, or future
breaches of the Agreement on the part of Employee.
SECTION 7. SEVERABILITY OF RESTRICTIVE COVENANTS. Company and Employee agree
that the restrictive covenants contained in Section 6, or any of its
sub-paragraphs, are severable and separate and the unenforceability of any
specific covenant therein shall not affect the validity of any other covenants
set forth therein. These covenants on the part of the Employee shall be
construed as an agreement independent of any other provision of this Agreement,
and the existence of any claim or cause of action of the Employee against
Company, whether predicated on this Agreement or otherwise, shall not constitute
a defense to the enforcement by the Company of said covenants. Employee agrees
and acknowledges that any violation by Employee of the covenants set forth in
Section 6 hereof would cause irreparable damage to Company, and Employee further
agrees that upon proof of the existence of such a violation of the covenants set
forth in said Section 6 hereof Company will be entitled to injunctive relief
against the Employee by any Court of competent jurisdiction. In the event any
Court of competent jurisdiction should determine that the territorial
restrictions set forth in Sections 6 hereof, and/or their durations, are
unreasonable in their scope, then, and in that event, the territorial
restrictions, and/or their duration, shall be limited to such territory and/or
duration as may be determined reasonable by a Court of competent jurisdiction.
SECTION 8. ATTORNEY'S FEES. The parties hereto agree that, in the event of any
legal action in connection with this Agreement, the prevailing party shall be
entitled to recover all of its legal expenses, including reasonable attorney's
fees and costs, whether the same are incurred in connection with trial or
appeal, and to have the same awarded as part of the judgment in the proceeding
in which such legal expenses and attorney's fees were incurred.
SECTION 9. CHOICE OF LAW AND VENUE. This agreement shall be construed according
to the laws of the State of Florida, without regard to choice of law provisions.
Venue to resolve any dispute under this Agreement shall be Pinellas County,
Florida.
SECTION 10. INVALIDITY OF PRIOR AGREEMENTS. This Agreement supersedes all prior
agreements and understandings between Employee and Company and this Agreement
expresses the whole and entire agreement between the parties with reference to
Employee's employment and it cannot be modified or changed by any oral or verbal
promise by whomsoever made, nor shall any written modification of it be binding
on Company until such written modification shall have been approved in writing
by the President of the Company.
SECTION 11. SEVERABILITY. All agreements and covenants contained herein are
severable and, in the event any of them shall be held to be invalid, illegal or
unenforceable by any
5
<PAGE> 6
competent Court, this contract shall be interpreted as if such invalid, illegal
or unenforceable agreement or covenants were not contained herein.
SECTION 12. NON-WAIVER OF RIGHTS. All of the rights of Company and Employee
hereunder shall be cumulative and not alternative, but a waiver or indulgence on
the part of Company or Employee of any rights or entitlement hereunder shall not
be construed as a waiver of any other rights or entitlements hereunder by either
Company or Employee. No notice shall be required by Company or Employee to
enforce strict adherence to all the terms of this agreement.
SECTION 13. MISCELLANEOUS PROVISIONS. The provisions of this Agreement shall
extend to the successors, surviving corporations and assigns of Company.
Singular and masculine pronouns shall include plural, feminine, and artificial
persons and entities whenever the context permits.
SECTION 14. EMPLOYEE'S ACKNOWLEDGMENT. Employee certifies that he is over
twenty-one (21) years of age and hereby acknowledges having read the entire
contents of this Agreement before signing his name below and that he has
received a copy hereof for his own use.
IN WITNESS WHEREOF, the Company and Employee have affixed their hands and
seals on this, the day and year first above written, the Company acting through
its duly authorized officers.
Signed, Sealed and Delivered in the Presence of:
WITNESSES: "COMPANY"
Insurance Management Solutions Group, Inc.
By: /s/ Jeffrey S. Bragg
- ----------------------------------- ---------------------------------------
As Its: COO
- ----------------------------------- -----------------------------------
Date: 8/10/98
-------------------------------------
WITNESSES: "EMPLOYEE"
/s/ David K. Meehan
- ----------------------------------- ------------------------------------------
Date: 8/10/98
- ----------------------------------- -------------------------------------
6
<PAGE> 1
EXHIBIT 10.3
INSURANCE MANAGEMENT SOLUTIONS GROUP, INC.
NON-EMPLOYEE DIRECTORS' STOCK OPTION PLAN
ARTICLE 1:
1. GENERAL:
1.1. PURPOSE. The purpose of the Insurance Management Solutions Group, Inc.
Non-Employee Directors' Stock Option Plan is to secure for Insurance
Management Solutions Group, Inc. and its stockholders the benefits of
the incentive inherent in increased common stock ownership by the
members of the Board of Directors of the Company who are not employees
of the Company or any of its Subsidiaries.
1.2. MAXIMUM NUMBER OF SHARES. The maximum number of shares of Common Stock
that may be issued under the Plan is 200,000, subject to adjustment as
provided in Section 3.1 below. The Common Stock to be issued may be
either authorized and unissued shares or issued shares acquired by the
Company. In the event that Options granted under the Plan shall
terminate or expire without being exercised in whole or in part, new
Options may be granted covering the shares not purchased under such
lapsed Options.
1.3. DEFINITIONS. The following words and terms as used herein shall have
that meaning set forth therefor in this Section 1.3 unless a different
meaning is clearly required by the context. Whenever appropriate,
words used in the singular shall be deemed to include the plural and
vice versa, and the masculine gender shall be deemed to include the
feminine gender.
1.3.1. "Board" or "Board of Directors" shall mean the Board of
Directors of the Company.
1.3.2. "Common Stock" shall mean the common stock of the Company.
1.3.3. "Company" shall mean Insurance Management Solutions Group,
Inc., a Florida corporation, and any successor.
1.3.4. "Effective Date" is defined in Section 3.9.
1.3.5. "Fair Market Value" of the shares of Common Stock shall mean
the closing price on the date in question (or, if no shares are
traded on such day, on the next preceding day on which shares
were traded) of the Common Stock on the principal securities
exchange in the United States on which such stock is listed, or
if such stock is not listed on a securities exchange in the
United States, the closing price on such day in the
over-the-counter market as reported by the National Association
of Security Dealers Automated Quotation System (NASDAQ), or
NASDAQ's successor, or if not reported on NASDAQ, the fair
market value of such stock as determined by the Board in good
faith and based on all relevant factors.
1.3.6. "NSO" shall mean a nonqualified stock option granted in
accordance with the provisions of Article 2 of this Plan.
1.3.7. "Non-Employee Director" shall mean a member of the Board of
Directors of the Company who is not an employee of the Company
or any Subsidiary.
1.3.8. "Option" shall mean an NSO.
1.3.9. "Optionee" shall mean a Non-Employee Director to whom an
Option is granted under the Plan.
1.3.10. "Plan" shall mean the Insurance Management Solutions Group,
Inc. Non-Employee Directors' Stock Option Plan, as set forth
herein and as amended from time to time.
<PAGE> 2
2.
1.3.11. "Subsidiary" shall mean any corporation that at the time
qualifies as a subsidiary of the Company under the definition
of "subsidiary corporation" contained in Section 424(f) of
the Internal Revenue Code of 1986, as amended.
1.4. ADMINISTRATION. This Plan is intended to be administered pursuant to
a formula and, accordingly, is intended to be self governing. To the
extent that any questions of interpretation arise, these questions
shall be resolved by the Board.
1.5. ELIGIBILITY REQUIREMENTS. Each Non-Employee Director shall be eligible
to receive Options in accordance with Article 2 below. The adoption of
this Plan shall not be deemed to give any director any right to be
granted options to purchase Common Stock of the Company, except to the
extent and upon such terms and conditions as set forth in this Plan.
ARTICLE 2:
2. TERMS AND CONDITIONS OF OPTIONS:
2.1. GRANT. Any NSO granted pursuant to the Plan shall be evidenced by
certificates or agreements, which certificates or agreements shall
comply with and be subject to the terms and conditions hereinafter
specified. The date on which the Board approves the grant of an NSO
shall be considered to be the date on which such Option is granted.
2.2. NUMBER OF SHARES. Each NSO shall state the number of Shares to which
it pertains. Although, the Board shall only have authority within this
Plan to issue to each Non-Employee Director a maximum of 7,200 shares
of Common Stock per any three (3) year period. It is anticipated that
the Board shall initially award, to every Non-Employee Director, 7,200
shares of Common Stock which shall vest in accordance with Article 2.6
below. Thereafter, on the three (3) year anniversary date of the
initial grant and all subsequent grants of Common Stock, the Board may
award each Non-Employee Director an additional 7,200 shares of Common
Stock.
2.3. OPTION PRICE. The Option exercise price shall be the Fair Market
Value of the Common Stock on the date of the grant of the Option.
2.4. METHOD OF EXERCISE. An Option may be exercised by a Non-Employee
Director during such time as may be permitted by the Option and the
Plan by providing written notice to the Board and tendering the
purchase price in accordance with the provisions of Section 2.5, and
complying with any other exercise requirements contained in the Option
or promulgated from time to time by the Board.
2.5. METHOD OF PAYMENT. Each Option shall state the method of payment of the
Option price upon the exercise of the Option. The method of payment
stated in the Option shall include payment (a) in United States
dollars in cash or by check, bank draft or money order payable to the
order of the Company, (b) in the discretion of and in the manner
determined by the Board, by the delivery of shares of Common Stock
already owned by the Optionee, (c) by any other legally permissible
means acceptable to the Board at the time of the grant of the Option
(including cashless exercise as permitted under the Federal Reserve
Board's Regulation T, subject to applicable legal restrictions), or
(d) in the discretion of the Board, through a combination of (a), (b)
and (c) of this Section 2.5. If the option price is paid in whole or
in part through the delivery of shares of Common Stock, the decision
of the Board with respect to the Fair Market Value of such shares
shall be final and conclusive.
2.6. TERM AND EXERCISE OF OPTIONS.
2.6.1. Unless otherwise specified in writing by the Board at the
time of grant, each NSO shall be exercisable, in whole or in
part, only in accordance with the "Vesting Schedule" below.
To the extent not exercised, exercisable installments of NSOs
shall be exercisable, in whole or in part, in any subsequent
period, but not later than the expiration date of the Option.
Each NSOs shall be exercisable by the Non-Employee Director
for a period of six (6) years from the date of grant. Not
less than one hundred (100) shares may be
<PAGE> 3
3.
exercised at any one time unless the number exercised is the
total number at the time exercisable under the Option..
Vesting Schedule:
As of the date of the Annual Meeting of Stockholders of the
Company, each Non-Employee Director who is then elected,
reelected or who is continuing as a member of the Board
after the adjournment of the Annual Meeting shall be vested
in 800 shares of Common Stock, to the extent he or she has
been awarded shares of Common Stock that are not yet
vested. In addition, as of the date of each regularly
scheduled quarterly meeting of the Board of Directors,
other than the Annual Meeting, each Non-Employee Director
who is then elected, reelected or who is continuing as a
member of the Board after the adjournment of the meeting
shall be vested in 400 shares of Common Stock, to the
extent he or she has been awarded shares of Common Stock
that are not yet vested. Notwithstanding the foregoing, if
a Non-Employee Director is absent from a meeting, arrives
late for a meeting or leaves a meeting early, then the
Chairman of the Board, in his absolute discretion, may
reduce by one-half the number of shares of Common Stock
that such Non-Employee Director would have been vested in
under this Section had he or she not been absent, arrived
late or left early.
2.6.2. No Option or any part of an Option shall be exercisable
unless written notice of the exercise is delivered to the
Company specifying the number of shares to be purchased and
payment in full is made for the shares of Common Stock being
acquired thereunder at the time of exercise prior to the
expiration of the Option.
2.7. DEATH OR OTHER TERMINATION OF POSITION AS A DIRECTOR. Notwithstanding
the provisions of Section 2.6 above.
2.7.1. In the event that a Non-Employee Director (a) is removed as a
director for dishonesty or violation of his or her fiduciary
duty to the Company, (b) voluntarily resigns under or
followed by such circumstances as would constitute a
violation of his or her fiduciary duty to the Company, or (c)
the Company discovers that he or she has committed an act of
dishonesty not discovered by the Company prior to the
cessation of his or her services as a Non-Employee Director
that would have resulted in his or her removal if discovered
prior to such date, then forthwith from the happening of any
such event, any Option then held by him or her shall
terminate and become void to the extent that it then remains
unexercised.
2.7.2. If a person shall cease to be a Non-Employee Director for any
reason other than one or more of the reasons set forth in
section 2.7.1, such person, or in the case of death, the
executors, administrators or distributees, as the case may
be, may, within six months after such person ceases to be a
Non-Employee Director (unless the option expires under
section 2.6.1 prior to the expiration of six months),
exercise the Option with respect to any shares of Common
Stock, to the extent that the Option has not been exercised
and to the extent the Optionee's right to exercise such
Option had accrued pursuant to this Article 2.6 and on the
date the person ceased to be such a Non-Employee Director.
2.7.2.1. In the event any Option is exercised by the executors,
administrators, legatees or distributees of the estate of a
deceased Optionee, the Company shall be under no obligation
to issue Common Stock thereunder unless and until the Company
is satisfied that the person or persons exercising the Option
are the duly appointed legal representatives of the deceased
Optionee's estate or the proper legatees or distributees
thereof.
2.8. TRANSFERABILITY OF OPTIONS. The Option shall not be transferable by
the Optionee otherwise than by will or the laws of descent and
distribution, and shall be exercisable during his lifetime only by
him.
2.9. DELIVERY OF CERTIFICATES REPRESENTING SHARES. As soon as practicable
after the exercise of an Option, the Company shall deliver, or cause
to be delivered, to the Non-Employee Director exercising the Option, a
certificate or certificates representing the shares of Common Stock
purchased upon the exercise. Certificates representing shares of
Common Stock to be delivered to a Non-Employee Director shall be
registered in the name of such director.
<PAGE> 4
4.
2.10. RIGHTS AS A STOCKHOLDER. A Non-Employee Director shall have no rights
as a stockholder with respect to any shares of Common Stock covered by
his or her Option until the date on which he or she becomes a record
owner of the shares purchased upon the exercise of the Option (the
"record ownership date"). No adjustment shall be made for dividends
(ordinary or extraordinary, whether in cash, securities or other
property), distributions, or other rights for which the record date is
prior to the record ownership date.
ARTICLE 3:
3. MISCELLANEOUS
3.1. STOCK ADJUSTMENTS.
3.1.1. In the event of any increase or decrease in the number of
issued shares of Common Stock resulting from a stock split or
other division or consolidation of shares or the payment of a
stock dividend (but only on Common Stock) or any other
increase or decrease in the number of such shares effected
without any receipt of consideration by the Company, then, in
any such event, the number of shares of Common Stock that
remain available under the Plan, the number of shares of
Common Stock covered by each outstanding Option, and the
purchase price per share of Common Stock covered by each
outstanding Option shall be proportionately and appropriately
adjusted for any such increase or decrease.
3.1.2. Subject to any required action by the stockholders, if any
change occurs in the shares of Common Stock by reason of any
recapitalization, reorganization, merger, consolidation,
split-up, combination or exchange of shares, or of any
similar change affecting the shares of Common Stock, then, in
any such event, the number and type of shares covered by each
outstanding Option, and the purchase price per share of
Common Stock covered by each outstanding Option, shall be
proportionately and appropriately adjusted for any such
change. A dissolution or liquidation of the Company shall
cause each outstanding Option to terminate.
3.1.3. In the event of a change in the Common Stock as presently
constituted that is limited to a change of all of its
authorized shares with par value into the same number of
shares with a different par value or without par value, the
shares resulting from any change shall be deemed to be shares
of Common Stock within the meaning of the Plan.
3.1.4. To the extent that the foregoing adjustments relate to stock
or securities of the Company, such adjustments shall be
made by, and in the discretion of, the Board, whose
determination in that respect shall be final, binding and
conclusive. Except as hereinabove expressly provided in
this Section 3.1, a Non-Employee Director shall have no
rights by reason of any division or consolidation of shares
of stock of any class or the payment of any stock dividend
or any other increase or decrease in the number of shares
of stock of any class or by reason of any dissolution,
liquidation, merger or consolidation, or spin-off of assets
or stock of another corporation; and any issuance by the
Company of shares of stock of any class, securities
convertible into shares of stock of any class, or warrants
or options for shares of stock of any class shall not
affect, and no adjustment by reason thereof shall be made
with respect to, the number or price of shares of Common
Stock subject to the Option.
3.1.5. The existence of the Plan and the grant of any Option
pursuant to the Plan shall not affect in any way the right or
power of the Company to make adjustments, reclassifications,
reorganizations or changes of its capital or business
structure or to merge or to consolidate, or to dissolve, to
liquidate, to sell, or to transfer all or any part of its
business or assets.
3.2. LISTING AND REGISTRATION OF COMMON STOCK. Each Option shall be
subject to the requirement that if at any time the Board shall
determine, in its discretion, that the listing, registration or
qualification of the shares of Common Stock covered thereby upon any
securities exchange or under any state or federal laws, or the
consent or approval of any governmental regulatory body, is necessary
or desirable as a condition of, or in connection with, the granting
of such Option or the issuance or purchase of shares thereunder, such
Option may not be exercised unless and until
<PAGE> 5
5
such listing, registration, qualification, consent or approval shall
have been effected or obtained free of any conditions not acceptable
to the Board. Notwithstanding anything in the Plan to the contrary,
if the provisions of this Section 3.2 become operative, and if, as a
result thereof, the exercise of an Option is delayed, then and in
that event, the term of the Option shall not be affected.
Notwithstanding the foregoing, or any other provisions in the Plan,
the Company shall have no obligation under the Plan to cause any
share of Common Stock to be registered or qualified under any federal
or state law, or listed on any stock exchange or admitted to any
national market system.
3.3. TERM OF THE PLAN. The Plan shall terminate upon the earlier of (a) the
adoption of a resolution of the Board terminating the Plan or (b) ten
years from the Effective Date.
3.4. AMENDMENT OF THE PLAN; TERMINATION. The Board may, insofar as
permitted by law, from time to time, with respect to any shares of
Common Stock at the time not subject to Options, suspend, discontinue
or terminate the Plan or revise or amend it in any respect whatsoever.
3.5. APPLICATION OF FUNDS. The proceeds received by the Company from the
sale of Common Stock pursuant to Options will be used for general
corporate purposes.
3.6. NO OBLIGATION TO EXERCISE. The granting of any Option under the Plan
shall impose no obligation upon any Optionee to exercise such Option.
3.7. NO IMPLIED RIGHTS TO DIRECTORS. Except as expressly provided for in
the Plan, no Non-Employee Director or other person shall have any
claim or right to be granted an Option under the Plan. Neither the
Plan, nor any action taken hereunder, shall be construed as giving any
Non-Employee Director any right to be retained as a Director or in any
other capacity.
3.8. WITHHOLDING.
3.8.1. The Company shall have the power to withhold, or require a
Participant to remit to the Company, an amount sufficient to
satisfy any federal, state or local withholding or other tax
due from the Company with respect to any amount payable
and/or shares issuable under the Plan, and the Company may
defer such payment or issuance unless indemnified to its
satisfaction. Whenever under the Plan payments are to be made
in cash, such payments shall be made net of an amount
sufficient to satisfy any federal, state or local withholding
tax liability.
3.8.2. Subject to the consent of the Board, with respect to the
exercise of an Option, a Participant may make an
irrevocable election (an "Election") to (A) have shares of
Common Stock otherwise issuable withheld, or (B) tender
back to the Company shares of Common Stock received, or (C)
deliver back to the Company previously acquired shares of
Common Stock having a Fair Market Value sufficient to
satisfy all or part of the Participant's estimated tax
obligations associated with the transaction. Such Election
must be made by a Participant prior to the date on which
the relevant tax obligation arises. The Board may
disapprove of any Election, may suspend or terminate the
right to make Elections, or may provide with respect to any
grant under this Plan that the right to make Elections
shall not apply to such grants.
3.9. CONDITIONS PRECEDENT TO EFFECTIVENESS. The Plan shall become effective
upon the satisfaction of all the following conditions, with the
Effective Date of the Plan being the date that the last such condition
is satisfied:
3.9.1. the adoption of the Plan by the Board of Directors; and
3.9.2. the effectiveness of the Company's Registration Statement on Form S-1
relating to the Company's initial public offering, as filed with the
SEC (File No. _____________).
<PAGE> 1
EXHIBIT 10.12
ADMINISTRATION SERVICES AGREEMENT
ADMINISTRATION SERVICES AGREEMENT ("Agreement") made effective as of the
1st day of January, 1998, by and between Bankers Insurance Group, Inc., a
Florida corporation (herein, "Bankers") and Insurance Management Solutions
Group, Inc., a Florida corporation (herein, "IMSG").
WHEREAS, Bankers has extensive experience in the management of
property/casualty insurance business; and
WHEREAS, IMSG is a subsidiary of Bankers and desires Bankers to perform
certain administrative and special services (collectively "services") for IMSG
in its operations and as IMSG may request; and
WHEREAS, Bankers and IMSG contemplate that such an arrangement will
achieve certain operating economies, and improve services to the mutual benefit
of both Bankers and IMSG; and
WHEREAS, Bankers and IMSG wish to assure that all charges for services and
the use of Facilities incurred hereunder are reasonable and to the extent
practicable reflect actual costs and are arrived at in a fair and equitable
manner, and that estimated costs, whenever used, are adjusted periodically, to
bring them into alignment with actual costs;
NOW, THEREFORE, in consideration of the promises and of the mutual
covenants herein contained, and intending to be legally bound hereby, Bankers
and IMSG agree as follows:
1. PERFORMANCE OF SERVICES AND USE OF FACILITIES. Bankers agrees to the
extent requested by IMSG to perform such services for IMSG as IMSG determines to
be reasonably necessary in the conduct of its operations. Bankers agrees to the
extent requested by IMSG to make available its Facilities to IMSG as IMSG may
determine to be reasonably necessary in the conduct of its operations, including
but not limited to: human resource services, such as recruiting, hiring,
benefits administration and training, legal services, certain corporate
accounting functions, buildings and services, cash management, agency accounting
and corporate communications. Bankers agrees at all times to use its best
efforts to maintain sufficient personnel and Facilities of the kind necessary to
perform this Agreement.
(a) Capacity of Personnel: Status of Facilities. Whenever Bankers
utilizes its personnel to perform services for IMSG pursuant to the this
Agreement, such personnel shall at all times remain employees of Bankers or its
affiliates and Bankers shall alone retain full liability to such employees for
their welfare, salaries, fringe benefits, legally required employer
contributions and tax obligations. No Facility of Bankers used in performing
services for or subject to use by IMSG shall be deemed to be transferred,
assigned, conveyed or leased by performance or use pursuant to this Agreement.
(b) Exercise of Judgment in Rendering Services. In providing any
services hereunder which require the exercise of judgment by Bankers, Bankers
shall perform any such service in accordance with any standards and guidelines
IMSG develops and communicates to Bankers. In performing any services hereunder,
Bankers shall at all times act in a manner reasonably calculated to be in, or
not opposed to, the best interests of IMSG, and in any event in accordance with
the written standards and guidelines of IMSG.
(c) Control. The performance of services by Bankers for IMSG pursuant
to this Agreement shall in no way impair the absolute control of the business
and operations of Bankers or IMSG by their respective Boards of Directors.
Bankers shall act hereunder so as to assure the separate operating identity of
IMSG.
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2. SERVICES
A. Custodial Services. Subject to the direction and control of the
Board of Directors of IMSG, IMSG does hereby appoint Bankers and Bankers does
accept such appointment to act as a custodian of cash and similar assets, with
full power and authority to act for, on behalf of, and in the name of IMSG in
the maintenance and management of monies, or other sums as IMSG may entrust to
Bankers under this Agreement; provided that:
(1) Bankers shall keep and maintain proper books and records wherein
shall be recorded the business transacted by it on behalf of, in the name of, or
on account of IMSG. Bankers shall monthly submit to an officer of IMSG
designated by IMSG for that purpose a transaction report for the preceding
month.
(2) Subject to the direction and control of the Board of Directors
of IMSG, and subject to compliance with investment guidelines established by
IMSG, Bankers shall make, manage, and dispose of all investments of IMSG in
accordance with the terms and conditions of a separate agreement to be entered
into between the parties hereto.
(3) Whenever Bankers receives and collects monies for the account of
IMSG, Bankers will not commingle such monies with its own, but will deposit such
monies in an appropriate separate account in the name of IMSG.
B. Functional Support Services. Subject to the ultimate control and
direction of the IMSG Board of Directors, Bankers shall provide legal services,
including the negotiation and preparation of contracts, agreements and agency
documents, governmental relations and advising on regulatory compliance and
rendering opinions on various legal matters, assisting IMSG with the selection
and performance management of third party legal counsel associated for purposes
of the prosecution or defense of actions. Other services to be provided include
Human Resources, payroll and employee relations services. Also provided is
Agency Accounting and Accounts Payable, Cash Management, Property Accounting,
Audit Services and Agency Licensing.
C. Location. Except as is herein specifically set forth to the
contrary, it is understood Bankers shall be providing all of the services for
which provision is herein set forth from its principal place of business located
in St. Petersburg, FL.; provided that such facility may be relocated from time
to time to such reasonable location as IMSG may determine upon 60 days' advance
notice to IMSG.
3. CHARGES.
(a) IMSG agrees to reimburse Bankers for services and Facilities
provided by Bankers to IMSG pursuant to this Agreement. The charge to IMSG for
such services and Facilities shall include all direct and directly allocable
expenses, reasonably and equitably determined to be attributable to IMSG by
Bankers, plus a reasonable charge for direct overhead, the amount of such charge
for overhead to be agreed upon by the parties from time to time. Quarterly
charges for Calendar Year 1998 are identified in Exhibit A.
(b) Bankers' determination of charges hereunder shall be presented to
IMSG, and if IMSG objects to any such determination, it shall so advise Bankers
within thirty (30) days of receipt of notice of said determination. Unless the
parties can reconcile any such objection, they shall agree to the selection of a
firm of independent certified public accountants which shall determine the
charges properly allocable to IMSG and shall, within a reasonable time, submit
such determination, together with the basis therefore, in writing to Bankers and
IMSG whereupon such determination shall be binding. The expenses of such a
determination by a firm of independent certified public accountants shall be
borne equally by Bankers and IMSG.
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4. PAYMENT.
(a) IMSG shall advance such funds to Bankers as the parties may
mutually agree are reasonably necessary to cover the charges (provision for
which is set forth in paragraph 3 hereof) of IMSG for the ensuing calendar
quarter.
(b) Within thirty (30) days after the end of each month, Bankers will
submit to IMSG a detailed written statement and accounting of the charges due
from IMSG to Bankers for services and the use of Facilities pursuant to this
Agreement in the preceding calendar quarter, including charges not included in
any previous statements. Any amount advanced by IMSG to Bankers under Section
4(a) hereof in excess of (i) the actual charges for services and Facilities
rendered and received plus (ii) such amount as is reasonably required for such
charges for the subsequent calendar quarter shall be refunded to IMSG by Bankers
along with the detailed written statement and accounting.
5. RECORDS AND DOCUMENTS RELATING TO CHARGES. Bankers shall be responsible
for maintaining full and accurate accounting records of all services rendered
and Facilities used pursuant to this Agreement and such additional information
as IMSG may reasonable request for purposes of its internal bookkeeping and
accounting operations. Bankers shall make such accounting records insofar as
they pertain to the computation of charges hereunder available at its principal
offices for audit, inspection and copying by IMSG or any governmental agency
having jurisdiction over IMSG during all reasonable business hours.
6. OTHER RECORDS AND DOCUMENTS.
(a) All books, records, and files established and maintained by Bankers
by reason of its performance under this Agreement which, absent this Agreement,
would have been held by IMSG, shall be the property of IMSG and shall be subject
to examination by IMSG and persons authorized by it at all times. IMSG may at
any time require Bankers to surrender possession of such books, records and
files, whereupon Bankers shall deliver them to IMSG.
(b) Without limiting the generality of the foregoing and
notwithstanding anything in this Agreement appearing to the contrary, it is
mutually understood and agreed that IMSG shall maintain the originals of its
books of account at its home office in Florida. For the purposes of this
Agreement, the term "books of account" means: the Charter and By-laws; the
record containing the names and addresses of shareholders, the number and class
of shares held by each and the dates when they respectively became the owners of
record thereof; the minutes of any meetings of shareholders and of the board of
directors and any committees thereof; the general ledger; the investment ledger;
journals; the cash book; subsidiary ledgers; annual and quarterly statements;
and all minutes supporting annual, quarterly and other statements and reports
filed with or submitted to supervisory and regulatory authorities.
7. TERMINATION AND MODIFICATION. This Agreement or any part thereof shall
commence and be effective as of the day and year first above set forth and shall
remain in effect for a period of one year. IMSG has the option of renewing this
Agreement for two successive one year periods upon 30 days prior written notice.
Thereafter, the term of this Agreement shall be perpetual, but can be
terminated, at no penalty, by either party upon 60 days prior written notice to
the other party. Upon termination, Bankers shall promptly deliver to IMSG all
books and records that are, or are deemed by this Agreement to be, the property
of IMSG. This Agreement may be amended only by mutual consent in writing signed
by the parties.
8. SETTLEMENT ON TERMINATION. No later than ninety (90) days after the
effective date of termination of this Agreement, Bankers shall deliver to IMSG a
detailed written statement for all charges incurred and not included in any
previous statement to the effective date of termination. The amount owed by
either party hereunder shall be due and payable within thirty (30) days of
receipt of such statement.
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9. ASSIGNMENT. This Agreement and any rights pursuant hereto shall not be
assignable by either party hereto, except by operation of law. Nothing in this
Agreement, expressed or implied, is intended to confer on any person other than
the parties hereto, or their respective legal successors, any rights, remedies,
obligations or liabilities, or to relieve any person other that the parties
hereto, or their respective legal successors, from any obligations or
liabilities that would otherwise be applicable.
10. GOVERNING LAW. This Agreement is made pursuant to and shall be
governed by, interpreted under, and the right of the parties determined in
accordance with, the laws of the State of Florida.
11. NOTICE. All notices, statements or requests provided for hereunder
shall be in writing and shall be deemed to have been duly given when delivered
by hand to an officer of the other party, or when deposited with the U.S. Postal
Service, as certified or registered mail, postage prepaid, addressed
(a) If to Bankers to:
360 Central Avenue
P.O. Box 15707
St. Petersburg, FL 33733
Attn: G. Kristin Delano
(813) 803-4016 FAX (813) 823-6518
(b) If to IMSG to:
360 Central Avenue
P.O. Box 15707
St. Petersburg, FL 33733
Attn: David K. Meehan, Chairman
(813) 823-4000 x 4201 FAX (813) 823-6518
or to such other person or place as each party may from time to time designate
by written notice sent as aforesaid.
12. HEADINGS. The headings of the various paragraphs of this Agreement are
for convenience only, and shall be accorded no weight in the construction of
this Agreement.
13. ENTIRE AGREEMENT. This Agreement, together with such Amendment as may
from time to time be executed in writing by the parties, constitutes the entire
Agreement between the parties with respect to the subject matter hereof.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
in duplicate by their respective officers duly authorized so to do, and their
respective corporate seals to be attached hereto as of the date and year first
above written.
WITNESSES: INSURANCE MANAGEMENT
SOLUTIONS GROUP, INC.
/s/ C. Anthony Sexton BY: /s/ Jeffrey S. Bragg
- -------------------------------------- ---------------------------------
AS ITS: COO
- -------------------------------------- -----------------------------
DATE: 5/15/98
-------------------------------
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WITNESSES: BANKERS INSURANCE GROUP, INC.
/s/ Erica Rudin BY: /s/ G. Kristin Delano
- --------------------------------------- ---------------------------------
AS ITS: Corporate Secretary
- --------------------------------------- -----------------------------
DATE: 5/18/98
-------------------------------
Exhibit A Fee Schedule
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Exhibit A
Management Agreement
Bankers Insurance Group, Inc. Services to Insurance Management Solutions Group
Functions performed by Bankers Insurance Group, Inc. for the benefit of
Insurance Management Solutions Group, Inc. for the Calendar year 1998 by
quarter:
<TABLE>
<S> <C> <C>
Human Resources: Quarter 1 $ 175,000
Quarter 2 $ 175,000
Quarter 3 $ 175,000
Quarter 4 $ 175,000
Accounts Payable: Quarter 1 $ 11,250
Quarter 2 $ 11,250
Quarter 3 $ 11,250
Quarter 4 $ 11,250
Agency Accounting: Quarter 1 $ 137,500
Quarter 2 $ 137,500
Quarter 3 $ 137,500
Quarter 4 $ 137,500
Cash Management: Quarter 1 $ 21,250
Quarter 2 $ 21,250
Quarter 3 $ 21,250
Quarter 4 $ 21,250
Property Accounting: Quarter 1 $ 5,000
Quarter 2 $ 5,000
Quarter 3 $ 5,000
Quarter 4 $ 5,000
Audit Services: Quarter 1 $ 37,500
Quarter 2 $ 37,500
Quarter 3 $ 37,500
Quarter 4 $ 37,500
Agency Licensing: Quarter 1 $ 5,000
Quarter 2 $ 5,000
Quarter 3 $ 5,000
Quarter 4 $ 5,000
Affiliated Senior Management: Quarter 1 $ 3,750
Quarter 2 $ 3,750
Quarter 3 $ 3,750
Quarter 4 $ 3,750
Total Contract Based on 1998 Budgets and Projections: $1,570,000
</TABLE>
IMS may, from time to time as needed, require Corporate Legal Services and
Corporate Communications Services. Such services will be provided on an Hourly
Basis as follows:
Legal Services: $150.00 per Hour
Corporate Communications: $40.00 per Hour
<PAGE> 7
It is understood by both IMS and Bankers Insurance Group, Inc. that should
material fluctuations in either a positive or negative direction impact IMS,
either party has the right to re-negotiate those contemplated services and
corresponding fees in light of material changes in demand for said services.
<PAGE> 1
EXHIBIT 10.22
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement") is made and entered into
as of this 31st day of July, 1998, by and between Geotrac, Inc., a Florida
corporation (the "Company")and Daniel J. White ("Executive").
RECITALS
A. The Company and Executive desire to enter into an employment
arrangement.
B. The Company has determined that it is in the best interests of the
Company to enter into this Agreement setting forth the rights, duties and
obligations of both the Company and Executive.
C. The Company's business requires secrecy in connection with the
methods and systems employed, and, for the proper protection of the Company, it
is absolutely necessary and essential (which necessity Executive expressly
recognizes) that all matters connected with, arising out of, or pertaining to
the business of the Company, its methods and systems and the names of its
customers be kept secret and confidential as goodwill belonging to the Company.
D. The Company will sustain great loss and damage, if during the term
of this Agreement, or for the period described in Section 10.2 below immediately
following its termination for any reason whatsoever, Executive should, for
himself or on behalf of any other person, persons, company, partnership or
corporation, call upon the trade, customers or clientele of the Company for the
purpose of soliciting, selling or servicing any programs of the type sold or
serviced by the Company, for which loss and damage, by reason of his financial
circumstances, Executive could not be compelled by law to respond to damages in
any action at law.
E. The Company wishes to assure itself of the services of Executive and
Executive is willing to be employed by the Company upon the terms and conditions
provided in this Agreement.
In consideration of the foregoing Recitals and the mutual covenants and
conditions contained herein, the parties agree as follows:
1. Employment. The Company hereby employs Executive, and Executive
hereby accepts employment with the Company, subject to the terms and conditions
of this Agreement.
2. Duties and Job Description. Executive shall serve as President and
Chief Executive Officer of the Company and shall do and perform all services,
acts and other things necessary to perform the tasks assigned to him by the
Board of Directors of the Company, which tasks shall be consistent with those
normally assigned to Presidents and Chief Executive Officers of similar
businesses. Executive shall devote his reasonable full-time efforts and
attention to the business of the Company during the Term (as defined in Section
3, below).
<PAGE> 2
3. Term. The term of employment under this Agreement shall become
effective and shall commence as of the date hereof and shall continue for a term
of four (4) years (the "Term"), unless earlier terminated in accordance with the
provisions of Sections 7 or 8 of this Agreement. If this Agreement has not been
previously terminated as provided herein, at the expiration of the Term, this
Agreement shall continue until terminated by either party on ninety (90) days'
prior written notice to the other.
4. Compensation. As compensation for the services to be performed under
this Agreement, Executive shall receive a base salary (the "Salary") at the rate
of $150,000.00 per year, payable in equal, biweekly installments or at such
other time or times as the Company and Executive shall agree. At the end of the
first year of this Agreement and each year thereafter, there shall be a review
of Executive's performance and compensation by the Board of Directors of the
Company. The annual review will include the possibility of a raise in salary.
The Executive shall be entitled to participate in any bonus program established
by the Company and shall be granted bonuses from time to time as determined by
the Board of Directors.
5. Duty of Loyalty. Executive shall discharge his duties in good faith
and shall not knowingly engage in any business or perform any services in any
capacity whatsoever that are in conflict with the best interests of the Company.
6. Benefits: Automobile Allowance.
6.1 Benefits. Executive shall be offered comparable benefits
to those offered to any other of the Company's executive officers, for
the purpose of Executive's entitlement to employee benefit programs,
including, without limitation, option plans, bonus programs, vacation,
sick pay, expense reimbursement, retirement plans, health, life and
disability insurance.
6.2 Automobile Allowance. The Company shall provide Executive
with a suitable automobile in connection with the performance of his
services under this Agreement in accordance with the Company's
policies.
6.3 Reimbursement of Expenses. The Company shall reimburse
Executive for any and all necessary, customary and usual expenses,
properly receipted in accordance with corporate policies, incurred by
Executive on behalf of the Company.
7. Death or Disability.
7.1 Termination of Employment. If during the term of this
Agreement Executive should die or become physically or mentally
disabled and as a result thereof becomes unable to continue the proper
performance of his duties under Section 2 of this Agreement,
Executive's employment under this Agreement shall thereupon
automatically cease and terminate. The Company's obligation to pay
Executive the Salary shall cease as of the date of such death or
disability, except that severance shall be paid equal to one times
Executive's
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then current annual salary and shall be paid first from any insurance
proceeds paid to the Company and the Company will pay the difference
between the severance amount and the amount provided by the insurance
proceeds in a lump sum within thirty (30) days of such termination.
7.2 Definition of Disabled. For purposes of this Section 7,
Executive shall be "disabled" if, due to illness or injury, either
physical or mental, Executive has been substantially unable to perform
his customary duties for the Company for a period of one hundred eighty
(180) consecutive days or an aggregate of one hundred eighty (180) days
within a period of 365 consecutive days, provided the Company has given
Executive thirty (30) days written notice of potential termination, and
within said thirty (30) day period after written notice of termination
had been given, Executive has not returned to the reasonable full-time
performance of his duties.
8. Termination.
8.1 Termination by the Company for Cause. The Company may
terminate this Agreement at any time for "Cause". "Cause" as used
herein shall be defined as:
(a) Drunkenness by Executive or illegal use of
narcotics when, in the opinion of a physician selected by the
Company's Board of Directors (the "Board") and reasonably
acceptable to Executive, such drunkenness or use of narcotics
materially impairs the ability of Executive to perform his
duties under this Agreement. Prior to termination for
drunkenness or illegal use of narcotics, Executive must have
been offered treatment and (i) rejected the offer for
treatment or (ii) failed to complete the treatment;
(b) Conviction of a felony having a demonstrably
material adverse effect on the financial condition of the
Company;
(c) Fraudulent conduct of a material nature of
Executive in connection with the business affairs of the
Company;
(d) Any other conduct of Executive which is in
material violation of this Agreement for a period of thirty
(30) business days after written notice thereof is received by
Executive from the Company.
Executive's employment shall in no event be considered to have been
terminated by the Company for Cause if such termination took place as
the result of (i) any act or omission believed in good faith to have
been in or not opposed to the interest of the Company, or (ii) any act
or omission in respect of which a determination is made that Executive
met the applicable standard of conduct prescribed for indemnification
or reimbursement or payment of expenses under the by-laws of the
Company or the laws of the State of Ohio, in each case as in effect at
the time of such act or omission.
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<PAGE> 4
The vote of four (4) out of the five (5) members of the Board shall be
required in order for Executive's employment to be terminated for cause
pursuant to this Section 8.1. However, with respect to drunkenness
under Section 8.1.a., and Section 8.1.d., such termination shall not
occur unless a member of the Board, in a counseling session with
Executive, has first described to Executive the reason for the
termination and Executive shall then have thirty (30) days to
discontinue the conduct so described or otherwise remedy the reason for
the cause of termination. A written record of such counseling session
shall be prepared and both the member of the Board and Executive shall
sign such written record to indicate that it accurately reflects the
matters discussed at the counseling session. If Executive's employment
is terminated for Cause pursuant to this Section 8.1 in accordance with
the provisions of this paragraph, Executive's employment may be
terminated immediately without any further advance written notice and
the Company shall have no obligation to make any payments to Executive
under this Agreement other than the Company's obligation to pay
Executive the Salary, any benefits and reimbursement of expenses
accrued through the date of such termination.
8.2 Termination by the Company Without Cause or for Good
Reason. In the event of termination by the Company without Cause or by
the Executive for Good Reason (as defined), the Company shall pay
Executive his base salary at the rate in effect as of such
determination date for the longer of (a) the remainder of the term of
this Agreement or (b) one year after such termination date. For
purposes of this Agreement, "Good Reason" shall mean (i) a reduction in
the Salary, (ii) a relocation of the Executive's headquarters outside
of the Norwalk, Ohio, area, (iii) a material demunition in the
Executive's duties or responsibilities, (iv) an adverse change in
Executive's title, (v) assignment to Executive of duties and
responsibilities inconsistent with his position in any material
respect, (vi) breach by the Company or Insurance Management Solutions
Group, Inc. ("IMSG") of their respective duties and obligations under
this Agreement and the Corporate Governance Agreement, dated the date
hereof between Executive, the Company and IMSG relating to certain
corporate governance issues, (vii) breach by the Company, IMSG or
Bankers Insurance Group, Inc. ("BIG") of their respective duties and
obligations under the Merger Agreement, dated May 12, 1998, by and
among Executive, his spouse, the Company, IMSG and BIG, (viii) breach
by the Company, IMSG or BIG of their respective duties and obligations
under the Option and Exchange Agreement dated of even date herewith
between Executive, the Company and IMSG or the Indemnity Agreement
between Executive, his spouse, the Company, IMSG and BIG, (ix) a
default under the terms of that certain Subordinated Promissory Note in
the principal amount of One Million Five Hundred Thousand Dollars
($1,500,000) issued by the Company to Executive, or (x) the sale,
directly or indirectly, of the capital stock or substantially all of
the assets of the Company to a competitor of the Company without the
consent of Executive.
8.3 Termination by Executive. Executive shall have the right
to terminate his employment with the Company under this Agreement at
any time. Executive agrees to provide the Company with ninety (90)
days' prior written notice of any such termination. The Company's
obligation to pay Executive the Salary pursuant to Section 4.1, above,
shall
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<PAGE> 5
cease as of his last day of work if Executive terminates his employment
with the Company for any reason other than Good Reason.
8.4 Effect of Termination. Upon termination of this Agreement
by the Company for any reason whatsoever, or upon the termination of
this Agreement by Executive, this Agreement shall thereupon be and
become void and of no further force or effect, except that the
confidentiality and noncompetition provisions of Section 10, below,
shall survive any such termination and shall continue to bind
Executive. Any payments due pursuant to the provisions of this
Agreement for services rendered prior to termination shall be made as
provided in this Agreement. Notwithstanding the foregoing, if Executive
is terminated other than for Cause, if Executive terminates his
employment with the Company for Good Reason or this Agreement is not
renewed for any reason other than death, disability or for Cause,
Sections 10.2 and 10.4 below shall not apply and Executive shall be
entitled to severance pay equal to Executive's then current salary
payable in accordance with the Company's usual payroll practices for a
period equal to the greater of (i) the unexpired term of this Agreement
or (ii) one year (the "Severance Payment"). In the event that Executive
is entitled to a Severance Payment pursuant to this Section 8.4 and
Executive secures employment at any time during the greater of (i) the
unexpired term of this Agreement or (ii) one year (the "Severance
Period"), then the Company shall be entitled to a credit against its
obligations to make the Severance Payment in an amount up to
seventy-five percent (75%) of Executive's base salary during the
Severance Period paid to him by his new employer.
9. Company's Performance. Executive shall prepare and deliver to the
Board at least ninety (90) days prior to fiscal year-end a calendarized budget
which includes a sales plan on a monthly basis for the next fiscal year
indicating how the Company expects to reach the target for that fiscal year (the
"Budget"). Executive shall use his best efforts to cause the Company to operate
within, in all material respects, the Budget and failure to exercise his best
efforts and to not achieve such goals, in all material respects, shall be reason
for termination. Failure of the Company to achieve the results reflected in the
Budget will not, in and of itself, be deemed a violation by Executive of this
Agreement and not constitute an event giving rise to a "for cause" termination.
10. Confidentiality and Noncompetition.
10.1 Disclosure of Information. Executive acknowledges that in
connection and as a result of his engagement hereunder, he will be
making use of, acquiring, and/or adding to confidential information of
a special and unique nature and value relating to such matters as the
Company's trade secrets, systems, procedures, manuals, confidential
reports, marketing or promotional methods, lists of customers, business
plans and referral sources. As a material inducement to the Company's
entering into this Agreement, and to pay the Salary, as well as any
other additional benefits provided for herein, Executive covenants and
agrees that he shall not, at any time during the duration of this
Agreement, including any renewals hereof, and continuing thereafter,
directly or indirectly, divulge or disclose, for any purpose whatsoever
(other than the performance of his obligations hereunder), any
confidential information that has been obtained by, or disclosed to,
him as a result of his
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<PAGE> 6
duties hereunder and his prior employment with SMS Geotrac, Inc., a
Delaware corporation, except to the extent that such confidential
information is (a) in the public domain, (b) generally known in the
flood zone mapping service industry, or (c) rightfully disclosed to
Executive by a third party.
10.2 Covenant Not to Compete. In consideration of the Salary
and other benefits provided herein, Executive agrees that for a period
of two (2) years following Executive's termination of employment with
the Company as provided for herein other than Executive's termination
of employment for Good Reason and the Company's termination of
Executive's employment for any reason other than for Cause, Executive
shall not, directly or indirectly, engage in the flood zone compliance
business nor in any other business engaged in or planned to be engaged
in by the Company within any state of the United States of America or
any other country in which the Company are doing or plan to do
business, nor shall Executive have any interest, directly or
indirectly, whether as proprietor, partner, employee, shareholder,
principal, agent, creditor, consultant, director, officer or in any
other capacity or manner whatsoever, in any such enterprise. For
purposes of this Section 10.2, the phrase "planned to be engaged in"
or "plans to do business" shall mean that as of the date Executive's
employment terminates, the Company has determined, and is pursuing
active steps, as evidenced by written documentation, to become involved
in a new product, service or geographic area and such determination has
been communicated to Executive.
It is the intention of the parties that if any court shall
determine that the scope, duration or geographical limit of any
restriction contained in this Section 10.2 is unenforceable, the
restrictive covenant set forth herein shall not thereby be terminated
but shall be deemed amended to the extent required to render it valid
and enforceable. Executive acknowledges that the scope, duration and
geographical limitation of the restrictions contained in this Section
10 constitute a reasonable and necessary protection of the legitimate
interests of the Company and that any violation of these restrictions
would cause substantial injury to the Company, who would not have
entered into this Agreement without receiving the additional
consideration offered by Executive in binding himself to these
restrictions.
10.3 Books and Records. Executive acknowledges that all files,
books, records and other materials owned by the Company and their
subsidiaries, as the case may be, shall at all times remain the
property of the Company or their subsidiaries, as the case may be, and
that upon termination of this Agreement, irrespective of the time,
manner or cause of such termination, Executive shall surrender to the
Company all such files, books, records and other materials.
10.4 Other Employees. Executive will not, during the term of
this Agreement and for two (2) years thereafter, directly or
indirectly, employ or attempt to employ or solicit for any employment
any of the Company's employees.
10.5 Survival of Obligations Beyond Termination. The
obligations of Executive under this Section 10 shall not terminate upon
the termination of this Agreement, but, rather,
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<PAGE> 7
shall continue in effect thereafter. With respect to improvements,
discoveries and inventions for which Executive has had any involvement,
directly or indirectly, Executive shall provide the assistance deemed
necessary by the Company with respect to acquiring and protecting the
rights of the Company thereto, and, with respect to confidential
information or other business information, until such time as the
information shall be in the public domain.
10.6 Injunctive Relief. In the event of a breach or threatened
breach by Executive of any of the provisions of this Section 10, the
Company, in addition to, and not in limitation of, any other rights,
remedies or damages available at law or in equity, shall be entitled to
preliminary and permanent injunctive relief in order to prevent or
restrain any such breach or threatened breach by Executive or
Executive's agents, representatives or any and all persons directly or
indirectly acting for or with Executive.
11. Key Man Insurance. The Company may purchase key man term life
insurance on the life of Executive in an amount of up to $2,000,000 for the
benefit of the Company (the "Life Insurance Policy"). Executive agrees to submit
to any reasonable physical examination required in connection with the Life
Insurance Policy and to otherwise cooperate with the Company in connection with
its obtaining the Life Insurance Policy. Executive confirms to Company that to
the best of his knowledge, he is insurable at normal rates.
12. General Provisions.
12.1. Notices. All notices which are required or may be given
pursuant to the terms of this Agreement shall be in writing and shall
be sufficient in all respects if (a) delivered personally, (b) mailed
by registered or certified mail, return receipt requested and postage
prepaid, or (c) sent via a nationally recognized overnight courier
service or (d) sent via facsimile confirmed in writing to the recipient
in each case as follows:
If to Company or Executive:
Geotrac, Inc.
3900 Laylin Road
Norwalk, Ohio 44057
Attention: Daniel J. White
Telephone (419) 668-8899
Telecopy: (419) 668-9266
7
<PAGE> 8
with a copy to:
Benesch, Friedlander, Coplan & Aronoff LLP
2300 BP America Building
200 Public Square
Cleveland, Ohio 44114
Attention: Ira Kaplan, Esq.
Telephone (216) 363-4567
Telecopy: (216) 363-4588
and copy to:
Insurance Management Solutions Group, Inc.
360 Central Avenue
St. Petersburg, Florida 33701
Attention: C. Anthony Sexton, Esq.
Telephone: (813) 823-4000 extension 4894
Telecopy: (813) 823-6518
or such other address or addresses as either party hereto shall have
designated by notice in writing to the other party hereto.
12.2 Waiver and Amendment. This Agreement may be amended,
supplemented, modified and/or rescinded only through an express written
instrument signed by the parties or their respective legal
representatives, successors and assigns. Any party may specifically and
expressly waive in writing any portion of this Agreement or any breach
hereof, but no such waiver shall constitute a further or continuing
waiver of any preceding or succeeding breach of the same or any other
provision. The consent by one party to any act for which such consent
was required shall not be deemed to imply consent or waiver of the
necessity of obtaining such consent for the same or similar acts in the
future.
12.3 Severability. Each provision of this Agreement is
intended to be severable. If any covenant, condition or other provision
contained in this Agreement is held to be invalid, void or illegal by
any court of competent jurisdiction, such provision shall be deemed
severable from the remainder of this Agreement and shall in no way
affect, impair or invalidate any other covenant, condition or other
provisions contained in this Agreement. If such condition, covenant or
other provision shall be deemed invalid due to its scope or breadth,
such covenant, condition or other provision shall be deemed valid to
the extent of the scope or breadth permitted by law.
12.4 Successors and Assigns. Each of the terms, provisions and
obligations of this Agreement shall be binding upon, shall inure to the
benefit of, and shall be enforceable by the parties and their
respective legal representatives, successors and assigns.
8
<PAGE> 9
12.5 Interpretation. The language in all parts of this
Agreement shall be in all cases construed simply according to its fair
meaning and not strictly for or against any party. Whenever the
context requires, all words used in the singular will be construed to
have been used in the plural, and vice versa, and each gender will
include any other gender. The captions of the Sections and Subsections
of this Agreement are for convenience only and shall not affect the
construction or interpretation of any of the provisions of this
Agreement.
12.6 Integration. This Agreement sets forth the entire
agreement between the parties with regard to the subject matter of this
Agreement. All agreements, covenants, representations and warranties,
express or implied, oral and written, of the parties with regard to the
subject matter of this Agreement are contained in this Agreement, in
the exhibits, schedules or annexes to this Agreement, and the documents
referred to or implementing any provision of this Agreement. No other
agreements, covenants, representations or warranties, express or
implied, oral or written, have been made by either party to the other
with respect to the subject matter of this Agreement. All prior and
contemporaneous conversations, negotiations, covenants and warranties
with respect to the subject matter of this Agreement are waived, merged
in this Agreement and superseded by this Agreement. This is an
integrated agreement.
12.7 Entire Agreement. This Agreement, and any exhibits,
schedules or annexes and any documents executed concurrently herewith,
constitute the entire agreement between the parties hereto with respect
to the subject matter hereof and supersede all prior agreements and
understandings, oral and written, between the parties with respect to
the subject matter hereof. No representation, warranty promise,
inducement or statement of intention has been made by either party
which as not embodied in this Agreement or such other documents; and
neither party shall be bound by, or be liable for, any alleged
representation, warranty, promise, inducement or statement or intention
not embodied herein or therein.
12.8 Applicable Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Ohio, without
regard to conflicts of law principles. However, jurisdiction and venue
for any action brought to enforce the terms or conditions of this
Agreement shall be the domicile of the defendant or respondent in any
such action.
12.9 Attorneys' Fees. If any party to this Agreement should
bring an arbitration or court action alleging breach of this Agreement
or seeking to enforce, rescind, renounce, declare void or terminate
this Agreement or any provisions thereof, the prevailing party shall be
entitled to recover all of its legal expenses, including reasonable
attorneys' fees and costs (including legal expenses for any appeals
taken), and to have the same awarded as part of the judgment in the
proceeding in which such legal expenses and attorneys' fees were
incurred.
12.10 Representation Acknowledged. The parties acknowledge
that each party and its counsel have reviewed and revised this
Agreement and that the normal rule of construction to the effect that
any ambiguities are to be resolved against the drafting party
9
<PAGE> 10
shall not be employed in the interpretation of this Agreement or any
amendments, exhibits, schedules or annexes hereto.
IN WITNESS WHEREOF, this Agreement has been duly executed and delivered
by the duly authorized officers of the parties hereto as of the day and year
indicated above.
WITNESSES COMPANY
Geotrac, Inc.
/s/ Martha M. Purcell By: /s/ Thomas B. Becker
- ------------------------------ ------------------------------
Executive Assistant Its: Vice President/Operations
- ------------------------------ -----------------------------
WITNESSES EXECUTIVE
/s/ Illegible signature /s/ Daniel J. White
- ------------------------------ ----------------------------------
Daniel J. White
- ------------------------------
10
<PAGE> 1
EXHIBIT 10.26
CORPORATE GOVERNANCE AGREEMENT
THIS CORPORATE GOVERNANCE AGREEMENT ("Agreement") is entered into this
31st day of July, 1998 among Geotrac, Inc., a Florida corporation ("Geotrac"),
Daniel J. White ("White") and Insurance Management Solutions Group, Inc., a
Florida corporation ("IMSG").
RECITALS
A. Geotrac, Inc., an Ohio corporation, White, Sandra White, Bankers Hazard
Determination Services, Inc., a Florida corporation ("Bankers"), IMSG and
Bankers Insurance Group, Inc., a Florida corporation have entered into a Merger
Agreement dated as of May 12, 1998 (the "Merger Agreement").
B. Pursuant to the Merger Agreement, Geotrac merged into and with Bankers
with Bankers being the surviving corporation and changing its name to Geotrac
(the "Company").
C. IMSG owns one hundred percent (100%) of the issued and outstanding
stock of the Company.
D. White is a shareholder of IMSG.
E. Geotrac and White have concurrently herewith entered into an Employment
Agreement dated as of the date hereof pursuant to which the Company has employed
White to serve as President and Chief Executive Officer of the Company (the
"Employment Agreement").
F. The parties hereto desire to enter into this Agreement in order to
confirm their understanding of the terms and conditions pursuant to which the
Company will be operated.
NOW, THEREFORE, in consideration of the premises and other valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties agree as follows:
1. Articles of Incorporation and By-Laws. The Company's Amended and
Restated Articles of Incorporation and By-Laws shall be adopted in the form of
Exhibit A and Exhibit B attached to this Agreement.
2. Directors; Related Matters. For so long as White owns shares of capital
stock of IMSG or owns shares of capital stock of the Company or has an option to
acquire shares of capital stock of the Company:
(a) IMSG will vote all shares of the Company (the "Shares") to fix and
maintain the number of directors on the Board of Directors of the Company (the
"Board") at five (5).
(b) IMSG will vote the Shares to elect as directors of the Company two
(2) persons designated by White ("White Directors"). In the event a White
Director ceases to serve on the Board, White may designate a replacement
director, and IMSG will vote all Shares to elect the designated replacement
director to the Board. After the fourth anniversary of the date of this
<PAGE> 2
Agreement, any White Director designated by White (other than White) shall be a
person reasonably acceptable to IMSG.
(c) The following matters will require the unanimous approval of the
Board:
(i) Any sale of the Shares or issuance of additional equity
securities, or securities convertible into or exercisable or
exchangeable for equity securities of the Company;
(ii) Any sale of assets of the Company outside of the ordinary
course of business or sale of its capital stock to anyone other than
an affiliate. Notwithstanding the foregoing, a sale of assets or
capital stock of the Company may be made without the unanimous
approval of the Board, provided, however, that White shall have first
been offered the option to purchase any assets or capital stock to be
sold. White shall provide the Company with written notice the exercise
of his option to purchase any such assets or capital stock of the
Company within thirty (30) days of White's receipt of written terms of
the proposed sale;
(iii) The relocation of a significant portion of the Company's
operations, of the headquarters of the Company or the Company's
executive officers outside of the Norwalk, Ohio area;
(iv) Entering into new agreements or amending or refinancing
any agreements pertaining to indebtedness for borrowed money;
(v) Making advances or loans to any party, other than to
employees of the Company, in the ordinary course of business;
(vi) Any modification of compensation of executive officers or
directors of the Company;
(vii) Any agreement of IMSG, any of its subsidiaries or parent
or any of their affiliates, to provide services to the Company;
(viii) Any payment of management or other similar fees, including
allocation of corporate expenses, to IMSG, any of its subsidiaries or
parent or any of their affiliates other than the actual cost of
services provided by IMSG or its affiliates to the Company;
(ix) Merging or consolidating with any other person or entity;
(x) Making distributions, including dividends or any
redemption of capital stock of the Company, the value of which may not
exceed 25% of the prior
2
<PAGE> 3
fiscal year earnings less reasonable reserves for cash flow for
operations, capital expenditures and growth.
(d) White hereby agrees that on any Board actions requiring the
unanimous consent specified in Paragraphs 2(c) and (f) hereof, other than
Paragraph 2(c)(iii), that White's consent will not be unreasonably withheld.
(e) Any termination of White as an employee of the Company, with or
without Cause (as defined in the Employment Agreement) shall require the vote of
four (4) out of five (5) members of the Board.
(f) The Articles of Incorporation and By-Laws of the Company may not be
amended without the prior written consent of the White Directors.
3. Severability. If any provision of this Agreement is held invalid,
unenforceable, or void by a court of competent jurisdiction, this Agreement
shall be considered divisible as to such provision, and the remainder of the
Agreement shall be valid and binding as though such provision were not included
in this Agreement.
4. Termination. This Agreement shall terminate upon the occurrence of any
of the following events:
(a) Cessation of the Company's business;
(b) Bankruptcy, receivership or dissolution of the Company;
(c) The voluntary agreement of all of the parties bound by the terms of
this Agreement;
(d) Death or Permanent Disability of White; or
(e) White voluntarily resigns from his position as a member of the
Board of Directors or ceases to own shares of capital stock of IMSG or
shares of capital stock of the Company or an option to acquire shares of
capital stock of the Company.
For purposes of this Agreement "Permanent Disability" if due to illness or
injury, either physical or mental, White has been substantially unable to
perform his customary duties as a Director of the Company for a period of one
hundred eighty (180) consecutive days or an aggregate of one hundred eighty
(180) days within a period of 365 consecutive days, provided the Company has
given White thirty (30) days written notice of potential termination of this
Agreement, and within said thirty (30) day period after written notice of
termination had been given, White has not returned to the reasonable full-time
performance of his duties as a Director of the Company.
3
<PAGE> 4
5. Benefits; Binding Effect. This Agreement shall be for the benefit of,
and shall be binding upon, the parties and their respective heirs, personal
representatives, executors, legal representatives, successors and assigns.
6. Notices. All notices which are required or may be given pursuant to the
terms of this Agreement shall be in writing and shall be sufficient in all
respects if (i) delivered personally, (ii) mailed by registered or certified
mail, return receipt requested and postage prepaid, or (iii) sent via a
nationally recognized overnight courier service or (iv) sent via facsimile
confirmed in writing to the recipient in each case as follows:
If to the Company or White:
Geotrac, Inc.
3900 Laylin Road
Norwalk, Ohio 44057
Attention: Daniel J. White
Telephone (419) 668-8899
Telecopy: (419) 668-9266
with a copy to:
Benesch, Friedlander, Coplan & Aronoff LLP
2300 BP America Building
200 Public Square
Cleveland, Ohio 44114
Attention: Ira Kaplan, Esq.
Telephone (216) 363-4567
Telecopy: (216) 363-4588
and
Insurance Management Solutions Group, Inc.
360 Central Avenue
St. Petersburg, Florida 33701
Attention: C. Anthony Sexton, Esq.
Telephone: (813) 823-4000 extension 4894
Telecopy: (813) 823-6518
4
<PAGE> 5
If to IMSG:
Insurance Management Solutions Group, Inc.
360 Central Avenue
St. Petersburg, Florida 33701
Attention: C. Anthony Sexton, Esq.
Telephone: (813) 823-4000 extension 4894
Telecopy: (813) 823-6518
or such other address or addresses as either party hereto shall have designated
by notice in writing to the other party hereto.
7. Amendments, Supplements, Etc. This Agreement may be amended or
supplemented at any time by such additional agreements, articles or
certificates, as may be determined by the parties hereto to be necessary,
desirable or expedient to further the purposes of this Agreement, or to clarify
the intention of the parties hereto, or to add to or modify the covenants, terms
or conditions hereof or to effect or facilitate any governmental approval or
acceptance of this Agreement or to effect or facilitate the filing or recording
of this Agreement or the consummation of any of the transactions contemplated
hereby. Any such agreement, article or certificate must be in writing and signed
by all parties. No oral or unexecuted agreement, promise or undertaking will be
effective to modify, amend or alter the terms of this Agreement in any manner
whatsoever.
8. Entire Agreement. This Agreement, its exhibits, schedules and annexes
and the documents executed in connection herewith, constitute the entire
agreement among the parties hereto with respect to the subject matter hereof and
supersede all prior agreements and understandings, oral and written, among the
parties hereto with respect to the subject matter hereof. No representation,
warranty promise, inducement or statement of intention has been made by any
party which as not embodied in this Agreement or such other documents; and no
party shall be bound by, or be liable for, any alleged representation, warranty,
promise, inducement or statement or intention not embodied herein or therein.
9. Applicable Law. This Agreement will be governed by and construed in
accordance with the laws of the State of Ohio, without regard to conflicts of
law principles. However, jurisdiction and venue for any action brought to
enforce the terms or conditions of this Agreement shall be the domicile of the
defendant or respondent in any such action.
10. Attorneys' Fees. If any party to this Agreement should bring an action
alleging breach of this Agreement or seeking to enforce, rescind, renounce,
declare void or terminate this Agreement or any provisions thereof, the
prevailing party shall be entitled to recover all of its legal expenses,
including reasonable attorneys' fees and costs (including legal expenses for any
appeals taken), and to have the same awarded as part of the judgment in the
proceeding in which such legal expenses and attorneys' fees were incurred.
5
<PAGE> 6
11. Representation Acknowledged. The parties acknowledge that each party
and its counsel have reviewed and revised this Agreement and that the normal
rule of construction to the effect that any ambiguities are to be resolved
against the drafting party shall not be employed in the interpretation of this
Agreement or any amendments or exhibits, schedules or annexes hereto.
IN WITNESS WHEREOF, this Agreement has been duly executed and delivered by
the duly authorized officers of the parties hereto as of the day and year
indicated below.
GEOTRAC, INC.
By: /s/ Daniel J. White
---------------------------------------
Its: President
--------------------------------------
INSURANCE MANAGEMENT SOLUTIONS GROUP, INC.
By: /s/ Jeffrey S. Bragg
---------------------------------------
Its: CCO
--------------------------------------
/s/ Daniel J. White
------------------------------------------
DANIEL J. WHITE
6
<PAGE> 1
EXHIBIT 10.27
TAX INDEMNITY AGREEMENT
THIS TAX INDEMNITY AGREEMENT (the "Agreement") is made and entered into as
of July 31, 1998, by and among Bankers Insurance Group, Inc., a Florida
corporation ("BIG"), Insurance Management Solutions Group, Inc., a Florida
corporation ("IMSG") and Daniel J. and Sandra White (the "Whites").
WHEREAS, the parties hereto have entered into that certain Agreement and
Plan of Merger (the "Merger Agreement") dated May 12, 1998 among Geotrac, Inc.,
an Ohio corporation ("Geotrac"), the Whites, Bankers Hazard Determination
Services, Inc., a Florida corporation ("Bankers"), IMSG and BIG.
WHEREAS, pursuant to the Merger Agreement, Geotrac will merge (the
"Merger") with and into Bankers with Bankers being the surviving company in the
Merger.
WHEREAS, pursuant to the Merger, the Whites will receive, in exchange for
their Geotrac stock, 480,515 shares of IMSG Common Stock and a subordinated
promissory note (the "Note") in the amount of $1,500,000.
WHEREAS, pursuant to Section 2.01 of the Merger Agreement, the number of
shares of IMSG Common Stock that the Whites are entitled to receive in the
Merger may be increased upon the occurrence of certain specified events (such
additional shares to be referred to as "Contingent Shares").
WHEREAS, pursuant to Section 2.05 of the Merger Agreement, and the Option
and Exchange Agreement described therein, the Whites will be granted certain put
and exchange rights with respect to the IMSG Common Stock that they receive in
the Merger (collectively, the "Rights").
WHEREAS, the Merger is intended to qualify as a reorganization described
in Sections 368(a)(1)(A) and 368(a)(2)(D) of the Internal Revenue Code of 1986,
as amended (the "Code").
WHEREAS, pursuant to Section 5.02(m)(3) of the Merger Agreement, IMSG and
BIG are required to enter into this Tax Indemnity Agreement.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:
1. Tax Indemnity. BIG and IMSG jointly and severally covenant and agree to
indemnify, defend and hold the Whites harmless from and against any and all
costs, expenses, losses or liabilities ("Damages") including, without
limitation, reasonable attorneys' fees, incurred or suffered by the Whites
resulting from, attributable to or arising under any of the following:
<PAGE> 2
(a) any federal, state or local income tax liabilities (including
penalties, interest and additions to tax) assessed against, or owed or
payable by, the Whites resulting from an assertion by the Internal Revenue
Service that the Merger does not qualify as a tax-free reorganization
within the meaning of Sections 368(a)(1)(A) and 368(a)(2)(D) of the Code
or otherwise with respect to the exchange by the Whites of their Geotrac
stock for IMSG Common Stock, the Note and the Rights (other than any
income tax liabilities attributable to their receipt of actual interest
payments under the Note and, except as provided in clause (d) below, their
receipt of the Note or principal payments on the Note);
(b) in the event that the Whites receive any Contingent Shares, any
federal, state or local income tax liabilities (including penalties,
interest and additions to tax) of the Whites attributable to the portion
of such Contingent Shares that is properly characterized as interest
income under the Code;
(c) any federal, state or local income tax liabilities (including
penalties, interest and additions to tax) of the Whites attributable to
their receipt of the Rights; and
(d) if the White's receipt of the Notes is taxable as a dividend
rather than capital gain, any incremental federal, state or local income
tax liabilities (including penalties, interest and additions to tax) of
the Whites attributable thereto (i.e., any excess tax liabilities
resulting from the characterization of the White's receipt of the Notes as
dividend versus capital gain income);
(e) any federal, state or local income tax liabilities of the Whites
attributable to their receipt of any payment pursuant to this Agreement,
it being the intent of the parties that the Whites receive an after tax
amount equal to any federal, state or local income tax liabilities
(including penalties, interest and additions to tax) of theirs described
in clauses (a)-(d) above.
The amount of any Damages incurred or suffered by the Whites shall be
determined by the certified public accountant retained by them to prepare their
tax returns. Payment of any amount owed to the Whites hereunder shall be made
within fifteen (15) days of the receipt by BIG and IMSG of a letter from such
certified public accountant certifying the amount of the Damages incurred or
suffered by the Whites, as long as BIG and IMSG have not delivered written
notice of a disagreement ("Dispute Notice" with the amount of such Damages to
the Whites within ten (10) days of the written notice of the certified public
accountant to BIG and IMSG. IMSG and BIG agree to act in good faith in
connection with their determination and delivery of any dispute notice. Upon
receipt of a Dispute Notice the Whites and BIG and IMSG shall select another
independent certified public accountant (the "Joint Accountant") within 5
business days to deliver a report as to the Damages, whose report shall be
binding on the parties
2
<PAGE> 3
hereto. In the event the parties are unable to agree on an independent certified
public accountant, BIG and IMSG shall select their own certified public
accountant within 10 days of such Dispute Notice who shall deliver its report as
to Damages within 30 days of the Dispute Notice. In the event that the certified
public accountant selected by BIG and IMSG does not agree with the Damages
certified by the Whites certified public accountant, the accountants shall
select a third independent certified public accountant (the "Third Accountant")
within 40 days of the Dispute Notice, who will deliver its report as to the
amount of the Damages within 30 days of its engagement and whose determination
shall be final and binding on the parties hereto. Each party shall pay the costs
of their own appraiser and shall split the costs of the Third Accountant. BIG
and IMSG shall be responsible for the fees and expenses of the Joint Accountant.
2. Tax Returns. The Whites shall file their 1998 federal, state and local
income tax returns consistent with the position that the Merger qualifies as a
reorganization described in Sections 368(a)(1)(A) and 368(a)(2)(D) of the Code.
3. Settlement of Tax Claim. In case any claim, demand or deficiency is
commenced or notice is given by the Internal Revenue Service against the Whites
with respect to which payment may properly be sought against BIG and IMSG
pursuant to this Agreement, the Whites shall promptly notify BIG and IMSG of
such fact in writing. The Whites shall conduct the defense of any such claim,
action or proceeding at BIG's and IMSG's expense with counsel reasonably
acceptable to BIG and IMSG; provided, however, that the Whites shall not settle
any such claim, action or proceeding without the prior written consent of BIG
and IMSG, which consent shall not be unreasonably withheld; and provided,
further that BIG and IMSG shall have the right to participate in such defense at
their own expense.
4. Successors and Assigns. This Agreement shall be binding on and shall
inure to the benefit of the parties hereto and their respective successors and
assigns.
5. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original and all of which
together shall constitute the same document.
6. Ohio Law to Govern. This Agreement shall be governed by and construed
in accordance with the laws of the State of Ohio.
3
<PAGE> 4
IN WITNESS WHEREOF, the parties hereto have executed this Tax Indemnity
Agreement as of July 31, 1998.
BANKERS INSURANCE GROUP, INC.
By: /s/ G. Kristin Delano
------------------------------------
Its: Corp. Secretary
-----------------------------------
INSURANCE MANAGEMENT SOLUTIONS
GROUP, INC.
By: /s/ Jeffrey S. Bragg
------------------------------------
Its: COO
-----------------------------------
/s/ Daniel J. White
---------------------------------------
Daniel J. White
/s/ Sandra White
---------------------------------------
Sandra White
4
<PAGE> 1
EXHIBIT 10.69
REGISTRATION RIGHTS AGREEMENT
This REGISTRATION RIGHTS AGREEMENT ("Agreement") is made as of July 31,
1998 between Information Solutions Group, Inc., a Florida corporation (the
"Company"), and Daniel J. and Sandra White (including permitted successors and
assigns hereunder) (the "Stockholders") of shares of Common Stock, par value
$.01 per share ("Common Stock"), of the Company.
WHEREAS, on May 12, 1998, the Stockholders, the Company, Bankers Hazard
Determination Services, Inc. ("Bankers"), Bankers Insurance Group, Inc. ("BIG")
and Geotrac, Inc., an Ohio corporation ("Geotrac") entered into an Agreement
and Plan of Merger (the "Merger Agreement");
WHEREAS, pursuant to the terms of the Merger Agreement Geotrac merged
(the "Merger") with and into Bankers, with Bankers being the surviving
corporation, and changing its name to Geotrac,Inc.;
WHEREAS, as part of the Merger consideration, for their shares of
Geotrac, the Whites received or will receive up to 480,515 shares of common
stock of IMSG; and
WHEREAS, under the Merger Agreement, it is a condition to the
obligations of the Stockholders and Geotrac to consummate the Merger that the
Company execute this Agreement.
NOW, THEREFORE, in consideration of the foregoing and the respective
covenants and agreements set forth in this Agreement, the parties agree as
follows:
1. Demand Registration. Subject to the terms and conditions of this
Agreement, at any time on or after the first anniversary of the Closing Date of
an initial public offering ("IPO") or registration of the Company's capital
stock under the Securities Exchange Act of 1934, as amended, the Stockholders
may deliver a written request (a "Demand Notice") to the Company to register
under the Securities Act of 1933, as amended (the "1933 Act"), on Form S-3 any
or all shares of Common Stock owned by such Stockholders (such shares of Common
Stock as to which any such request is made pursuant to this Section 1 or Section
2 hereof being the "Registrable Securities"). The Company agrees that is will
use reasonable efforts to cause the prompt registration of all such Registrable
Securities; provided however, the Company may postpone for a limited time, which
in no event shall be longer than ninety (90) days, compliance with a request for
registration pursuant to this Section 1 if (i) such compliance would materially
adversely affect (including, without limitation, through the premature
disclosure thereof) a proposed material financing, reorganization,
recapitalization, acquisition, consolidation or similar transaction, (ii) the
Company is conducting a public offering of capital stock and the managing
underwriter concludes in its reasonable judgment that such compliance would
materially adversely affect such offering or (iii) the Company notifies
<PAGE> 2
the Stockholders that a material event has occurred or is likely to occur that
has not been publicly disclosed and if disclosed would have a material adverse
effect on the Company and its ability to consummate any offering of the
Registrable Securities subject to the Demand Notice. If there is a postponement
under any of clause (i), (ii) or (iii) above, the Demand Notice may be withdrawn
by the Stockholders by notice to the Company. In such case, no demand shall have
been made for the purposes of this Section 1. The Stockholders shall not make a
demand for registration of shares of Common Stock pursuant to this Section 1
within six (6) months following the effective date of the registration for a
"piggyback" registration pursuant to Section 2 below. Notwithstanding anything
in this Section 1 to the contrary, the Company shall not be required to comply
with more than one (1) request of the Stockholders pursuant to this Section 1.
Any underwriter selected by the Stockholders to act as such in connection with a
registration pursuant to this Section 1 must be reasonably acceptable to the
Company.
2. "Piggyback" Registration. Whenever the Company proposes to file a
registration statement relating to any of its securities under the 1933 Act for
its account or the account of any other stockholder of the Company (other than a
registration statement required to be filed in respect of employee benefit plans
of the Company on Form S-8 or any similar form from time to time in effect or
any registration statement on Form S-4 or similar successor form), the Company
shall, at least twenty-one (21) days (or if such twenty-one (21) day period is
not practicable, then a reasonable shorter period which shall not be less than
seven (7) days) prior to such filing, give written notice of such proposed
filing to the Stockholders, and such notice shall offer each of the Stockholders
the opportunity to register such Registrable Securities as such Stockholder may
request, and such notice shall state the name of the managing underwriter for
such registration, the number of securities to be registered for the account of
the Company and for the account of any stockholder, and the intended method of
disposition of such securities. Upon the written request of a Stockholder, given
within five (5) days after receipt of any such notice of registration from the
Company, to register any shares of Common Stock owned by him or her (which
request shall state the amount of Registrable Securities requested to be
registered), the Company shall include such Registrable Securities in such
registration statement or in a separate registration statement concurrently
filed on terms and conditions comparable to those of the securities offered on
behalf of the Company or for the account of any other stockholder of the
Company, unless the managing underwriter therefor concludes in its reasonable
judgment that the inclusion of such Registrable Securities in such offering
would materially adversely affect such offering, in which event the number of
shares that may be sold in such offering shall be allocated, first, to the
Company (or, if the offering is being made principally for the account of
another person, to such person), second to the Stockholders pro rata in
accordance with their percentage of shares of Common Stock included in the
offering and, third, to any other third party having registration rights with
respect to shares. If any of the Registrable Securities that a Stockholder has
requested be included in such offering are not so included, then the Company
shall cause such Registrable Securities to be registered under a separate
registration statement a limited period of time thereafter, which in no event
shall be more than six (6) months.
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<PAGE> 3
3. General Provisions.
(a) The Company shall use all reasonable efforts to cause any
registration statement referred to in Section 1 or Section 2 to become
effective and to remain effective (with a prospectus at all times
meeting the requirements of the 1933 Act) until the earlier of (i) six
(6) months from the effective date of the registration statement or (ii)
the date the Stockholder(s) complete the distribution of Registrable
Securities. The Company will use all reasonable efforts to effect such
qualifications under applicable "blue sky" or other state securities
laws as may be reasonably requested by the Stockholders (provided that
the Company shall not be obligated to file a general consent to service
of process or qualify to do business as a foreign corporation or
otherwise subject itself to taxation in any jurisdiction solely for the
purpose of any such qualification) to permit or facilitate such sale or
other distribution.
(b) To the extent not inconsistent with applicable law, the
Company and each of the Stockholders agrees not to effect any public
sale or distribution of their respective shares of Common Stock,
including, without limitation, a sale pursuant to Rule 144 promulgated
under the 1933 Act or pursuant to the Stockholders Agreement, during the
sixty (60) day period prior to, and during the ninety (90) day period
beginning on, the effective date of a registration statement in which
shares of its Registrable Securities are registered (except as part of
such registration), if and to the extent requested by the Company or by
the underwriter(s) in the case of an underwritten public offering.
4. Information, Documents, Etc. Upon making a request for
registration pursuant to Section 1 or Section 2, each of the Stockholders shall
furnish to the Company such information regarding his or her holdings and the
proposed manner of distribution thereof as shall be required in connection with
any registration qualification or compliance referred to in this Agreement. The
Company agrees that it will furnish to each of the Stockholders the number of
prospectuses, offering circulars or other documents, or any amendments or
supplements thereto, incident to any registration, qualification or compliance
referred to in this Agreement as the Stockholders from time to time may
reasonably request.
5. Expenses. The Company will bear all expenses of registrations
incident to its performance of or compliance with this Agreement, including,
without limitation, registration and filing fees, exchange listing fees,
printing expenses, fees and expenses of compliance with blue sky or other state
securities law and fees and disbursements of (a) counsel for the Company, (b)
all independent certified public accountants, (c) underwriters, and (d) any and
all other persons retained by the Company; provided, however, the Company will
not pay (i) underwriting discounts and commissions and brokerage commissions and
fees, if any, payable with respect to Registrable Securities sold by a
Stockholder, (ii) filing fees attributable to a Stockholder's Registrable
Securities, (iii) fees and expenses of compliance with blue sky or other state
securities laws that are required by law to be paid directly by a Stockholder,
and (iv) fees and expenses of any counsel and accountants for any Stockholder.
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<PAGE> 4
6. Cooperation. In connection with any registration of Registrable
Securities pursuant to this Agreement, the Company agrees to:
(a) enter into such customary agreements (including an
underwriting agreement containing such representations and warranties by
the Company and such other terms and provisions, including
indemnification provisions, as are customarily contained in underwriting
agreements for comparable offerings and, if no underwriting agreement is
entered into, an indemnification agreement on such terms as is customary
in transactions of such nature) and take all such other actions as the
Stockholders or the underwriters, if any, participating in such offering
and sale may reasonably request in order to expedite or facilitate such
offering and sale;
(b) furnish, at the request of the Stockholders or any
underwriters participating in such offering and sale, (i) a comfort
letter or letters, dated the date of the final prospectus with respect
to the Registrable Securities and/or the date of the closing for the
sale of the Registrable Securities, from the independent certified
public accountants of the Company and addressed to the Stockholders and
any underwriters participating in such offering and sale, which letter
or letters shall state that such accountants are independent with
respect to the Company within the meaning of Rule 1.01 of the Code of
Professional Ethics of the American Institute of Certified Public
Accountants and shall address such matters as the Stockholders and
underwriters may reasonably request and as may be customary in
transactions of a similar nature for similar entities and (ii) an
opinion, dated the date of the closing for the sale of the Registrable
Securities, of the counsel representing the Company with respect to such
offering and sale, addressed to the Stockholders and any such
underwriters, which opinion shall address such matters as they may
reasonably request and as may be customary in transactions of a similar
nature for similar entities; and
(c) make available for inspection by the Stockholders, the
underwriters, if any, participating in such offering and sale (which
inspecting underwriters shall, if reasonably possible, be limited to any
manager or managers for such participating underwriters), the counsel
for the Stockholders, one accountant or accounting firm retained by the
Stockholders and any such underwriters, or any other agent retained for
purposes of effecting the registration of the Registrable Securities by
the Stockholders or such underwriters, all financial and other records,
corporate documents and properties of the Company, and supply such
additional information, as they shall reasonably request.
7. Action to Suspend Effectiveness; Supplement to Registration
Statement.
(a) The Company will notify each of the Stockholders and their
counsel promptly of (i) any action by the Securities and Exchange
Commission ("SEC") to suspend the effectiveness of the registration
statement covering the Registrable Securities or the institution or
threatening of any proceeding for such purpose (a "stop order") or (ii)
the receipt by the Company of any notification with respect to the
suspension of the qualification of the Registrable Securities for sale
in any jurisdiction or the initiation or threatening of any
4
<PAGE> 5
proceeding for such purpose. Immediately upon receipt of any such
notice, the Stockholders shall cease to offer or sell any Registrable
Securities pursuant to the registration statement in the jurisdiction to
which such stop order or suspension relates. The Company will use all
reasonable efforts to prevent the issuance of any such stop order or the
suspension of any such qualifications and, if any such stop order is
issued or any such qualification is suspended, to obtain as soon as
possible the withdrawal or revocation thereof, and will notify each of
the Stockholders and their counsel at the earliest practicable date of
the date on which the Stockholders may offer and sell the Registrable
Securities pursuant to the registration statement.
(b) Within the applicable period referred to in Section 3(a)
following the effectiveness of a registration statement filed pursuant
to this Agreement, the Company will notify each of the Stockholders
promptly of the occurrence of any event or the existence of any state of
facts that, in the judgment of the Company, should be set forth in such
registration statement. Immediately upon receipt of such notice, the
Stockholders shall cease to deliver or use the prospectus relating to
such registration statement, and if so requested by the Company, return
to the Company, at its expense, all copies (other than permanent file
copies) of such registration statement and prospectus. The Company will,
as promptly as practicable, take such action as may be necessary to
amend or supplement such registration statement in order to set forth or
reflect such event or state of facts. The Company will furnish copies of
such proposed amendment or supplement to the Stockholders and will not
file or distribute such amendment or supplement without the prior
consent of the Stockholders, which consent shall not be unreasonably
withheld.
8. Indemnification.
(a) The Company hereby agrees to indemnify and hold harmless
each Stockholder and their agents (including counsel), and agrees to
indemnify each underwriter participating in such offering and sale and
each Person, if any, who controls such underwriter within the meaning of
the 1933 Act, against any losses, claims, damages or liabilities, joint
or several, to which the Stockholders, any agent or any such underwriter
or controlling Person may become subject under the 1933 Act or
otherwise, insofar as such losses, claims, damages or liabilities (or
actions in respect thereof) arise out of or are based upon (i) any
untrue statement or alleged untrue statement of any material fact
contained in any registration statement under which such Registrable
Securities were registered under the 1933 Act pursuant to Section 1 or
Section 2, any preliminary prospectus or final prospectus contained
therein, or any amendment or supplement thereof, or arise out of or are
based upon the omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements
therein not misleading or (ii) any violation by the Company of the 1933
Act or the Securities Exchange Act of 1934, as amended (the "1934
Act"), or other federal or state law applicable to the Company and
relating to any action or inaction required of the Company in connection
with such registration, and will reimburse the Stockholders, each such
agent and underwriter and each such controlling Person for any legal
5
<PAGE> 6
or other expenses reasonably incurred by them in connection with
investigating or defending any such loss, claim, damage, liability or
action; provided, however, that the Company will not be liable in any
such case if and to the extent that any such loss, claim, damage or
liability arises out of or is based upon an untrue statement or alleged
untrue statement or omission or alleged omission so made in reliance
upon and in conformity with information pertaining to such Stockholder,
such underwriter or controlling Person, furnished in writing to the
Company by the Stockholder, such underwriter or such controlling Person
for use in such registration statement or prospectus or by a
Stockholder's or such controlling Person's failure to deliver a copy of
the registration statement or prospectus or any amendment or supplement
thereto after being furnished with a sufficient number of copies of the
same by the Company. Such indemnity shall remain in full force and
effect regardless of any investigation made by or on behalf of the
Stockholders, such underwriter or such controlling Person and shall
survive any transfer by the Stockholders.
(b) If the Stockholders sell Registrable Securities under a
prospectus that is part of a registration statement, then the
Stockholder(s) participating in such offering (the "Participating
Stockholders"), by exercising their registration rights hereunder,
hereby agree, jointly and severally (if applicable), to indemnify and
hold harmless the Company, its agents (including counsel) and each
Person, if any, who controls the Company within the meaning of the 1933
Act, each officer of the Company who signs the registration statement,
each director of the Company, each underwriter and each Person who
controls any underwriter within the meaning of the 1933 Act, against all
losses, claims, damages or liabilities, joint or several, to which the
Company or such agent, officer or director or underwriter or controlling
Person may become subject under the 1933 Act or otherwise, insofar as
such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon (i) any untrue statement or
alleged untrue statement of any material fact contained in the
registration statement under which such Registrable Securities were
registered under the 1933 Act, any preliminary prospectus or final
prospectus contained therein, or any amendment or supplement thereof,
or arise out of or are based upon the omission or alleged omission to
state therein a material fact required to be stated therein or necessary
to make the statements therein not misleading, or (ii) any violation by
the Participating Stockholders of the 1933 Act or the 1934 Act, or other
federal or state law applicable to the Participating Stockholders and
relating to any action or inaction required by the Participating
Stockholders in connection with such registration, and will reimburse
the Company and each such agent, officer, director, underwriter and
controlling Person for any legal or other expenses reasonably incurred
by them in connection with investigating or defending any such loss,
claim, damage, liability or action; provided, however, that the
Participating Stockholders will be liable hereunder in any such case if
and only to the extent that any such loss, claim, damage or liability
arises out of or is based upon an untrue statement or alleged untrue
statement or omission or alleged omission made in reliance upon and in
conformity with information furnished in writing to the Company by the
Participating Stockholders specifically for use in such registration
statement or prospectus.
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<PAGE> 7
(c) Promptly after receipt by an indemnified party hereunder
of notice of the commencement of any action, such indemnified party
shall, if a claim in respect thereof may be made against the
indemnifying party hereunder, notify the indemnifying party in writing
thereof, but the omission so to notify the indemnifying party shall not
relieve it from any liability which it may have to any indemnified party
hereunder except to the extent such indemnifying party is prejudiced by
such failure to so notify nor shall it relieve it from any liability
which it may have to any indemnified party other than under this
Agreement. In case any such action shall be brought against any
indemnified party and it shall notify the indemnifying party of the
commencement thereof, the indemnifying party shall be entitled to
participate in and, to the extent it shall desire, to assume and
undertake the defense thereof with counsel satisfactory to such
indemnified party, and, after notice from the indemnifying party to such
indemnified party of its election so to assume and undertake the defense
thereof, the indemnifying party shall not be liable to such indemnified
party under this Section 8 for any legal expenses subsequently incurred
by such indemnified party in connection with the defense thereof;
provided, however, that, if the defendants in any such action include
both the indemnified party and the indemnifying party and the
indemnified party shall have reasonably concluded that there may be
reasonable defenses available to it which are different from or
additional to those available to the indemnifying party or if the
interests of the indemnified party reasonably may be deemed to conflict
with the interests of the indemnifying party, the indemnified party
shall so notify the indemnifying party in writing and shall have the
right to select a separate counsel and to control the defense of such
action, with the reasonable expenses and fees of such separate counsel
and other reasonable expenses related to such participation to be
reimbursed by the indemnifying party as incurred.
In any such action, any indemnified party shall have the right
to retain its own counsel, but, except as provided above, the fees and
disbursements of such counsel shall be at the expense of such
indemnified party unless (i) the indemnifying party shall have failed to
retain counsel for the indemnified party as aforesaid or (ii) the
indemnifying party and such indemnified party shall have mutually agreed
in writing to the retention of such counsel. It is understood that the
indemnifying party shall not, in connection with any action or related
actions in the same jurisdiction, be liable for the fees and
disbursements of more than one separate firm qualified in such
jurisdiction to act as counsel for the indemnified party and shall not
be obligated to pay the fees and expenses of more than one counsel (and
any required local counsel) for all parties indemnified by such
indemnifying party with respect to such claim, unless in the reasonable
judgment of any indemnified party a conflict of interest exists between
such indemnified party and any other of such indemnified parties with
respect to such claim. The indemnifying party shall not be liable for
any settlement of any proceeding effected without its prior written
consent, which consent shall not be unreasonably withheld, but if
settled with such consent or if there be a final judgment for the
plaintiff, the indemnifying party agrees to indemnify the indemnified
party from and against any loss or liability by reason of such
settlement or judgment.
7
<PAGE> 8
If the indemnification provided for in this Section 8 is
unavailable for any reason or insufficient to hold harmless an
indemnified party in respect of any losses, claims, damages or
liabilities or actions referred to herein, then each indemnifying party
shall in lieu of indemnifying such indemnified party contribute to the
amount paid or payable by such indemnified party as a result of such
losses, claims, damages, liabilities or actions in such proportion as is
appropriate to reflect the relative fault of the Company, on the one
hand, and the Stockholder, on the other, in connection with the
statements or omissions which resulted in such losses, claims, damages,
liabilities or actions as well as any other relevant equitable
considerations. The relative fault shall be determined by reference to,
among other things, whether the untrue or alleged untrue statement of a
material fact relates to information supplied by the Company, on the one
hand, or the Stockholders, on the other hand, and to the parties'
relative intent, knowledge, access to information and opportunity to
correct or prevent such statement of omission. The parties hereto agree
that it would not be just and equitable if contributions pursuant to
this paragraph were determined by any method of allocation which did not
take account of the equitable considerations referred to above in this
paragraph. Subject to the provisions of this Section 8, the amount paid
or payable by an indemnified party as a result of the losses, claims,
damages, liabilities or actions in respect thereof, referred to above in
this paragraph, shall be deemed to include any legal or other expenses
reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim.
9. Amendments. This Agreement may not be modified, amended,
altered or supplemented except upon the execution and delivery of a written
agreement executed by the Company and each of the Stockholders.
10. Notices. All notices and other communications hereunder shall
be in writing and shall be deemed given if delivered personally, telecopied
(which is confirmed) or sent by an overnight courier service, such as Federal
Express, or by registered or certified mail, return receipt requested, to the
parties at the following addresses (or at such other address for a party as
shall be specified by like notice):
(a) If to the Company:
Insurance Management Solutions Group, Inc.
360 Central Avenue
St. Petersburg, Florida 33701
Attention: C. Anthony Sexton, Esq.
Telephone: (813) 823-4000, ext. 4894
Telecopy: (813) 823-6518
8
<PAGE> 9
(b) If to the Stockholders:
at each of the Stockholder's last address
on the stock records of the
Company or the last address given
by each Stockholder to the Company
for notices under this Agreement
with copies to:
Benesch, Friedlander, Coplan & Aronoff LLP
2300 BP America Building
200 Public Square
Cleveland, OH 44114
Attention: Ira Kaplan, Esq.
Telephone No.: (216) 363-4500
Telecopy No.: (216) 363-4588
Any notice given by (i) telecopier will be effective when confirmed if
given prior to 6:00 p.m., local time, on a Business Day, otherwise it will be
effective on the next succeeding business day; (ii) overnight courier or
personal delivery will be effective on the day delivered, unless such day is
not a Business Day, in which case it will be effective on the next succeeding
Business Day; and (iii) registered or certified mail will be effective three
Business Days after deposit in the mails, all fees prepaid.
11. Interpretation and Definitions. When a reference is made in this
Agreement to Sections, such reference shall be to a Section of this Agreement
unless otherwise indicated. Whenever the words "include," "includes" or
"including" are used in this Agreement they shall be deemed to be followed by
the words "without limitation."
12. Counterparts. This Agreement may be executed in two or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when two or more counterparts have been signed by each of
the parties and delivered to the other parties, it being understood that all
parties need not sign the same counterpart.
13. Entire Agreement; Limitation on Third Party Beneficiaries. This
Agreement (including the documents and the instruments referred to herein)
constitutes the entire agreement and supersedes all prior agreements and
understandings, both written and oral, among the parties with respect to the
subject matter of this Agreement. Nothing expressed or implied in this Agreement
is intended, or shall be construed, to confer upon any Person other than the
parties hereto and their permitted successors and assigns, any rights, remedies,
obligations or liabilities under or by reason of this Agreement or result in any
such Person being deemed a third party beneficiary of this Agreement.
9
<PAGE> 10
14. Severability. If any term, provision, covenant or restriction of
this Agreement is held by a court of competent jurisdiction or other authority
to be invalid, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions of this Agreement shall remain in full force and
effect and shall in no way be affected, impaired or invalidated.
15. Specific Performance. The parties agree that irreparable damage
would occur in the event any provision of this Agreement was not performed in
accordance with the terms of this Agreement and that the parties shall be
entitled to the remedy of specific performance of the terms of this Agreement,
in addition to any other remedy at law or equity.
16. Governing Law. This Agreement shall be governed and construed in
accordance with the laws of the State of Ohio without giving effect to the
principles of conflicts of law thereof. However, jurisdiction and venue for any
action brought to enforce the terms or conditions of this Agreement shall be the
domicile of the defendant or respondent in any such action.
17. Assignment. Each of the terms, provisions and obligations of this
Agreement will be binding upon, inure to the benefit of and be enforceable by
the parties and their respective legal representatives, successors and assigns.
Notwithstanding the foregoing, the Stockholders shall not be permitted to assign
their interests, during their life, under this Agreement to any person or entity
other than Permitted Assigns. For purposes of this Agreement "Permitted Assigns"
shall mean Daniel J. or Sandra White, their lineal descendants and any trust or
other fiduciary for the benefit of such individual; and/or such individual's
spouse and/or lineal descendants, and such individual's parents.
18. Number; Gender. Whenever the context so requires, the singular
number shall include the plural and the plural shall include the singular, and
the gender of any pronoun shall include the other genders.
19. Captions. The titles, captions and headings contained in this
Agreement are inserted herein only as a matter of convenience and for reference
and in no way define, limit, extend or describe the scope of this Agreement or
the intent of any provision hereof.
20. Termination of Registration Rights. The registration rights
provided by this Agreement shall terminate and be of no further force and effect
unless exercised prior to the earlier of: (a) the sixth anniversary of the
Closing Date of an IPO or other registration of the Company's securities under
the Securities Exchange Act of 1934, as amended; (b) with respect to any
Stockholder, such time as the Stockholder has an unlimited right to sell all of
his or her Registrable Securities in the public market without restriction on
volume or otherwise; or (c) Daniel J. White
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<PAGE> 11
voluntarily leaves the employ of the Company for any reason other than "Good
Reason" as defined in the Employment Agreement dated the date hereof, between
the Company and Daniel J. White.
IN WITNESS WHEREOF, the Company and the Stockholders have duly executed
this Registration Rights Agreement as of the date first written above.
"COMPANY"
INFORMATION MANAGEMENT
SOLUTIONS GROUP, INC.
By: /s/ Jeffrey S. Bragg
--------------------------------
"STOCKHOLDERS"
/s/ Daniel J. White
------------------------------------
DANIEL J. WHITE
/s/ Sandra White
------------------------------------
SANDRA WHITE
11
<PAGE> 1
EXHIBIT 10.70
SOFTWARE LICENSE AGREEMENT
This Software License Agreement (this "License Agreement") effective the
1st day of January, 1998, by and between Bankers Insurance Group, Inc. and
Bankers Insurance Company ("Bankers") and Insurance Management Solutions, Inc.,
a Florida corporation, with its principal place of business located at 360
Central Avenue, St. Petersburg, Florida 33701 (hereinafter referred to as
"IMS").
WHEREAS, Bankers desires to grant IMS a nonexclusive, perpetual license to
certain policy and claims administration software ("Licensed Program") and
enhancements thereto without payment by IMS of any license, user or other fee
except for the one time payment of one dollar and other valuable consideration,
the receipt and value of which is hereby acknowledged; and
NOW, THEREFORE, for and in consideration of the covenants and promises
herein recited, it is understood and agreed as follows:
1. Grant of License.
a) Bankers by its acceptance of this License Agreement by signature of
an authorized officer grants to IMS a nonexclusive license to use,
enhance, modify, sell, lease and license in both source and object
code in machine readable form (the "Licensed Program"), together with
the documentation (including, but not limited to, manuals, printed
materials, source and object codes "Documentation"). The Licensed
Program and the Documentation are referred to collectively herein as
the "Program". This nonexclusive license is granted by Bankers to IMS
subject to all the terms and conditions of this License Agreement.
b) The Program includes policy and claims administration, processing,
billing, and production programs licensed or owned by Bankers either
currently or in the future in areas including, but not limited to the
following:
o Policy Administration and Processing System
o Claims Administration and Processing System
o Claims Disbursement Interface
o Agency Disbursement Interface
o Return Premium Interface
o Producer (Agent) System
o Billing (Direct Bill) System
o Production System(s)
o Production Reports
o Statistical, Operational and Financing Database Programs
o Development Modeling Tools (Software not available to third
parties)
All of the above are for automobile, homeowners, flood and commercial
lines products.
(See attached Schedule for detail description of actual data base transferred).
<PAGE> 2
c) The license granted under this License Agreement authorizes IMS or
its assigns to:
1. Use, enhance, or modify the Licensed Program in machine readable form
on IMS's computers at such locations as IMS may conduct its business
from time to time and in conjunction therewith to store the Licensed
Program and transmit it through or display it on units associated
with IMS's computers;
2. Utilize the Documentation in support of the use of the Licensed
Program;
3. Copy the Licensed Program and the Documentation to provide
sufficient copies to support IMS's use of the Licensed Program
as authorized under this License Agreement.
4. Sell or grant non-exclusive, perpetual licenses of the Licensed
Program and any enhancements to any third parties.
2. Term. This License Agreement and the license granted herein shall become
effective on the 1st day of January, 1998 (the "Effective Date") and shall
continue perpetually thereafter.
3. Warranty. To the extent that Bankers received patent rights, copyrights,
trademarks or similar rights in its purchase of the Licensed Program, then
IMS, or its assigns are granted the same rights.
4. Enhancements. The parties hereto agree to provide to each other at no
additional cost any enhancements to the Licensed Program. IMS agrees to be
responsible for the maintenance of and upgrades to the Programs.
5. Construction of Agreement. Words of a gender used in this Agreement shall
be held to include any other gender, the words in a singular number held to
include the plural, when the sentence so requires.
6. Captions. The paragraph captions as to contents of the particular
paragraphs herein are inserted only for convenience and are in no way to be
construed as part of this Agreement or as a limitation of the scope of the
particular paragraph in which they are referred.
7. Modification. No change or modification of this License Agreement shall be
valid unless the same shall be in writing and signed by all of the parties
hereto.
8. Severability. All agreements and covenants contained herein are severable
and in the event any of them shall be held to be illegal, invalid or
unenforceable by any Court of competent jurisdiction, this Agreement shall
be interpreted as if such illegal, invalid, or unenforceable agreements or
covenants were not contained herein.
9. Notices. Any and all notices, designations, consents, offers, acceptances,
or any other communication provided for herein shall be given in writing by
hand
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<PAGE> 3
delivery, by overnight carrier, by registered or certified mail or by
facsimile transmission and shall be addressed as follows:
To IMS: Insurance Management Solutions, Inc.
360 Central Avenue
St. Petersburg, FL 33701
Attention: Jeffrey Bragg
Telephone (813) 823-4000
Fax (813) 823-6518
To Bankers: Bankers Insurance Group, Inc. and
Bankers Insurance Company
360 Central Avenue
St. Petersburg, FL 33701
Attention: G. Kristin Delano
Telephone (813) 823-4000
Fax (813) 823-6518
Notices sent by hand delivery shall be deemed effective on the date of
hand delivery. Notices sent by overnight carrier shall be deemed
effective on the next business day after being placed into the hands
of the overnight carrier. Notices sent by registered or certified mail
shall be deemed effective on the third business day after being
deposited into the post office. Notices sent by facsimile transmission
shall be deemed to be effective on day when sent if sent prior to 4:30
p.m. (the time being determined by the time zone of the recipient)
otherwise they shall be deemed effective on the next business day.
IN WITNESS WHEREOF, the parties hereto executed this Agreement on the day
and year set forth below in St. Petersburg, Florida.
WITNESSES: "IMS"
Insurance Management Solutions, Inc.
/s/ C. Anthony Sexton BY: /s/ Kelly K. King
- ------------------------------- ---------------------------------
/s/ Erica Reed Date: 8/7/98
- ------------------------------- ------------------------------
WITNESSES: "Bankers"
Bankers Insurance Group, Inc. and
Bankers Insurance Company
/s/ C. Anthony Sexton BY: /s/ G. Kristin Delano
- ------------------------------- ---------------------------------
G. Kristin Delano, Secretary
/s/ Erica Reed Date: 8/10/98
- -------------------------------: ------------------------------
3
<PAGE> 1
EXHIBIT 10.71
FIRST AMENDMENT TO LOAN AND SECURITY AGREEMENT
This First Amendment to Loan and Security Agreement ("Amendment") is made
and entered into by and between GEOTRAC, INC. (formerly known as YoSystems, Inc.
and successor by merger to SMS Geotrac, Inc.), an Ohio corporation (herein the
"Company") and THE HUNTINGTON NATIONAL BANK, a national banking association
(herein the "Bank") as of the 31st day of July, 1998.
RECITALS
A. The Company and the Bank entered into a certain Loan and Security
Agreement dated as of July 31, 1997 (the "Loan Agreement"), and
B. The Company and Bankers Hazard Determination Services, Inc. ("BHDS")
are expected to merge (the "Merger") pursuant to an Agreement and Plan of
Merger dated as of May 28, 1998 (the "Merger Agreement") by and among the
Company, BHDS, Insurance Management Solutions Group, Inc. ("IMSG"), Bankers
Insurance Group, Inc. ("BIG") and Daniel J. and Sandra White (collectively, the
"Whites"), whereby BHDS, a Florida corporation, will be the surviving
corporation and will change its name to Geotrac of America, Inc.
C. The Company has requested that the Bank consent to the Merger, the
terms and conditions of which include the Company incurring additional
indebtedness in the principal amount of $1,500,000.00 payable to the Whites,
incurring certain future indebtedness to IMSG with respect to contractual
obligations of IMSG under the Merger Agreement to lend money to the Company,
upon request, to pay certain minority shareholders, and incurring indebtedness
to IMSG in connection with the Company issuing preferred stock to IMSG with
provides for the accrual of interest at a fixed rate.
D. The Bank has agreed to consent to the Merger pursuant to the terms
and conditions of this Amendment.
NOW, THEREFORE, for valuable consideration received to their mutual
satisfaction, the Company and the Bank hereby agree, effective upon
consummation of the Merger as to Sections 1 through 11 hereof and effective
upon execution of this Amendment as to Sections 12 through 20 hereof, as
follows:
1. The definition of "Company" set forth in Section 1.1 of the Loan
Agreement shall be deleted in its entirety and the following definition shall
be inserted in lieu thereof:
"Company" means Geotrac of America, Inc., a Florida corporation,
successor by merger to Geotrac, Inc., an Ohio corporation (formerly known as
YoSystems Inc. and successor by merger to SMS Geotrac, Inc.).
<PAGE> 2
2. Section 1.1 of the Loan Agreement shall be amended by inserting the
definitions of "Guaranty" and "Subordinated Debt" in proper alphabetical order
as follows:
"Guaranty" means collectively, that certain Continuing Guaranty
Unlimited executed by Insurance Management Solutions Group, Inc. and dated
as of July 31, 1998 and that certain Continuing Guaranty Unlimited executed
by Bankers Insurance Group, Inc. and dated as of July 31, 1998, each of the
foregoing delivered to the Bank in the form of Exhibit E and Exhibit E-1
hereto.
"Subordinated Debt" means (i) indebtedness of the Company owed to
Daniel J. and Sandra White (the "Whites") in the principal amount of
$1,500,000.00, subordinated to the Obligations of the Company to the Bank
pursuant to the terms and conditions of a Subordination Agreement executed
by the Whites and dated as of July 31, 1998, delivered to the Bank in the
form of Exhibit F attached hereto, and (ii) indebtedness of the Company
owed to Insurance Management Solutions Group, Inc. ("IMSG"), subordinated
to the Obligations of the Company to the Bank pursuant to the terms and
conditions of a Subordination Agreement executed by IMSG and dated as of
July 31, 1998, delivered to the Bank in the form of Exhibit F-1 attached
hereto.
3. The words "October 31" appearing in Section 2(d) of the Loan
Agreement shall be deleted and the words "April 30" shall be inserted in lieu
thereof. The following language shall be inserted as the third (3rd) sentence
in Section 2(d) of the Loan Agreement: "The Mandatory Prepayment due on April
30, 1999 shall be determined based on Excess Cash Flow calculated for the
period of time commencing July 1, 1998 through December 31, 1998."
4. The following shall be inserted as the last sentence in the first
paragraph of Section 4.1 of the Loan Agreement: "All of the Obligations shall
also be secured by the Guaranty."
5. Section 5.1 of the Loan Agreement shall be deleted in its entirety
and the following shall be inserted in lieu thereof:
"5.1 Corporate Organization and Authority. (a) Geotrac of America,
Inc. is a corporation duly organized and validly existing and in good
standing under the laws of the State of Florida; (b) the Company has all
the requisite corporate power and authority and all necessary licenses and
permits to own and operate its properties and to carry on its business as
now conducted and as presently proposed to be conducted; (d) other than the
State of Georgia in connection with the Georgia Residential Office, the
Company is not doing business or conducting any activity in any
jurisdiction in which it has not duly qualified and become authorized to do
business; and (e) the Company has no subsidiaries and will not create or
acquire any subsidiaries without the prior consent of the Bank."
6. The first sentence of Section 6.5 of the Loan Agreement shall be
deleted in its entirety and the following sentence shall be inserted in lieu
thereof:
-2-
<PAGE> 3
"6.5 Other Borrowings and Contingent Liabilities. Except for the
Loan, the Subordinated Debt and the indebtedness identified on Schedule 1
attached hereto, the Company will not (a) create or incur any indebtedness
for borrowed money or advances, or (b) guarantee, indorse, or otherwise
become surety for or upon the obligations of others, except by indorsement
of negotiable instruments for deposit or collection in the ordinary course
of business."
7. Section 6.11 of the Loan Agreement shall be deleted in its entirety and
the following shall be inserted in lieu thereof:
"6.11 Cash Dividends, Other Disbursements and Management Fees. The
Company shall not (i) declare or pay any cash dividends or other
distributions on its common or preferred stock, including, without
limitation, any current, accumulated and/or accrued interest due in
connection with the coupon of its preferred stock, which total in excess of
fifty percent (50%) of Excess Cash Flow in any one fiscal year, provided,
that any dividend payable in fiscal year 1999 and calculated with reference
to fiscal year 1998 shall be determined based on the time period commencing
July 1, 1998 through December 31, 1998; (ii) make any other distributions
of any kind to its common or preferred shareholders; or (iii) pay any
management fees to IMSG, BIG, any corporation or entity affiliated with
IMSG or BIG, or the Whites totaling in excess $350,000.00 in any one fiscal
year, provided, however, that the foregoing limitation shall not include
amounts payable to Daniel J. White under that certain Employment Agreement
by and between the Company and Mr. White and dated as of July __, 1998 and
further provided that Company may declare dividends with respect to its
Preferred Stock to allow the holders of such Preferred Stock to realize the
benefit thereof, provided that the accrual and any payment of such dividend
is made in compliance with the terms of this Agreement. Provided, further,
that no dividends, distributions or management fees shall be paid if any
Event of Default has occurred and is continuing under this Agreement."
8. Section 6.13 of the Loan Agreement shall be deleted in its entirety
and the following shall be inserted in lieu thereof:
"6.13 Net Worth. The Company shall maintain a consolidated Net Worth
as follows:
(a) from the date hereof through and including December 30,
1998, a consolidated Net Worth of not less than $7,750,000.00;
(b) from December 31, 1998 and thereafter, a consolidated Net
Worth of not less than $7,750,000.00 plus fifty percent (50%) of
consolidated net income for each successive fiscal year commencing
with fiscal year 1998, provided that the calculation for fiscal year
1998 shall be based on the period of time commencing July 1, 1998 and
ending December 31, 1998, and thereafter based on a twelve (12) month
fiscal year ending on December 31 of each such fiscal year."
The parties hereto further agree that the foregoing consolidated Net Worth
covenant shall be calculated on a "push down" basis consistent with the
proforma balance sheet and projections delivered by the Company to the Bank
reflecting the projected financial
-3-
<PAGE> 4
condition of the Company following the merger of Geotrac, Inc. with and
into Bankers Hazard Determination Services, Inc. (such merger effective as
of July 31, 1998).
9. Section 6.14 of the Loan Agreement shall be deleted in its entirety and
the following shall be inserted in lieu thereof:
"6.14 Leverage Ratio. The Company shall maintain a Leverage Ratio as
follows:
(a) from June 30, 1999 through and including December 30,
1999, a Leverage Ratio of not greater than 2.5 to 1.0; and
(b) from December 31, 1999 and thereafter, a Leverage
Ratio of not greater than 2.0 to 1.0."
10. Section 6.15 of the Loan Agreement shall be deleted in its entirety
and the following shall be inserted in lieu thereof:
"6.15 Cash Flow Coverage Ratio. The Company shall maintain a Cash
Flow Coverage Ratio as follows:
(a) from July 1, 1998 through and including December 30,
1998, a Cash Flow Coverage Ratio of not less than 1.10 to 1.0;
(b) from December 31, 1998 through and including
December 30, 1999, a Cash Flow Coverage Ratio of not less than 1.15 to
1.0; and
(c) from December 31, 1999 and thereafter, a Cash Flow
Coverage Ratio of not less than 1.20 to 1.0."
The parties hereto further agree that the foregoing Cash Flow Coverage
Ratio shall be calculated on a cumulative basis from July 1, 1998 through
and including June 29, 1999 and thereafter calculated on a rolling four (4)
quarter basis.
11. All sentences referring to "each Company" or "eithcr Company" or
"neither Company", the foregoing references indicating YoSystems, Inc. and SMS
Geotrac, Inc. as co-Borrowers under the Loan Agreement, shall be revised to read
"the Company" (with corresponding changes in verb tense), such phrase now
referring to Geotrac of America, Inc., a Florida corporation, successor by
merger to Geotrac, Inc. (an Ohio corporation formerly known as YoSystems, Inc.
and successor by merger to SMS Geotrac, Inc.). All references to "Exhibit B" in
the Loan Agreement shall be revised to read "Exhibit B-1", and Exhibit B-1
shall be attached to the Loan Agreement in the form of such exhibit attached
hereto. New Exhibits E, E-1, F, F-1 and G shall be attached to the Loan
Agreement in the form of such exhibits attached hereto. A new Schedule 1 shall
be attached to the Agreement in the form of such schedule attached hereto.
-4-
<PAGE> 5
12. The Company has requested the Bank to consent to the transactions
contemplated by the Merger Agreement, the terms and conditions of which include
the following: (a) the merger of the Company with and into BHDS, with BHDS as
the surviving corporation, (b) upon consummation of the Merger, execution by
Geotrac of America, Inc. (the surviving corporation) of a subordinated
promissory note in the principal amount of $1,500,000.00 in favor of the Whites
(the "White Promissory Note"), (c) the terms of Section 2.01 (d) of the Merger
Agreement whereby IMSG has agreed to loan the Company, upon request, up to
$750,000 in connection with payments due to certain minority shareholders (the
foregoing, together with the White Promissory Note, collectively referred to
herein as the "Subordinated Debt") and (d) issuance by the surviving corporation
of certain preferred stock to IMSG. The Merger, the Subordinated Debt and
issuance of the preferred stock are prohibited transactions pursuant to several
provisions in the Loan Agreement, including, without limitation, Sections 6.5,
6.7 and 6.8 therein. The Bank hereby consents to the Merger, the Subordinated
Debt and issuance of the preferred stock, provided that the following conditions
are satisfied: (i) no Event of Default now exists under the Loan Agreement or
would have occurred but for the passage of time or the giving of notice (a
"Future Event of Default), or both, (ii) on or before August 31, 1998, Geotrac
of America, Inc. (the surviving corporation) shall repay in full a secured line
of credit provided to the Company by Marine Bank in the principal amount of
$600,000, and shall obtain a pay-off letter issued for the benefit of the Bank,
in form and substance acceptable to the Bank, and shall obtain all necessary
releases of all liens and security interests granted as security therefore,
(iii) IMSG and BIG each execute and deliver to the Bank a Continuing Guaranty
Unlimited in the form of Exhibits E and E-1 attached hereto, (iv) the Whites and
IMSG each execute and deliver to the Bank a Subordination Agreement in the form
of Exhibits F and F-1 attached hereto, (v) Geotrac of America, Inc. (the
surviving corporation) executes and delivers to the Bank an Agreement of
Assumption and Reaffirmation of Obligations in the form of Exhibit G attached
hereto, (vi) counsel to the Company and counsel to BHDS, IMSG and BIG deliver to
the Bank one or more legal opinions in form and substance satisfactory to the
Bank; (vii) the Bank shall have received certified Authorizing Resolutions,
Articles of Incorporation, By-Laws and Certificates of Good Standing for
Geotrac, Inc., Geotrac of America, Inc., BHDS, IMSG and BIG, (viii) a revised
Exhibit B-1 (Permitted Liens) and a new Schedule 1 (Permitted Indebtedness) are
delivered to the Bank in form and content acceptable to the Bank, and (ix) the
Company shall deliver, or cause to be delivered, to the Bank all other opinions,
certificates, resolutions, UCC-1 Financing Statements, UCC-3 amendments and
other documents the Bank reasonably deems necessary in order to protect the
Bank's interests with respect to the Obligations and all liens granted as
security therefore.
13. This Amendment shall be effective as of July 31, 1998. Except as
previously amended or as herein specifically amended, directly or by reference,
all of the terms and conditions set forth in the Loan Agreement are confirmed
and ratified, and shall remain as originally written. This Amendment shall be
construed in accordance with the laws of the State of Ohio, without regard to
principles of conflict of laws. The Loan Agreement and all other related loan
documents executed in connection with the Loan Agreement shall remain in full
force and effect in all respects as if The unpaid balance of the principal
outstanding, together with interest accrued thereon, had originally been payable
and secured as provided for therein, as amendcd from time to time and as
modified by this Agreement. Nothing herein shall affect or impair any
-5-
<PAGE> 6
rights and powers which the Bank may have under the Loan Agreement and any and
all related loan documents.
14. In consideration of this Agreement, the Company hereby releases and
discharges the Bank and its shareholders, directors, officers, employees,
attorneys, affiliates and subsidiaries from any and all claims, demands,
liability and causes of action whatsoever, now known or unknown, arising prior
to the date hereof out of or in any way related to the extension or
administration of the Obligations of the Company (as defined in the Loan
Agreement), the Loan Agreement or any mortgage or security interest related
thereto.
15. For purposes of this Amendment, the terms used in the Loan Agreement
shall have the same meaning as used herein unless otherwise defined herein. The
Company and the Bank hereby agree to extend all liens and security interests
securing the Obligations, until said Obligations, as modified herein, and any
and all related promissory notes have been fully paid. The parties hereto
further agree that this Amendment shall in no manner affect or impair the liens
and security interests evidenced by the Loan Agreement and/or any other
instruments evidencing, securing or related to the Obligations. The Company
hereby acknowledges that all liens and security interests securing the
Obligations are valid and subsisting.
16. The Company covenants and agrees (i) to pay the balance of any
principal, together with all accrued interest, as specified above in connection
with any promissory note executed and evidencing any indebtedness incurred in
connection with the Loan Agreement, as modified by this Amendment, and (ii) to
perform and observe covenants, agreements, stipulations and conditions on its
part to be performed hereunder or under the Loan Agreement and all other related
loan documents executed in connection herewith or thereof.
17. The Company hereby declares that the Company has no set offs,
counterclaims, defenses or other causes of action against the Bank arising out
of the Loan Agreement or any related loan documents, and to the extent any such
set offs, counterclaims, defenses or other causes of action may exist, whether
known or unknown, such items are hereby waived by the Company.
18. This Amendment may be executed in counterparts and all such
counterparts shall constitute one agreement binding on all the parties,
notwithstanding that the parties are not signatories to the same counterpart.
19. In consideration of this Amendment, the Company agrees to pay the Bank
an amendment fee in the amount of $7,500.00 upon execution of this Amendment.
The Company hereby further agrees to reimburse the Bank for any and all
out-of-pocket costs, fees and expenses incurred in connection with this
Amendment, including, without limitation, attorney's fees.
20. The Company hereby represents and warrants to the Bank that (a) the
Company has the legal power and authority to execute and deliver this Amendment;
(b) the officials executing this Amendment have been duly authorized to execute
and deliver the same and bind the Company with respect to the provisions hereof;
(c) the execution and delivery hereof by the Company and
-6-
<PAGE> 7
the performance and observance by the Company of the provisions hereof do not
violate or conflict with the organizational agreements of the Company or any law
applicable to the Company or result in a breech of any provisions of or
constitute a default under any other agreement, instrument or document binding
upon or enforceable against the Company; and (d) this Amendment constitutes a
valid and binding obligation upon the Company in every respect.
IN WITNESS WHEREOF, the Company and the Bank have executed this Amendment
as of the 31st day of July, 1998.
THE BANK THE HUNTINGTON NATIONAL BANK,
a national banking association
By: /s/ Timothy M. Ward
--------------------------------
Name: Timothy M. Ward
------------------------------
Title: V.P.
-----------------------------
BORROWER GEOTRAC, INC.,
an Ohio corporation
By: /s/ Karen R. Kiedrowicz
--------------------------------
Name: Karen R. Kiedrowicz
------------------------------
Title: Vice President
-----------------------------
-7-
<PAGE> 8
EXHIBIT B-1
PERMITTED LIENS
Permitted Liens shall mean:
(i) Liens for taxes, assessments, or similar charges, incurred in the
ordinary course of business and which are not yet due and payable
(or which are being contested in good faith by appropriate and
lawful proceedings diligently conducted);
(ii) Pledges or deposits made in the ordinary course of business to
secure payment of workmen's compensation, or to participate
in any fund in connection with workmen's compensation,
unemployment Insurance, old-age pensions or other social
security programs;
(iii) Liens of mechanics, materialmen, warehousemen, carriers, or other
like liens, securing obligations incurred in the ordinary course of
business that are not yet due and payable (or which are being
contested in good faith by appropriate and lawful proceedings
diligently conducted or otherwise released by surety bond within 90
days of attachment) and liens of landlords securing obligations to
pay lease payments that are not yet due and payable or in default
(or which are being contested in good faith by appropriate and
lawful proceedings diligently conducted);
(iv) Good-faith pledges or deposits made in the ordinary course of
business to secure performance of bids, tenders, contracts (other
than for the repayment of borrowed money) or leases, not in excess
of the aggregate amount due thereunder, or to secure statutory
obligations, or surety, appeal, indemnity, performance or other
similar bonds required in the ordinary course of business;
(v) Encumbrances consisting of zoning restrictions, easements or other
restrictions on the use of real property, none of which materially
impairs the use of such property;
(vi) Liens on property leased by Borrower or other interest or title of
the lessor under leases not otherwise prohibited by the Loan
Agreement securing obligations of Borrower to the lessor under
such leases;
(vii) Purchase money security interests to the extent that such purchase
money security interests attach to inventory purchased in the
ordinary course of business pursuant to customary payment terms;
(viii) Liens resulting from the Cross License Agreement;
(ix) Liens relating to any sublease of real property leased by Borrower,
which sublease does not materially impair Borrower's use of such
property; and
(x) The following liens encumbering specific equipment:
Debtor Name: Bankers Hazard Determination Services, Inc.
<TABLE>
<CAPTION>
Approximate current
principal outstanding
Jurisdiction: FL - State of Florida as of 7/1/98
- --------------------------------------------------------------------------------------------------
<S> <C> <C>
(A) File Number: 95000004849 Original to 95000004849
Filed Date: January 9, 1995
Secured Party: First of America Bank - Florida F.S.B. $ 18,000
(B) File Number: 960000050533 Amendment to 95000004849
Filed Date: March 13, 1996
Secured Party: First of America Bank - Florida F.S.B. $ 18,000
(C) File Number: 9700000071744 Original to 9700000071744
Filed Date: January 10, 1997
Secured Party: First of America Bank - Florida $153,125
(D) File Number: 980000004386 Original to 980000004386
Filed Date: January 8, 1998
Secured Party: South Trust Bank, NA $156,413
</TABLE>
<PAGE> 9
SCHEDULE 1
PERMITTED INDEBTEDNESS
Bankers Hazard Determination Services
??? of Notes Payable - Current and Long Term Portion
Of. # 207009
June 30, 1998
<TABLE>
<CAPTION>
BALANCE CURRENT BALANCE LONG
INTEREST EFFECTIVE MATURITY AS OF INCREASE/ MONTH AS OF CURRENT TERM
ACCOUNT # NOTE RATE DATE DATE 01/31/98 (DECREASE) PYMT 06/31/98 PORTION PORTION
- -------------------------------------------------------------- -------- ---------- ------ -------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
207000-0150 *Marine Bank IOC Prime +1 12/27/95 00/00/00 600,000.00 -- 100,000.00 600,000.00 0.00
207000-0406 First of America Prime 12/30/94 12/30/19 11,070.00 (1,000.30) 16,000.00 12,000.00 3,000.00
207000-0406 First of America Prime 12/30/96 12/30/20 100,228.11 (5,104.17) 153,124.94 61,200.04 11,174.90
207000-0498 Southtrust 4.50% 12/30/97 12/30/30 121,057.46 (4,644.76) 156,413.40 56,724.72 100,684.68
---------- --------- --------- ---------- ---------- ----------
BALANCE 832,355.57 0.00 (10,749.23) 427,???.34 729,9??.76 114,859.58
---------- --------- --------- ---------- ---------- ----------
</TABLE>
- ----------------
* The Marine Bank line of credit shall only be permitted until August 31, 1998
pursuant to the terms and conditions of Section 12(ii) of the First
Amendment to Loan and Security Agreement dated as of July 31, 1998.
<PAGE> 1
EXHIBIT 10.72
CONTINUING GUARANTY UNLIMITED
For the purpose of inducing THE HUNTINGTON NATIONAL BANK (hereinafter
referred to as "Bank") to lend money or advance credit to, or renew, extend or
forbear from demanding immediate payment of the Obligations of GEOTRAC OF
AMERICA, INC. (formerly known as Bankers Hazard Determination Services, Inc.
and successor by merger to Geotrac, Inc. (formerly known as YoSystems, Inc. and
successor by merger to SMS Geotrac, Inc.)), a Florida corporation (hereinafter
referred to as "Debtor"), the undersigned (hereinafter referred to as
"Guarantors" whether one or more), jointly and severally if more than one
(which joint and several liability shall exist regardless of whether additional
Guarantors have evidenced or may in the future evidence their undertaking by
executing this Guaranty, by co-signing one or more promissory notes or other
instruments of indebtedness, by executing one or more separate agreements of
guaranty of any or all of the Obligations referred to herein or otherwise),
hereby unconditionally guarantee the prompt and full payment to Bank when due,
whether by acceleration or otherwise, of all Obligations of any kind for which
Debtor is now or may hereafter become liable to Bank in any manner.
The word "Obligations" is used in its most comprehensive sense and
includes, without limitation, all indebtedness, debts and liabilities
(including principal, interest, late charges, collection costs, attorneys' fees
and the like) of Debtor to Bank, either created by Debtor alone or together
with another or others, primary or secondary, secured or unsecured, absolute or
contingent, liquidated or unliquidated, direct or indirect, whether evidenced
by note, draft, application for letter of credit, agreements of guaranty or
otherwise, and any and all renewals of, extensions of or substitutes therefor.
The word "Obligations" shall include, BUT NOT BE LIMITED TO, all indebtedness
owed by Debtor to Bank by reason of credit extended or to be extended to Debtor
in the original principal amount of $8,750,000.00, pursuant to one or more
instruments of indebtedness and related loan documents.
Guarantors, and each of them, hereby promise that if one or more of the
Obligations are not paid promptly when due, they, and each of them, will, upon
request of Bank, pay the Obligations to Bank, irrespective of any action or
lack of action on Bank's part in connection with the acquisition, perfection,
possession, enforcement or disposition of any or all Obligations or any or all
security therefor or otherwise, and further irrespective of any invalidity in
any or all Obligations, the unenforceability thereof or the insufficiency,
invalidity or unenforceability of any security therefor. Guarantors further
agree that when the Obligations become due, any indebtedness owing to any of
them from the Bank may be used and applied as payment hereon.
Guarantors waive notice of any and all acceptances of this Guaranty. This
Guaranty is a continuing guaranty, and, in addition to covering all present
Obligations of Debtor to Bank, will extend to all future Obligations of Debtor
to Bank, and this whether such Obligations are reduced or entirely extinguished
and thereafter increased or reincurred. This Guaranty is made and will remain in
effect as to any and all Obligations of Debtor incurred or arising prior to
receipt by the
<PAGE> 2
loan officer of Bank who is handling Debtor's Obligations of written notice of
termination of this Guaranty. No such written notice or other revocation will
in any way affect the duties of Guarantors to Bank with respect to either
Obligations incurred by Debtor or instruments executed by Debtor prior to the
receipt of such notice by such loan officer of Bank. In addition, no such
written notice or other revocation will in any way affect the liabilities of
Guarantors to Bank with respect to revolving Obligations of Debtor on which
loans or advances are made, whether such loans or advances are made prior or
subsequent to such notice. Revocation by any one or more of Guarantors will not
affect the duties of the remaining Guarantor or Guarantors.
Bank's rights hereunder shall be reinstated and revived, and this Guaranty
shall be fully enforceable, with respect to any amount at any time paid on
account of the Obligations which thereafter shall be required to be restored or
returned by Bank as a result of the bankruptcy, insolvency or reorganization of
Debtor, Guarantors, or any other person, or as a result of any other fact or
circumstance, all as though such amount had not been paid.
Guarantors waive any claims or other rights which they might now have or
hereafter acquire against Debtor or any other person, guarantor, maker or
endorser primarily or contingently liable on the Obligations that arise from
the existence or performance of Guarantors' obligations under this Guaranty or
under any instrument or agreement with respect to any property constituting
collateral or security herefor, including, without limitation, any right of
subrogation, reimbursement, exoneration, contribution, indemnification, or any
right to participate in any claim or remedy of Bank against Debtor or any
collateral security therefor which Bank now has or hereafter acquires; whether
such claim, remedy or right arises in equity, under contract or statute, at
common law, or otherwise.
Guarantors waive presentment, demand, protest, notice of protest and
notice of dishonor or other nonpayment of any and all Obligations and further
waive notice of sale or other disposition of any collateral or security now
held or hereafter acquired by Bank. Guarantors agree that no extension of time,
whether one or more, nor any other indulgence granted by Bank to Debtor, or to
Guarantors, or any of them, and no omission or delay on Bank's part in
exercising any right against, or in taking any action to collect from or pursue
Bank's remedies against Debtor or Guarantors, or any of them, will release,
discharge or modify the duties of Guarantors. Guarantors agree that Bank may,
without notice to or further consent from Guarantors, release or modify any
collateral, security or other guaranties now held or hereafter acquired, or
substitute other collateral, security or other guaranties, and no such action
will release, discharge or modify the duties of Guarantors hereunder.
Guarantors further agree that Bank will not be required to pursue or exhaust
any of its rights or remedies against Debtor or Guarantors, or any of them,
with respect to payment of any of the Obligations, or to pursue, exhaust or
preserve any of its rights or remedies with respect to any collateral, security
or other guaranties given to secure the Obligations, or to take any action of
any sort, prior to demanding payment from or pursuing its remedies against
Guarantors.
-2-
<PAGE> 3
Guarantors agree to furnish true and complete financial statements from
time to time on request of Bank and agree that failure to furnish such financial
statements may constitute or be deemed to constitute a default or event of
default of the Obligations. Any transfer, whether voluntary or involuntary, of
any or all of Guarantors assets, whether in a single transfer or series of
transfers, without the prior written consent of Bank, and which materially
adversely affects the financial condition of the Guarantors, as determined in
Bank's sole discretion, shall constitute an event of default under this Guaranty
and the Obligations. Guarantors agree that any legal suit, action or proceeding
arising out of or relating to this Guaranty may be instituted in a state or
federal court of appropriate subject matter jurisdiction in the State of Ohio;
waive any objection which they may have now or hereafter to the laying of venue
of any such suit, action or proceeding; and irrevocably submit to the
jurisdiction of any such court in any such suit, action or proceeding.
WAIVER OF RIGHT TO TRIAL BY JURY
GUARANTORS ACKNOWLEDGE THAT, AS TO ANY AND ALL DISPUTES THAT MAY ARISE
BETWEEN GUARANTORS AND BANK, THE COMMERCIAL NATURE OF THE TRANSACTION OUT OF
WHICH THIS GUARANTY ARISES WOULD MAKE ANY SUCH DISPUTE UNSUITABLE FOR TRIAL BY
JURY. ACCORDINGLY, GUARANTORS HEREBY WAIVE ANY RIGHT TO TRIAL BY JURY AS TO ANY
AND ALL DISPUTES THAT MAY ARISE RELATING TO THIS GUARANTY OR TO ANY OF THE
OTHER INSTRUMENTS OR DOCUMENTS EXECUTED IN CONNECTION HEREWITH.
Guarantors hereby authorize any attorney at law to appear for them in any
action on any or all Obligations guaranteed hereby at any time after such
Obligations become due, whether by acceleration or otherwise, in any court of
record in or of the State of Ohio or elsewhere, to waive the issuing and
service of process against, and confess judgment against Guarantors, or any of
them, in favor of Bank for the amount that may be due, including interest, late
charges, collection costs, attorneys' fees and the like as provided for in said
Obligations, and costs of suit, and to waive and release all errors in said
proceedings and judgments, and all petitions in error and rights of appeal from
the judgments rendered. No such judgment or judgments against less than all of
Guarantors shall be a bar to a subsequent judgment or judgments against any one
or more of Guarantors against whom judgment has not been obtained hereon, this
being a joint and several warrant of attorney to confess judgment.
If any Obligation of Debtor is assigned by Bank, this Guaranty will inure
to the benefit of Bank's assignee, and to the benefit of any subsequent
assignee, to the extent of the assignment or assignments, provided that no
assignment will operate to relieve Guarantors, or any of them, from any duty to
Bank hereunder with respect to any unassigned Obligation. In the event that any
one or more of the provisions contained in this Guaranty or any application
thereof shall be determined to be invalid, illegal or unenforceable in any
respect, the validity, legality and enforceability of the remaining provisions
contained herein and any other applications thereof shall not in any way
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<PAGE> 4
be affected or impaired thereby. This Guaranty shall be construed in accordance
with the law of the State of Ohio.
WARNING--BY SIGNING THIS PAPER YOU GIVE UP YOUR RIGHT TO NOTICE AND COURT
TRIAL. IF YOU DO NOT PAY ON TIME A COURT JUDGMENT MAY BE TAKEN AGAINST YOU
WITHOUT YOUR PRIOR KNOWLEDGE AND THE POWERS OF A COURT CAN BE USED TO COLLECT
FROM YOU REGARDLESS OF ANY CLAIMS YOU MAY HAVE AGAINST THE CREDITOR WHETHER FOR
RETURNED GOODS, FAULTY GOODS, FAILURE ON HIS PART TO COMPLY WITH THE
AGREEMENT, OR ANY OTHER CAUSE.
Executed and delivered at Tampa, FL this 29th day of July, 1998.
GUARANTOR: INSURANCE MANAGEMENT
SOLUTIONS GROUP, INC.,
a Florida corporation
By: /s/ Kelly K. King
--------------------------
Name: Kelly K. King
Title: Secretary
Address: 360 Central Avenue
St. Petersburg, Florida 33701
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<PAGE> 1
EXHIBIT 10.73
SUBORDINATION AGREEMENT
THIS SUBORDINATION AGREEMENT (this "Agreement") is made and entered into
by and among GEOTRAC OF AMERICA INC., (formerly known as Bankers Hazard
Determination Systems, Inc. and successor by merger to Geotrac, Inc., (formerly
known as YoSystems, Inc. and successor by merger to SMS Geotrac, Inc.)), a
Florida corporation ("Borrower"), DANIEL J. AND SANDRA WHITE, (collectively,
"Subordinated Lender") and THE HUNTINGTON NATIONAL BANK, a national banking
association, its successors and assign ("Senior Lender").
RECITALS
A. Geotrac, Inc. (formerly known as YoSystems, Inc. and successor by merger
to SMS Geotrac, Inc.) ("Old Geotrac"), Bankers Insurance Group, Inc. ("BIG"),
Insurance Management Solutions Group, Inc. ("IMSG") and Bankers Hazard
Determination Services, Inc. ("BHDS") and Subordinated Lender entered into an
Agreement and Plan Merger dated as of the 28th day of May, 1998, (the "Merger
Agreement"), a copy of which has been furnished to Senior Lender. Old Geotrac
and BHDS merged pursuant to the terms of the Agreement, the surviving entity
referred to herein as Borrower. The indebtedness of Borrower to Subordinated
Lender under the Merger Agreement is represented by a Subordinated Promissory
Note dated as of ____________ , 1998 (the "Subordinated Note"). The parties
hereto represent that the Subordinated Indebtedness (as hereinafter defined) has
not heretofore been assigned to or subordinated in favor of any other person.
B. Old Geotrac has borrowed monies (the "Loans") from Senior Lender, as
evidenced by a Loan and Security Agreement dated as of July 31, 1997, as
amended from time to time (the "Loan Agreement") and related documents between
Senior Lender and Old Geotrac of even date therewith, as the same may be
amended from time to time (collectively, the "Loan Documents"). The Loans and
the Loan Documents have been assumed and ratified by Borrower. The Loans are
secured by a first priority blanket lien on all of Borrower's assets.
C. In order to induce Senior Lender, its successors or assigns, to
continue to make the Loans, or to grant renewals, or extensions, modifications,
or amendments to the Loans, as Senior Lender may deem advisable, Subordinated
Lender desires to subordinate the Subordinated Indebtedness and all security
held therefor to any and all indebtedness now or hereafter owing by Borrower to
Senior Lender in accordance with the provisions of this Agreement.
D. Subordinated Lender acknowledges that the continuing extensions of
credit and other financial accommodations to Borrower by Senior Lender is of
value to Subordinated Lender.
<PAGE> 2
PROVISIONS
NOW, THEREFORE, for good and valuable consideration, receipt of which is
hereby acknowledged by Subordinated Lender, and in order to induce Senior
Lender, now or from time to time hereafter, to extend credit or other financial
accommodation to Borrower pursuant to the Loan Agreement as it may be amended,
modified or restated, Subordinated Lender hereby agrees as follows:
1. Subordination of Subordinated Indebtedness. All indebtedness evidenced
by the Subordinated Note together with all accrued interest thereon; and any
other indebtedness for borrowed money now owing or which hereafter may become
owing by or from Borrower to Subordinated Lender, howsoever such indebtedness
for borrowed money may be hereafter created, extended, renewed or evidenced,
together with all accrued interest thereon and any and all other present and
future obligations and liabilities owing by Borrower to Subordinated Lender,
howsoever such obligations and liabilities may be created, extended, renewed or
evidenced (all such indebtedness, obligations and liabilities referred to
collectively as the "Subordinated Indebtedness") shall at all times and in all
respects be subordinate and junior in right of payment to any and all
indebtedness of Borrower to Senior Lender, its successors and assigns,
including, without limitation, the Loans and any extensions, renewals,
modifications, and amendments thereof and all accrued interest thereon
(collectively, the "Senior Debt"). For purposes of this Agreement, Subordinated
Indebtedness shall not include any amounts payable to Daniel J. White pursuant
to that certain Employment Agreement by and between Mr. White and Borrower
dated as of _____________, 1998 (the "Employment Agreement").
2. Permitted Payments. Unless and until (A) all of the Senior Debt shall
have been fully and finally paid and satisfied, and (B) all financing
arrangements, including, but not limited to the Loan Agreement, between
Borrower and Senior Lender have been terminated, no payments of principal or
interest shall be made on or with respect to the Subordinated Indebtedness by
or on behalf of Borrower (or by Guarantor) or accepted by Subordinated Lender,
except as permitted in this Section 2. Borrower may from time to time, pay or
cause to be paid to Subordinated Lender and Subordinated Lender may accept from
Borrower payment of regularly scheduled installments of interest (at a
non-default rate of interest) pursuant to the terms and conditions of the
Subordinated Note, provided that no Event of Default then exists or would have
occurred but for the passage of time or giving of notice or both, or will have
occurred after giving effect to any payment which otherwise would be permitted
hereby under the Loan Agreement or any of the other Loan Documents (herein
referred to as a "Standstill Event"). In the event any Standstill Event shall
have occurred, all payments pursuant to the Subordinated Note from Borrower to
Subordinated Lender shall cease immediately and Borrower shall not make, nor
shall Subordinated Lender accept any such payment from or on behalf of Borrower
until such time as Subordinated Lender and Borrower receive written permission
from Senior Lender to commence such payments again. Subordinated Lender hereby
agrees not to accept any prepayments of any payment due on account of the
Subordinated Indebtedness.
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<PAGE> 3
3. Forbearance: Subordination of Liens. Unless and until (A) all of the
Senior Debt shall have been fully and finally paid and satisfied, and (B) all
financing arrangements, including, but not limited to the Loan Agreement,
between Borrower and Senior Lender have been terminated, Subordinated Lender
shall not: (i) declare the Subordinated Indebtedness or any portion thereof to
be due and payable prior to the stated maturity date, nor accelerate the
maturity date thereof; (ii) enforce or exercise any right of demand or setoff
or commence any legal or other action against Borrower or any third party to
collect upon any Subordination Indebtedness; (iii) take or accept any
collateral or security with respect to the Subordinated Indebtedness without
the prior written consent of Senior Lender; (iv) commence foreclosure or any
other similar type of proceedings or exercise any similar remedies in respect
of any collateral for the Subordinated Indebtedness; (v) enforce any judgment
that it might obtain with respect to the Subordinated Indebtedness (including,
without limitation, execution, attachment or foreclosure of judgment liens
against any assets of Borrower) without obtaining the prior written consent of
Senior Lender; or (vi) commence or join with any other creditor or creditors of
Borrower in commencing any bankruptcy, reorganization or insolvency proceedings
against Borrower. All rights, liens and security interests of Subordinated
Lender in any assets of Borrower or any other person securing the Senior Debt,
whether now or hereafter arising and howsoever existing, shall be and hereby
are subordinated to the rights and interests of Senior Lender under this
Agreement and in those assets. Subordinated Lender shall have no right to
possession of any such assets or to foreclose or execute upon any such assets,
whether by judicial action or otherwise. Notwithstanding the foregoing,
Subordinated Lender may take those actions as described in clauses (i) through
(vi) above at any time following the date which is three hundred sixty-five
(365) days after the occurrence of a Standstill Event (a "Standstill Period")
as evidenced by written notice from Senior Lender; provided that Senior Lender
shall not have rescinded such notice of a Standstill Event prior to the
expiration of such Standstill Period; and provided further that Subordinated
Lender shall have given Senior Lender written notice at least ten (10) days
prior to taking such action. Senior Lender and Subordinated Lender further
agree that Senior Lender shall have the right to extend a Standstill Period for
an additional one hundred eighty (180) days upon ten (10) days prior written
notice to Subordinated Lender of such extension.
4. Bankruptcy Proceedings. In the event of (i) any distribution, division
or application, partial or complete, voluntary or involuntary, by operation of
law or otherwise, of all or any part of the assets of Borrower or the proceeds
thereof, to creditors of Borrower by reason of the liquidation, dissolution or
other winding up of Borrower's business, or (ii) any sale, receivership,
insolvency or bankruptcy proceeding, or assignment for the benefit of creditors,
or any proceeding by or against Borrower for any relief under any bankruptcy or
insolvency laws relating to the relief of debtors, readjustment of indebtedness,
reorganization, compositions or extensions, Subordinated Lender covenants that
any payment or distribution of any kind or character to or received by
Subordinated Lender, either in cash, securities or other property which shall be
paid or delivered, or payable or deliverable, upon or with respect to the
Subordinated Indebtedness immediately shall be paid or delivered directly to
Senior Lender for application on the Senior Debt, whether or not due, of
Borrower to Senior Lender until the Senior Debt to Senior Lender first shall
have been fully paid and satisfied. Until Senior Debt shall have been fully and
finally paid and satisfied with interest and financing arrangements, including,
but not limited to
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<PAGE> 4
the Loan Agreement, between Borrower and Senior Lender have been terminated, in
order to enable Senior Lender to enforce its rights hereunder in any such action
or proceeding, Senior Lender is hereby irrevocably authorized and empowered in
its sole discretion to make and present for and on behalf of Subordinated Lender
such proofs of claims against Borrower on account of the Subordinated
Indebtedness hereby subordinated as Senior Lender may deem expedient or proper
and to vote such proofs of claims in any such proceeding and to receive and
collect any and all dividends or other payments or disbursements made thereon in
whatever form the same may be paid or issued and to apply the same on account of
any of the Senior Debt; provided, however, that if Senior Lender has failed to
file proofs of claims against Borrower on behalf of Subordinated Lender within
seven (7) days prior to any applicable bar date in a bankruptcy proceeding,
Subordinated Lender may file such proofs of claims on account of the
Subordinated Indebtedness.
5. Appointment of Power of Attorney. Upon the occurrence of an Event of
Default, Subordinated Lender irrevocably authorizes, appoints, and empowers
Senior Lender to demand, sue for, collect, and receive every such payment or
distribution and give acquittance therefor and to file claims and take such
other proceedings, in Senior Lender's own name or in the name of and as
attorney-in-fact for Subordinated Lender, as Senior Lender may deem necessary or
advisable for the enforcement of this Agreement; and Subordinated Lender shall
execute and deliver to Senior Lender such powers of attorney, assignments, or
other instruments as may be requested by Senior Lender to enable Senior Lender
to enforce any and all claims upon or with respect to the Subordinated
indebtedness and to collect and receive all payments or distributions which may
be payable or deliverable at any time upon or with respect to the Subordinated
Indebtedness.
6. Delivery of Payment to Senior Lender. Except for the payments permitted
pursuant to Section 2 of this Agreement, if any payment, distribution, security
or proceeds thereof is received by Subordinated Lender upon or with respect to
any indebtedness of Borrower to Subordinated Lender (including the Subordinated
Indebtedness) prior to the satisfaction in full of the Senior Debt by Borrower,
Subordinated Lender immediately shall deliver the same to Senior Lender in
precisely the form received (except for the endorsement or assignment of
Subordinated Lender where necessary), for application to the Senior Debt,
whether or not due, and until so delivered the same shall be held in trust by
Subordinated Lender as property of Senior Lender. In the event of the failure
of Subordinated Lender to make any such endorsement or assignment, Senior
Lender, or any of its officers or employees, hereby irrevocably is constituted
and appointed attorney-in-fact of Subordinated Lender with full power to make
the same. Subordinated Lender hereby agrees that all payments received by
Senior Lender may be applied and reapplied, in whole or in part, to any of the
Senior Debt, as Senior Lender, in its sole discretion, deem appropriate. By its
execution of this Agreement, Borrower agrees not to pay Subordinated Lender any
sum on account of any of the Subordinated Indebtedness or to give Subordinated
Lender any collateral as security therefor at any time when payment thereof
would be in breach of any of the terms of this Agreement.
7. Assignment of Claims. Subordinated Lender shall not assign or transfer
any claim, nor suffer or permit the creation or attachment of any lien, claim
or encumbrance, hypothecation or pledge upon any claim, it has or may have
against Borrower other than claims arising under the
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<PAGE> 5
Employment Agreement and/or that certain Corporate Governance Agreement by and
between Borrower, Subordinated Lender and IMSG dated as of ___________, 1998,
while any portion of the Senior Debt remains unpaid unless such assignment or
transfer is made expressly subject to this Agreement and upon obtaining Senior
Lender's prior written consent to such an assignment or transfer.
8. Legend. The Subordinated Note, and any other instrument evidencing any
of the Subordinated Indebtedness, or any portion thereof, shall bear the
following legend on the first page thereof:
"THE INDEBTEDNESS EVIDENCED BY THIS NOTE OR INSTRUMENT IS SUBORDINATE TO
THE INDEBTEDNESS OF THE MAKER (OR ANY SUCCESSOR THERETO) TO THE HUNTINGTON
NATIONAL BANK OR ITS SUCCESSORS OR ASSIGNS PURSUANT TO THE TERMS OF A
SUBORDINATION AGREEMENT DATED JULY 31, 1998 (OR ANY SUCCESSOR AGREEMENT
WHICH REPLACES AND REFERENCES SUCH AGREEMENT)."
9. Subordinated Note. Any instrument evidencing any of the Subordinated
Indebtedness, or any portion thereof, which is hereafter executed by Borrower
will, on the date of such execution, be inscribed with the aforesaid legend.
Subordinated Lender will not modify, amend, change, or otherwise alter the
terms and provisions of the Subordinated Note or any other instrument
evidencing the Subordinated Indebtedness in any manner that affects Senior
Lender's rights under this Agreement, without the prior written consent of
Senior Lender.
10. Additional Agreements with Senior Lender; Cross-Default. At any time,
and from time to time, Senior Lender may enter into any agreements with
Borrower as Senior Lender may deem proper extending the time of payment or
renewing or otherwise altering the terms of the Loan Documents or affecting the
security underlying any or all of such obligations, or may exchange, sell, or
surrender or otherwise deal with any such security, or may release any balance
of funds of Borrower, with Senior Lender, without notice to Subordinated
Lender, and without in any way impairing or affecting this Agreement thereby.
Any default by Borrower or Subordinated Lender pursuant to the terms and
conditions of this Agreement shall constitute an Event of Default under the
Loan Agreement.
11. Continuing Nature of Subordination. This is a continuing agreement of
subordination and Senior Lender may continue, at any time and without notice to
Subordinated Lender, to extend credit or other financial accommodation or
benefit and loan monies to or for the account of Borrower on the faith hereof.
This Agreement shall be irrevocable by Subordinated Lender and shall continue
to be effective until the Senior Debt shall have been fully and finally
discharged and all financing arrangements, including, but not limited to the
Loan Agreement, between Borrower and Senior Lender have been terminated.
Subordinated Lender consents and covenants that all obligations and liabilities
of Borrower to Senior Lender shall be deemed to have been made or incurred, in
part, in reliance upon this Agreement.
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<PAGE> 6
12. Waiver of Notice. The undersigned waive: (a) notice of acceptance of
this Agreement; (b) notice of the existence, creation, extension, refunding,
refinancing or non-payment of all or any of the Senior Debt; (c) all diligence
in collection or protection of or realization upon the Senior Debt or any part
thereof or any security therefor; and (d) notice of the release, waiver or
cancellation of any obligors or guarantors of all or any portion of the Senior
Debt or any security therefor. Subordinated Lender agrees that Senior Lender
has made no warranties or representations with respect to the due execution,
legality, validity, completeness or enforceability of the Loan Agreement, or
the collectability of the Senior Debt, that Senior Lender shall be entitled to
manage and supervise its loans to Borrower and its relationship with Borrower
in accordance with its usual practices, modified from time to time as Senior
Lender deems appropriate under the circumstances, without regard to the
existence of any rights that Subordinated Lender may now or hereafter have in
or to any of the assets of Borrower. Subordinated Lender agrees that Senior
Lender shall not have any liability to Subordinated Lender for, and waives
any claim which Subordinated Lender may now or hereafter have against Senior
Lender arising out of: (i) any and all actions which Senior Lender, in good
faith, takes or omits to take with respect to the Loan Agreement or any
other agreement related thereto or to the collection of the Senior Debt;
(ii) Senior Lender's election, in any proceeding instituted under Chapter 11
of Title 11 of the United States Code (11 U.S.C. Section 101 et seq.) (the
"Bankruptcy Code"), of the application of Section 1111(b)(2) of the
Bankruptcy Code; and/or (iii) any borrowing or grant of a security interest
under Section 364 of the Bankruptcy Code.
13. Refinancing of Senior Debt. Senior Lender may, from time to time,
without notice to the undersigned, assign or transfer any or all of the Senior
Debt or any interest therein or permit another person (a "Refinancing Party")
to extend credit to Borrower to enable Borrower to repay all or a portion of
the Senior Debt (a "Refinancing"), and, notwithstanding any such assignment,
transfer or Refinancing or any subsequent assignment, transfer or Refinancing,
such Senior Debt shall be and remain Senior Debt for the purposes of this
Agreement, and every immediate and successive assignee or transferee of any of
the Senior Debt or of any interest therein, including, without limitation, any
Refinancing Party, shall, to the extent of the interest of such assignee,
transferee or Refinancing Party in the Senior Debt, be entitled to the benefits
of this Agreement to the same extent as if such assignee, transferee or
Refinancing Party were Senior Lender. Borrower and Subordinated Lender agree to
execute a subordination agreement in substantially the same form as this
Agreement in favor of the Refinancing Party upon request by Senior Lender.
14. Information Concerning Financial Condition of Borrower. Subordinated
Lender hereby assumes responsibility for keeping itself informed of the
financial condition of Borrower, any and all endorsers and any and all
guarantors of the Senior Debt and of all other circumstances bearing upon the
risk of non-payment of the Senior Debt and/or Subordinated Indebtedness that
diligent inquiry would reveal, and Subordinated Lender hereby agrees that
Senior Lender shall not have any duty to advise Subordinated Lender of
information known to Senior Lender regarding such condition or any such
circumstances. In the event Senior Lender, in its sole discretion, undertakes,
at any time or from time to time, to provide any such information to
Subordinated Lender, Senior Lender shall not be under any obligation to
disclose any information which,
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<PAGE> 7
pursuant to accepted or reasonable commercial finance practice, Senior Lender
wishes to maintain confidential.
15. Representation and Warranty of Subordinated Lender. Borrower and
Subordinated Lender hereby represent and warrant to Senior Lender as follows:
(i) that the current unpaid principal balance due under the Subordinated Note
is $1,500,000.00 and that Borrower is not in default of any covenant and no
event of default has occurred or would occur with the passage of time under or
pursuant to the Subordinated Note or any other agreement or instrument issued
in connection with the Subordinated Indebtedness; (ii) that the terms and
provisions of the Loan Agreement, this Agreement and the other Loan Documents
do not violate any term or provision of the Subordinated Indebtedness; (iii)
that it has not previously assigned any interest in the Subordinated
Indebtedness; (iv) that no other party owns any interest in the Subordinated
Indebtedness other than Subordinated Lender (whether as joint holders of the
Subordinated Indebtedness, participants or otherwise) and that the entire
Subordinated Indebtedness is and shall continue to be owing only to
Subordinated Lender; (v) that as of the date hereof, other than amounts owed
under the Employment Agreement, the Subordinated Note is the only monetary
obligation owing by Borrower to Subordinated Lender; (vi) that Borrower has no
obligations, monetary or otherwise, to Subordinated Lender, other than the
Subordinated Note; and (vii) that it has all necessary authority to grant the
subordination evidenced hereby and execute this Agreement.
16. No Waiver of Senior Lender's Rights. No waiver shall be deemed to be
made by Senior Lender or any of its rights hereunder, unless the same shall be
in writing signed on behalf of Senior Lender, and each waiver, if any, shall be
a waiver only with respect to the specific instance involved and shall in no
way impair the rights of Senior Lender or the obligations of Subordinated
Lender to Senior Lender in any other respect at any other time. The
subordination provisions contained in this Agreement are for the benefit of
Senior Lender and may not be rescinded, canceled, amended or modified in any
way without the prior written consent thereto executed by Senior Lender. Senior
Lender shall not be prejudiced in its rights to enforce the subordination
contained in this Agreement in accordance with the terms hereof by any act or
failure by Senior Lender or Borrower to provide Subordinated Lender with any
notice.
17. Governing Law. This Agreement shall be construed according to the laws
of the State of Ohio. Wherever possible, each provision of this Agreement shall
be interpreted in such manner as to be effective and valid under applicable law,
but if any provisions of this Agreement shall be prohibited by or invalid under
applicable law, such provision shall be ineffective to the extent of such
prohibition or invalidity, without invalidating the remainder of such provision
or the remaining provisions of this Agreement.
18. Entire Agreement. This Agreement sets forth the entire Agreement and
understanding among the parties as to the subject matter hereof and merges and
supersedes all prior discussions, agreements, and undertakings of every kind
and nature among them with respect to the subject matter hereof. This
Agreement shall be immediately binding upon Borrower and
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<PAGE> 8
Subordinated Lender, and their successors and permitted assigns, and the
subordination described herein shall inure to the benefit of any assignee or
successor in interest of Senior Lender.
19. Counterparts. This Agreement may be executed in any number of
counterparts, and by the parties hereto on the same or separate counterparts,
and each such counterpart, when executed and delivered, shall be deemed to be
an original, but all such counterparts shall together constitute but one and
the same Agreement.
20. Notice. All notices, requests, demands and other communications
provided for hereunder shall be in writing and, if mailed by registered mail or
delivered, addressed at the address specified on the signature pages of this
Agreement. All notices, statements, requests, demands and other communications
provided for hereunder shall be deemed to be given or made when delivered or,
if registered mail, upon refusal to accept.
21. Jurisdiction and Venue. All judicial proceedings arising out of or
relating to this Agreement or any obligation hereunder will be brought in the
United States District Court for the Northern District of Ohio or in the Court
of Common Pleas, Cuyahoga County, Ohio, and by their respective execution and
delivery of this Agreement, the undersigned accept for themselves and in
connection with their properties, generally and unconditionally, the
jurisdiction of the aforesaid courts and waive any defense of forum non
conveniens, and irrevocably agree to be bound by any judgment rendered thereby
in connection with this Agreement.
22. JURY TRIAL WAIVER. THE UNDERSIGNED, TO THE EXTENT PERMITTED BY LAW,
WAIVE ANY RIGHT TO HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE WHETHER
SOUNDING IN CONTRACT, TORT, OR OTHERWISE, AMONG SENIOR LENDER AND ANY OF THEM
ARISING OUT OF, IN CONNECTION WITH, RELATED TO OR INCIDENTAL TO THE
RELATIONSHIP ESTABLISHED BETWEEN THEM IN CONNECTION WITH THIS AGREEMENT OR ANY
DOCUMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH OR THE TRANSACTIONS
RELATED THERETO.
[Remainder of this page intentionally left blank.]
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<PAGE> 9
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the 31st day of July, 1998.
SENIOR LENDER: BORROWER:
THE HUNTINGTON NATIONAL BANK, GEOTRAC OF AMERICA, INC.
a national banking association (formerly known as Bankers Hazard
Determination Services, Inc. and successor
by merger to Geotrac, Inc.
(formerly known as YoSystems, Inc. and
successor by merger to SMS Geotrac,
Inc.)), a Florida corporation
By: /s/ Timothy M. Ward By: /s/ Daniel J. White
-------------------------- ---------------------------------
Name: Timothy M. Ward Name: Daniel J. White
---------------------- -----------------------------
Title: V.P. Title: President
----------------------- -----------------------------
SUBORDINATED LENDERS:
/s/ Daniel J. White
-----------------------------------
Daniel J. White, an individual
/s/ Sandra White
------------------------------------
Sandra White, an individual
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<PAGE> 1
EXHIBIT 10.74
SUBORDINATION AGREEMENT
THIS SUBORDINATION AGREEMENT (this "Agreement") is made and entered into
by and among GEOTRAC OF AMERICA INC., (formerly known as Bankers Hazard
Determination Systems, Inc. and successor by merger to Geotrac, Inc., (formerly
known as YoSystems, Inc. and successor by merger to SMS Geotrac, Inc.)), a
Florida corporation ("Borrower"), INSURANCE MANAGEMENT SYSTEMS GROUP, INC.,
(collectively, "Subordinated Lender") and THE HUNTINGTON NATIONAL BANK, a
national banking association, its successors and assign ("Senior Lender").
RECITALS
A. Geotrac, Inc. (formerly known as YoSystems, Inc. and successor by
merger to SMS Geotrac, Inc.) ("Old Geotrac"), Bankers Insurance Group, Inc.
("BIG"), Daniel J. and Sandra White ("Whites") and Bankers Hazard Determination
Services, Inc. ("BHDS") and Subordinated Lender entered into an Agreement and
Plan Merger dated as of the 28th day of May, 1998, (the "Merger Agreement"), a
copy of which has been furnished to Senior Lender. Old Geotrac and BHDS merged
pursuant to the terms of the Agreement, the surviving entity referred to herein
as Borrower. The indebtedness of Borrower to the Subordinated Lender arises
under Section 2.01(d) of the Merger Agreement and in connection with certain
preferred stock issued by Borrower to Subordinated Lender (the "Preferred
Stock"). The parties hereto represent that the Subordinated Indebtedness (as
hereinafter defined) has not heretofore been assigned to or subordinated in
favor of any other person.
B. Old Geotrac has borrowed monies (the "Loans") from Senior Lender, as
evidenced by a Loan and Security Agreement dated as of July 31, 1997, as
amended from time to time (the "Loan Agreement") and related documents between
Senior Lender and Old Geotrac, of even date therewith, as the same may be
amended from time to time (collectively, the "Loan Documents"). The Loans and
the Loan Documents have been assumed and ratified by Borrower. The Loans are
secured by a first priority blanket lien on all of Borrower's assets.
C. In order to induce Senior Lender, its successors or assigns, to
continue to make the Loans, or to grant renewals, or extensions, modifications,
or amendments to the Loans, as Senior Lender may deem advisable, Subordinated
Lender desires to subordinate the Subordinated Indebtedness and all security
held therefor to any and all indebtedness now or hereafter owing by Borrower to
Senior Lender in accordance with the provisions of this Agreement.
D. Subordinated Lender acknowledges that the continuing extensions of
credit and other financial accommodations to Borrower by Senior Lender is of
value to Subordinated Lender.
<PAGE> 2
PROVISIONS
NOW, THEREFORE, for good and valuable consideration, receipt of which is
hereby acknowledged by Subordinated Lender, and in order to induce Senior
Lender, now or from time to time hereafter, to extend credit or other financial
accommodation to Borrower pursuant to the Loan Agreement as it may be amended,
modified or restated, Subordinated Lender hereby agrees as follows:
1. Subordination of Subordinated Indebtedness. Any and all indebtedness
for borrowed money together with all accrued interest thereon; and any other
indebtedness now owing or which hereafter may become owing by or from Borrower
to Subordinated Lender, including, without limitation, indebtedness arising in
connection with the Preferred Stock, howsoever such indebtedness may be
hereafter created, extended, renewed or evidenced, together with all accrued
interest thereon and any and all other present and future obligations and
liabilities owing by Borrower to Subordinated Lender, howsoever such
obligations and liabilities may be created, extended, renewed or evidenced (all
such indebtedness, obligations and liabilities referred to collectively as the
"Subordinated Indebtedness") shall at all times and in all respects be
subordinate and junior in right of payment to any and all indebtedness of
Borrower to Senior Lender, its successors and assigns, including, without
limitation, the Loans and any extensions, renewals, modifications, and
amendments thereof and all accrued interest thereon (collectively, the "Senior
Debt").
2. Permitted Payments. Unless and until (A) all of the Senior Debt shall
have been fully and finally paid and satisfied, and (B) all financing
arrangements, including, but not limited to the Loan Agreement, between
Borrower and Senior Lender have been terminated, no payments of principal or
interest shall be made on or with respect to the Subordinated Indebtedness by
or on behalf of Borrower (or by Guarantor) or accepted by Subordinated Lender,
except as permitted in this Section 2. Borrower may from time to time, pay or
cause to be paid to Subordinated Lender and Subordinated Lender may accept from
Borrower payment of regularly scheduled payments of accrued interest (at a
non-default rate of interest) pursuant to the terms and conditions of any
subordinated promissory note or notes previously approved by Senior Lender in
connection with any indebtedness arising under Section 2.01(d) of the Agreement
(a "Subordinated Note"), and any interest or dividend payments payable to
Subordinated Lender in accordance with the terms of the Preferred Stock,
subject to the limitations and restrictions set forth in the Loan Agreement,
including, without limitation, Section 6.11 thereof, provided that no Event of
Default then exists or would have occurred but for the passage of time or
giving of notice or both, or will have occurred after giving effect to any
payment which otherwise would be permitted hereby under the Loan Agreement or
any of the other Loan Documents (herein referred to as a "Standstill Event").
In the event any Standstill Event shall have occurred, all payments pursuant to
a Subordinated Note or in connection with the Preferred Stock from Borrower to
Subordinated Lender shall cease immediately and Borrower shall not make, nor
shall Subordinated Lender accept any such payment from or on behalf of Borrower
until such time as Subordinated Lender and Borrower receive written permission
from Senior Lender to commence such payments again.
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<PAGE> 3
Subordinated Lender hereby agrees not to accept any prepayments of any payment
due on account of the Subordinated Indebtedness.
3. Forbearance: Subordination of Liens. Unless and until (A) all of the
Senior Debt shall have been fully and finally paid and satisfied, and (B) all
financing arrangements, including, but not limited to the Loan Agreement,
between Borrower and Senior Lender have been terminated, Subordinated Lender
shall not: (i) declare the Subordinated Indebtedness or any portion thereof to
be due and payable prior to the stated maturity date, nor accelerate the
maturity date thereof; (ii) enforce or exercise any right of demand or setoff
or commence any legal or other action against Borrower or any third party to
collect upon any Subordination Indebtedness; (iii) take or accept any
collateral or security with respect to the Subordinated Indebtedness without
the prior written consent of Senior Lender; (iv) commence foreclosure or any
other similar type of proceedings or exercise any similar remedies in respect
of any collateral for the Subordinated Indebtedness; (v) enforce any judgment
that it might obtain with respect to the Subordinated Indebtedness (including,
without limitation, execution, attachment or foreclosure of judgment liens
against any assets of Borrower) without obtaining the prior written consent of
Senior Lender; or (vi) commence or join with any other creditor or creditors of
Borrower in commencing any bankruptcy, reorganization or insolvency proceedings
against Borrower. All rights, liens and security interests of Subordinated
Lender in any assets of Borrower or any other person securing the Senior Debt,
whether now or hereafter arising and howsoever existing, shall be and hereby
are subordinated to the rights and interests of Senior Lender under this
Agreement and in those assets. Subordinated Lender shall have no right to
possession of any such assets or to foreclose or execute upon any such assets,
whether by judicial action or otherwise.
4. Bankruptcy Proceedings. In the event of (i) any distribution, division
or application, partial or complete, voluntary or involuntary, by operation of
law or otherwise, of all or any part of the assets of Borrower or the proceeds
thereof, to creditors of Borrower by reason of the liquidation, dissolution or
other winding up of Borrower's business, or (ii) any sale, receivership,
insolvency or bankruptcy proceeding, or assignment for the benefit of
creditors, or any proceeding by or against Borrower for any relief under any
bankruptcy or insolvency laws relating to the relief of debtors, readjustment
of indebtedness, reorganization, compositions or extensions, Subordinated
Lender covenants that any payment or distribution of any kind or character to
or received by Subordinated Lender, either in cash, securities or other
property which shall be paid or delivered, or payable or deliverable, upon or
with respect to the Subordinated Indebtedness immediately shall be paid or
delivered directly to Senior Lender for application on the Senior Debt, whether
or not due, of Borrower to Senior Lender until the Senior Debt to Senior Lender
first shall have been fully paid and satisfied. Until Senior Debt shall have
been fully and finally paid and satisfied with interest and financing
arrangements, including, but not limited to the Loan Agreement, between
Borrower and Senior Lender have been terminated, in order to enable Senior
Lender to enforce its rights hereunder in any such action or proceeding, Senior
Lender is hereby irrevocably authorized and empowered in its sole discretion to
make and present for and on behalf of Subordinated Lender such proofs of claims
against Borrower on account of the Subordinated Indebtedness hereby
subordinated as Senior Lender may deem expedient or proper and to vote such
proofs of claims in any such proceeding and to receive and collect any and
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<PAGE> 4
all dividends or other payments or disbursements made thereon in whatever form
the same may be paid or issued and to apply the same on account of any of the
Senior Debt.
5. Appointment of Power of Attorney. Upon the occurrence of an Event of
Default, Subordinated Lender irrevocably authorizes, appoints, and empowers
Senior Lender to demand, sue for, collect, and receive every such payment or
distribution and give acquittance therefor and to file claims and take such
other proceedings, in Senior Lender's own name or in the name of and as
attorney-in-fact for Subordinated Lender, as Senior Lender may deem necessary
or advisable for the enforcement of this Agreement; and Subordinated Lender
shall execute and deliver to Senior Lender such powers of attorney,
assignments, or other instruments as may be requested by Senior Lender to
enable Senior Lender to enforce any and all claims upon or with respect to the
Subordinated indebtedness and to collect and receive all payments or
distributions which may be payable or deliverable at any time upon or with
respect to the Subordinated Indebtedness.
6. Delivery of Payment to Senior Lender. Except for the payments permitted
pursuant to Section 2 of this Agreement, if any payment, distribution, security
or proceeds thereof is received by Subordinated Lender upon or with respect to
any indebtedness of Borrower to Subordinated Lender (including the Subordinated
Indebtedness) prior to the satisfaction in full of the Senior Debt by Borrower,
Subordinated Lender immediately shall deliver the same to Senior Lender in
precisely the form received (except for the endorsement or assignment of
Subordinated Lender where necessary), for application to the Senior Debt,
whether or not due, and until so delivered the same shall be held in trust by
Subordinated Lender as property of Senior Lender. In the event of the failure
of Subordinated Lender to make any such endorsement or assignment, Senior
Lender, or any of its officers or employees, hereby irrevocably is constituted
and appointed attorney-in-fact of Subordinated Lender with full power to make
the same. Subordinated Lender hereby agrees that all payments received by
Senior Lender may be applied and reapplied, in whole or in part, to any of the
Senior Debt, as Senior Lender, in its sole discretion, deem appropriate. By its
execution of this Agreement, Borrower agrees not to pay Subordinated Lender any
sum on account of any of the Subordinated Indebtedness or to give Subordinated
Lender any collateral as security therefor at any time when payment thereof
would be in breach of any of the terms of this Agreement.
7. Assignment of Claims. Subordinated Lender shall not assign or transfer
any claim, nor suffer or permit the creation or attachment of any lien, claim
or encumbrance, hypothecation or pledge upon any claim, it has or may have
against Borrower while any portion of the Senior Debt remains unpaid unless
such assignment or transfer is made expressly subject to this Agreement and
upon obtaining Senior Lender's prior written consent to such an assignment or
transfer.
8. Legend. Any Subordinated Note, and any other instrument evidencing any
of the Subordinated Indebtedness, including, without limitation, the Preferred
Stock or any portion thereof, shall bear the following legend on the first page
thereof:
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<PAGE> 5
"THE INDEBTEDNESS EVIDENCED BY THIS NOTE OR INSTRUMENT IS SUBORDINATE
TO THE INDEBTEDNESS OF THE MAKER (OR ANY SUCCESSOR THERETO) TO THE
HUNTINGTON NATIONAL BANK OR ITS SUCCESSORS OR ASSIGNS PURSUANT TO THE
TERMS OF A SUBORDINATION AGREEMENT DATED JULY ___, 1998 (OR ANY
SUCCESSOR AGREEMENT WHICH REPLACES AND REFERENCES SUCH AGREEMENT)."
9. Possession of Subordinated Note(s). Subordinated Lender agrees that the
original of any Subordinated Note, and the original of any modification,
amendment or restatement thereof, shall be held by Senior Lender until the
Subordinated Indebtedness is indefeasibly paid in full. Any instrument
evidencing any of the Subordinated Indebtedness, or any portion thereof, which
is hereafter executed by Borrower will, on the date of such execution, be
inscribed with the aforesaid legend and the original thereof will be delivered
to Senior Lender. Subordinated Lender will not modify, amend, change, or
otherwise alter the terms and provisions of the Subordinated Note or any other
instrument evidencing the Subordinated Indebtedness in any manner that affects
Senior Lender's rights under this Agreement, without the prior written consent
of Senior Lender.
10. Additional Agreements with Senior Lender: Cross-Default. At any time,
and from time to time, Senior Lender may enter into any agreements with
Borrower as Senior Lender may deem proper extending the time of payment or
renewing or otherwise altering the terms of the Loan Documents or affecting the
security underlying any or all of such obligations, or may exchange, sell, or
surrender or otherwise deal with any such security, or may release any balance
of funds of Borrower, with Senior Lender, without notice to Subordinated
Lender, and without in any way impairing or affecting this Agreement thereby.
Any default by Borrower or Subordinated Lender pursuant to the terms and
conditions of this Agreement shall constitute an Event of Default under the
Loan Agreement.
11. Continuing Nature of Subordination. This is a continuing agreement of
subordination and Senior Lender may continue, at any time and without notice to
Subordinated Lender, to extend credit or other financial accommodation or
benefit and loan monies to or for the account of Borrower on the faith hereof.
This Agreement shall be irrevocable by Subordinated Lender and shall continue
to be effective until the Senior Debt shall have been fully and finally
discharged and all financing arrangements, including, but not limited to the
Loan Agreement, between Borrower and Senior Lender have been terminated.
Subordinated Lender consents and covenants that all obligations and liabilities
of Borrower to Senior Lender shall be deemed to have been made or incurred, in
part, in reliance upon this Agreement.
12. Waiver of Notice. The undersigned hereby waive: (a) notice of
acceptance of this Agreement; (b) notice of the existence, creation, extension,
refunding, refinancing or non-payment of all or any of the Senior Debt; (c) all
diligence in collection or protection of or realization upon the Senior Debt or
any part thereof or any security therefor; and (d) notice of the release,
waiver or cancellation of any obligors or guarantors of all or any portion of
the Senior Debt or any security therefor. Subordinated Lender agrees that
Senior Lender has made no warranties or
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<PAGE> 6
representations with respect to the due execution, legality, validity,
completeness or enforceability of the Loan Agreement, or the collectability of
the Senior Debt, that Senior Lender shall be entitled to manage and supervise
its loans to Borrower and its relationship with Borrower in accordance with its
usual practices, modified from time to time as Senior Lender deems appropriate
under the circumstances, without regard to the existence of any rights that
Subordinated Lender may now or hereafter have in or to any of the assets of
Borrower. Subordinated Lender agrees that Senior Lender shall not have any
liability to Subordinated Lender for, and waives any claim which Subordinated
Lender may now or hereafter have against Senior Lender arising out of: (i) any
and all actions which Senior Lender, in good faith, takes or omits to take with
respect to the Loan Agreement or any other agreement related thereto or to the
collection of the Senior Debt; (ii) Senior Lender's election, in any proceeding
instituted under Chapter 11 of Title 11 of the United States Code (11 U.S.C.
Section 101 et seq.) (the "Bankruptcy Code"), of the application of Section
1111(b)(2) of the Bankruptcy Code; and/or (iii) any borrowing or grant of a
security interest under Section 364 of the Bankruptcy Code.
13. Refinancing of Senior Debt. Senior Lender may, from time to time,
without notice to the undersigned, assign or transfer any or all of the Senior
Debt or any interest therein or permit another person (a "Refinancing Party")
to extend credit to Borrower to enable Borrower to repay all or a portion of
the Senior Debt (a "Refinancing"), and, notwithstanding any such assignment,
transfer or Refinancing or any subsequent assignment, transfer or Refinancing,
such Senior Debt shall be and remain Senior Debt for the purposes of this
Agreement, and every immediate and successive assignee or transferee of any of
the Senior Debt or of any interest therein, including, without limitation, any
Refinancing Party, shall, to the extent of the interest of such assignee,
transferee or Refinancing Party in the Senior Debt, be entitled to the benefits
of this Agreement to the same extent as if such assignee, transferee or
Refinancing Party were Senior Lender. Borrower and Subordinated Lender agree to
execute a subordination agreement in substantially the same form as this
Agreement in favor of the Refinancing Party upon request by Senior Lender.
14. Information Concerning Financial Condition of Borrower. Subordinated
Lender hereby assumes responsibility for keeping itself informed of the
financial condition of Borrower, any and all endorsers and any and all
guarantors of the Senior Debt and of all other circumstances bearing upon the
risk of non-payment of the Senior Debt and/or Subordinated Indebtedness that
diligent inquiry would reveal, and Subordinated Lender hereby agrees that
Senior Lender shall not have any duty to advise Subordinated Lender of
information known to Senior Lender regarding such condition or any such
circumstances. In the event Senior Lender, in its sole discretion, undertakes,
at any time or from time to time, to provide any such information to
Subordinated Lender, Senior Lender shall not be under any obligation to
disclose any information which, pursuant to accepted or reasonable commercial
finance practice, Senior Lender wishes to maintain confidential.
15. Representation and Warranty of Subordinated Lender. Borrower and
Subordinated Lender hereby represent and warrant to Senior Lender as follows:
(i) that Borrower is not in default of any covenant and no event of default has
occurred or would occur with the passage of time under any agreement or
instrument issued in connection with the Subordinated Indebtedness;
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<PAGE> 7
(ii) that the terms and provisions of the Loan Agreement, this Agreement and
the other Loan Documents do not violate any term or provision of the
Subordinated Indebtedness; (iii) that it has not previously assigned any
interest in the Subordinated Indebtedness; (iv) that no other party owns any
interest in the Subordinated Indebtedness other than Subordinated Lender
(whether as joint holders of the Subordinated Indebtedness, participants or
otherwise) and that the entire Subordinated Indebtedness is and shall continue
to be owing only to Subordinated Lender; (v) that as of the date hereof, the
accrual of dividends on the Preferred Stock, is the only monetary obligation
owing by Borrower to Subordinated Lender; (vi) that Borrower has no obligations
to Subordinated Lender, monetary or otherwise, other than in connection with
the Preferred Stock and pursuant to Section 2.01(d) of the Merger Agreement and
any Subordinated Note which may be issued in connection therewith; and (vii)
that it has all necessary authority to grant the subordination evidenced hereby
and execute this Agreement.
16. No Waiver of Senior Lender's Rights. No waiver shall be deemed to be
made by Senior Lender or any of its rights hereunder, unless the same shall be
in writing signed on behalf of Senior Lender, and each waiver, if any, shall be
a waiver only with respect to the specific instance involved and shall in no way
impair the rights of Senior Lender or the obligations of Subordinated Lender to
Senior Lender in any other respect at any other time. The subordination
provisions contained in this Agreement are for the benefit of Senior Lender and
may not be rescinded, canceled, amended or modified in any way without the prior
written consent thereto executed by Senior Lender. Senior Lender shall not be
prejudiced in its rights to enforce the subordination contained in this
Agreement in accordance with the terms hereof by any act or failure by Senior
Lender or Borrower to provide Subordinated Lender with any notice.
17. Governing Law. This Agreement shall be construed according to the laws
of the State of Ohio. Wherever possible, each provision of this Agreement shall
be interpreted in such manner as to be effective and valid under applicable
law, but if any provisions of this Agreement shall be prohibited by or invalid
under applicable law, such provision shall be ineffective to the extent of such
prohibition or invalidity, without invalidating the remainder of such provision
or the remaining provisions of this Agreement.
18. Entire Agreement. This Agreement sets forth the entire Agreement and
understanding among the parties as to the subject matter hereof and merges and
supersedes all prior discussions, agreements, and undertakings of every kind
and nature among them with respect to the subject matter hereof. This Agreement
shall be immediately binding upon Borrower and Subordinated Lender, and their
successors and permitted assigns, and the subordination described herein shall
inure to the benefit of any assignee or successor in interest of Senior Lender.
19. Counterparts. This Agreement may be executed in any number of
counterparts, and by the parties hereto on the same or separate counterparts,
and each such counterpart, when executed and delivered, shall be deemed to be
an original, but all such counterparts shall together constitute but one and
the same Agreement.
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<PAGE> 8
20. Notice. All notices, requests, demands and other communications
provided for hereunder shall be in writing and, if mailed by registered mail or
delivered, addressed at the address specified on the signature pages of this
Agreement. All notices, statements, requests, demands and other communications
provided for hereunder shall be deemed to be given or made when delivered or,
if registered mail, upon refusal to accept.
21. Jurisdiction and Venue. All judicial proceedings arising out of or
relating to this Agreement or any obligation hereunder will be brought in the
United States District Court for the Northern District of Ohio or in the Court
of Common Pleas, Cuyahoga County, Ohio, and by their respective execution and
delivery of this Agreement, the undersigned accept for themselves and in
connection with their properties, generally and unconditionally, the
jurisdiction of the aforesaid courts and waive any defense of forum non
conveniens, and irrevocably agree to be bound by any judgment rendered thereby
in connection with this Agreement.
22. JURY TRIAL WAIVER. THE UNDERSIGNED, TO THE EXTENT PERMITTED BY LAW,
WAIVE ANY RIGHT TO HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE WHETHER
SOUNDING IN CONTRACT, TORT, OR OTHERWISE, AMONG SENIOR LENDER AND ANY OF THEM
ARISING OUT OF, IN CONNECTION WITH, RELATED TO OR INCIDENTAL TO THE RELATIONSHIP
ESTABLISHED BETWEEN THEM IN CONNECTION WITH THIS AGREEMENT OR ANY DOCUMENT
EXECUTED OR DELIVERED IN CONNECTION HEREWITH OR THE TRANSACTIONS RELATED
THERETO.
[Remainder of this page intentionally left blank.]
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<PAGE> 9
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the ___ day of July, 1998.
SENIOR LENDER: BORROWER:
THE HUNTINGTON NATIONAL BANK, GEOTRAC OF AMERICA, INC.
a national banking association (formerly known as Bankers Hazard
Determination Services, Inc. and successor
by merger to Geotrac, Inc.
(formerly known as YoSystems, Inc. and
successor by merger to SMS Geotrac,
Inc.)), a Florida corporation
By: /s/ Timothy M. Ward By: /s/ Daniel J. White
-------------------------- --------------------------------
Name: Timothy M. Ward Name: Daniel J. White
------------------------- ------------------------------
Title: V.P. Title: President
-------------------------- -----------------------------
SUBORDINATED LENDER:
INSURANCE MANAGEMENT
SERVICES GROUP, INC.,
a Florida corporation
By: /s/ Kelly K. King
-----------------------------------
Print Name: Kelly K. King
---------------------------
Title: Secretary
--------------------------------
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<PAGE> 1
EXHIBIT 10.75
TAX INDEMNITY AGREEMENT
THIS TAX INDEMNITY AGREEMENT (the "Agreement") is made and entered
into as of July 31, 1998, by and among Bankers International Financial
Corporation, a Florida corporation ("BIFC"), and Insurance Management Solutions
Group, Inc., a Florida corporation ("IMSG").
WHEREAS, there is that certain Amended and Completely Restated Tax
Allocation Agreement (herein, "Tax Agreement") dated October 1, 1993 made by
and between BIFC and each of its subsidiaries; and
WHEREAS, effective as of the close of business on July 31, 1998
Bankers Insurance Group, Inc. sold a sufficient number of shares of IMSG so
that IMSG will no longer file its tax return with BIFC on a consolidated basis;
WHEREAS, the parties wish to terminate the Tax Agreement as to IMSG
and its subsidiaries;
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:
1. Definition of Terms. Capitalized terms not otherwise defined
herein shall be granted the definitions assigned thereto in the Tax Agreement.
2. Termination of Tax Agreement. The Tax Agreement shall be terminated
between BIFC and IMSG effective as of the close of business on July 31, 1998
(herein, "Termination Date") .
3. Reimbursement for Credits. BIFC shall pay to IMSG the amount of any
Credits which it may have as of the Termination Date and which actually reduced
the taxes of other Members, and IMSG shall pay to IMSG the amount of any
Credits of other Members which actually reduced the IMSG tax liability computed
on a "separate return basis" (as defined in the Tax Agreement).
4. Tax Indemnity.
a) BIFC covenants and agrees to indemnify, defend, and hold IMSG
harmless from and against any and all costs, expenses, losses
or liabilities ("Damages") including, without limitation,
reasonable attorneys' fees, incurred or suffered by IMSG
resulting from, attributable to or arising under any federal,
state or local income tax liabilities (including penalties,
interest and additions to tax) assessed against, or owed or
payable by IMSG but which Damages arise from the taxable
income of Members (determined on a "separate return basis")
other than IMSG or one of its subsidiaries.
b) IMSG covenants and agrees to indemnify, defend, and hold BIFC
harmless from and against any and all costs, expenses, losses
or liabilities ("Damages") including, without limitation,
reasonable attorneys' fees, incurred or suffered by BIFC
resulting from, attributable to or arising under
<PAGE> 2
any federal, state or local income tax liabilities
(including penalties, interest and additions to tax)
assessed against, or owed or payable by BIFC but which
Damages arise from the taxable income (determined on a
"separate return basis") of IMSG or one of its
subsidiaries.
5. Settlement of Tax Claim. In case any claim, demand or deficiency is
commenced or notice is given by the Internal Revenue Service or other taxing
authorities against either party with respect to which payment may properly be
sought against the other party pursuant to this Agreement, the injured party
shall promptly notify the other party of such fact in writing. The injured
party shall conduct the defense of any such claim, action or proceeding at the
other party's expense with counsel reasonably acceptable to the other party;
provided, however, that the injured party shall not settle any such claim,
action or proceeding without the prior written consent of the other party,
which consent shall not be unreasonably withheld; and provided, further that
the other party shall have the right to participate in such defense at their
own expense.
6. Successors and Assigns. This Agreement shall be binding on and
shall inure to the benefit of the parties hereto and their respective
successors and assigns.
7. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original and all of which
together shall constitute the same document.
8. Florida Law to Govern. This Agreement shall be governed by and
construed in accordance with the laws of the State of Florida.
9. Records and Documents Relating to Charges. Each party hereto shall
be responsible for maintaining full and accurate accounting and tax records for
purposes of its internal bookkeeping and accounting operations. Each party
hereto shall make such accounting and tax records insofar as they pertain to
the computation of charges hereunder available at the other party's principal
offices for audit, inspection and copying during all reasonable business hours.
10. Termination And Modification. This Agreement or any part thereof
shall commence and be effective as of the day and year first above set forth
and shall remain in effect until terminated by either party on 30 days prior
written notice to the other party. This Agreement may be amended only by mutual
consent in writing signed by the parties.
11. Notice. All notices, statements or requests provided for hereunder
shall be in writing and shall be deemed to have been duly given when delivered
by hand to an officer of the other party, or when deposited with the U.S.
Postal Service, as certified or registered mail, postage prepaid, addressed
2
<PAGE> 3
(a) If to BIFC to:
360 Central Avenue
P.O. Box 15707
St. Petersburg, FL 33733
Attn: G. Kristin Delano, Corporate Secretary
(813) 803-4016 FAX (813) 823-6518
(b) If to IMSG to:
360 Central Avenue
P.O. Box 15707
St. Petersburg, FL 33733
Attn: David K. Meehan, Chairman
(813) 823-4000 x 4201 FAX (813) 823-6518
or to such other person or place as each party may from time to time designate
by written notice sent as aforesaid.
12. Headings. The headings of the various paragraphs of this Agreement
are for convenience only, and shall be accorded no weight in the construction
of this Agreement.
13. Entire Agreement. This Agreement, together with such Amendment as
may from time to time be executed in writing by the parties, constitutes the
entire Agreement between the parties with respect to the subject matter hereof.
IN WITNESS WHEREOF, the parties hereto have executed this Tax
Indemnity Agreement as of July 31, 1998.
WITNESSES: INSURANCE MANAGEMENT
SOLUTIONS GROUP, INC.
/s/ C. Anthony Sexton BY: /s/ Kelly K. King
- ----------------------------- ------------------------------
/s/ Erica Reed AS ITS: CFO
- ----------------------------- --------------------------
DATE: 8/7/98
----------------------------
WITNESSES: BANKERS INTERNATIONAL
FINANCIAL CORPORATION
/s/ C. Anthony Sexton BY: /s/ G. Kristin Delano
- ----------------------------- ------------------------------
/s/ Erica Reed AS ITS: Corporate Secretary
- ----------------------------- --------------------------
DATE: 8/10/98
---------------------------
3
<PAGE> 1
EXHIBIT 10.76
TAX ALLOCATION AGREEMENT
This Tax Allocation Agreement is executed to be effective as of the 31st
day of July, 1998, by and between Insurance Management Solutions Group, Inc.
(herein, "IMSG") and each of the subsidiaries of IMSG: Insurance Management
Solutions, Inc. and Geotrac of America, Inc. f/k/a Bankers Hazard Determination
Services, Inc., a Florida corporation and Geotrac, Inc., an Ohio Corporation
(herein collectively called, "Consolidated Group"). For convenience, each
corporation within the Consolidated Group shall be called, "Member".
R E C I T A L S :
1. IMSG is the ultimate United States domestic controlling corporation in the
Consolidated Group.
2. The Consolidated Group has previously filed a consolidated income tax
return with the Internal Revenue Service in conformance with that certain Tax
Allocation Agreement dated December 3, 1982, and an Amended and Completely
Restated Tax Allocation Agreement effective October 1, 1993 by and among
Bankers International Financial Corporation (herein "BIFC") and its various
subsidiaries (herein, "Prior Agreements").
NOW, THEREFORE, in consideration of the mutual covenants and agreements
hereinafter set forth, as well for other good and valuable consideration, the
parties hereto do covenant and agree as follows:
1. The Prior Agreements were terminated between BIFC and IMSG effective as
of the close of business on July 31, 1998.
2. A U.S. consolidated income tax return shall be filed by IMSG for each
taxable year in respect of which this Agreement is in effect and for which the
Consolidated Group is required or permitted to file a consolidated tax return.
Each Member shall execute and file such consent, elections, and other documents
that may be required or appropriate for the proper filing of such returns.
3. (a) For each taxable period, each Member shall compute its separate tax
liability as if it had filed a separate tax return in accordance with Treasury
Reg. Section 1.1552-(1) (a) (2).
(b) For each taxable period, the Consolidated Group shall compute its
tax liability on a consolidated basis as provided in Treasury Reg.
Section 1.1501 et seq.
(c) For each taxable period, in accordance with Treasury Reg.
Section 1.1502-33 (d)(2)(ii), an additional amount shall be allocated to each
Member to the extent the Member's tax liability computed on a separate return
basis exceeds the portion of the consolidated tax liability apportioned to such
member under Treasury Reg. Section 1.1552 (1)(a)(2).
1
<PAGE> 2
(d) Each Member whose tax liability has been reduced by reason of the
filing of a consolidated return and the appropriation of foreign tax credits,
investment credits, losses, or any loss carry over (herein collectively called,
"Credits") generated by other Members shall pay to IMSG, or such Member as IMSG
may direct, cash in the amount of such tax savings.
(e) IMSG shall pay (or cause to be paid) to each Member the amount of
any Credits generated by that Member to the extent actually used in the
consolidated return. Payment shall be equal to the savings generated by the
Credits.
(f) Once a Member is paid for its Credits, it cannot use such Credits
in the calculation of its tax liability on the "separate return basis." Any of
the Members' Credits which are not used in the consolidated return and for
which it has not been paid shall be retained by the Member for possible future
use.
(g) For purposes of this Agreement, a separate return is defined as a
return completed by an insurer as if it were and had been filed as a separate
individual tax payer. However, intercompany transactions which are deferred
under the consolidated tax return filing will be recognized.
4. All settlements under this Agreement shall be made within 30 days of
the filing of the applicable estimated or actual consolidated federal corporate
income tax return with the Internal Revenue Service, except where a refund is
due the parent, in which case payment may be deferred to the Member within 30
days of receipt of such refund. All settlements shall be in cash or securities
eligible as investments for an insurance company organized and existing under
the laws of the State of Florida. Securities shall be valued at market value.
5. If taxable income, special deductions or credits reported in a
consolidated federal income tax return are revised by the Internal Revenue
Service or other appropriate authority, a recalculation of the tax liability
for all parties to the Agreement shall be made.
6. This Agreement shall be terminated if:
(h) The parties agree in writing to such termination;
(i) Membership in the Consolidated Group (or the Consolidated
Group itself) ceases or is terminated for any reason; or
(j) The Consolidated Group fails to file a consolidated
return for any taxable year.
7. Notwithstanding the termination of this Agreement, its provisions will
remain in effect with respect to any period of time during the tax year in
which the termination occurs, for which the income of the terminating party
must be included in a consolidated income tax return. Further, notwithstanding
any termination of this Agreement, all material including, but not limited to,
returns, supporting schedules, work papers, correspondence and other documents
relating to the consolidated return shall be made available to any Member
during regular business hours.
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<PAGE> 3
8. This Agreement shall not be assignable by any Member without the prior
written consent of all of the other Members.
9. Any unresolved difference between the parties arising out of or
relating to this Agreement, or the breach thereof, shall be settled by
arbitration in accordance with the Commercial Arbitration Rules of the American
Arbitration Association and the Expedited Procedures thereof, and judgment upon
the award rendered by the Arbitrator may be entered in any Court having
jurisdiction thereof.
IN WITNESS WHEREOF, the parties hereto have set their hands and seals in
St. Petersburg, Florida.
Insurance Management Solutions Group, Inc. (and designated subsidiaries)
Attest:
By: /s/ Kelly K. King By: /s/ Jeffrey S. Bragg
--------------------------------- ------------------------------
Kelly K. King, Secretary Jeffrey S. Bragg, Vice President
Date: 8/14/98 Date: 8/14/98
-------------------------------- -----------------------------
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<PAGE> 1
EXHIBIT 10.77
EMPLOYMENT AGREEMENT
AGREEMENT made effective this 11th day of June, 1998 between INSURANCE
MANAGEMENT SOLUTIONS GROUP, INC., a Florida corporation, which corporation,
together with its subsidiary companies, shall hereinafter be referred to as
"Company" and Jeff Bragg, of _____________, Florida, hereinafter referred to
as "Employee".
R E C I T A L S :
1. Company is engaged in the business of providing comprehensive
outsourcing services to the property and casualty insurance industry with an
emphasis on providing full third party administration outsourcing services for
flood insurers and is also a provider of flood zone determination and ancillary
services primarily to insurance companies and financial institutions throughout
the State of Florida and such other states as the Company shall deem
appropriate.
2. The Company's business requires secrecy in connection with the methods
and systems employed, and, for the proper protection of the Company, it is
absolutely necessary and essential (which necessity Employee expressly
recognizes) that all matters connected with, arising out of, or pertaining to
the business of the Company, its methods and systems and the names of its
customers be kept secret and confidential as goodwill belonging to the Company.
3. The Company will sustain great loss and damage, if during the term of
this Agreement, or for a period of two (2) years immediately following its
termination for any reason whatsoever, the Employee should, for himself or
herself, or on behalf of any other person, persons, company, partnership or
corporation, call upon the customers or clientele of the Company for the purpose
of soliciting, selling or servicing any of the programs or services of the
Company as described in Section 1 hereof, or the solicitation of any Company
employee for the purpose of hiring such employee, for which loss and damage, by
reason of his or her financial circumstances, Employee could not be compelled by
law to respond to damages in any action at law.
NOW, THEREFORE, Company and Employee, in consideration of the covenants and
agreements herein contained and in further consideration of the benefits and
advantages flowing from each to the other, covenant and agree as follows:
SECTION 1. EMPLOYMENT OF EMPLOYEE. Company hereby agrees to employ Employee
as EVP/COO.
SECTION 2. EMPLOYEE'S BEST EFFORTS. Employee hereby accepts employment by
Company, and agrees to devote his or her entire time and best efforts to this
employment. Employee agrees to perform such other duties as are customarily
performed by one holding such position in other, same or similar businesses as
that engaged in by Company, and shall also render such other and unrelated
services and duties as may be assigned to him or her from time to time by
Company.
<PAGE> 2
SECTION 3. TERMS OF EMPLOYMENT.
(a) Company and Employee understand and agree that the term of employment
of this Agreement shall be for a period of three years from the date hereof and
thereafter shall continue indefinitely until terminated by either party pursuant
to the terms herein.
(b) Said employment may be terminated with cause, and no notice or
severance is owed. Involuntary termination with cause is defined as a dismissal
at any time based on failure to conform to the conditions of employment,
material breach of this Agreement, gross misconduct or willful violation of
Company policy or procedure as outlined in Section 2.12 on Involuntary
Termination contained in the Company's Human Resources Policies and Procedures
Manual, as amended from time to time.
(c) In the event this Agreement is terminated without cause, then the
Employee shall be entitled to any payments payable under Section 4 which have
been earned but not yet paid,and in addition, Employee shall be entitled to
severance pay equal to Employee's then current salary payable in accordance with
the Company's usual payroll practices for a period equal to twelve (12) months
(the "Severance Payment"). In the event that Employee is entitled to a Severance
Payment pursuant to this Section 3(c) and Employee secures employment at any
time during the twelve (12) months following termination (the "Severance
Period"), then the Company shall be entitled to a credit against its obligations
to make the Severance Payment in the amount up to seventy-five percent (75%) of
Employee's base salary during the Severance Period paid to him by his new
employer.
(d) Notwithstanding anything contained herein to the contrary, in the event
Company shall discontinue operating its business, then this Agreement shall
terminate as of the last day of the month on which Company ceases operations
with the same force and effect as if such last day of the month were originally
set as the termination date hereof.
SECTION 4. EMPLOYEE'S COMPENSATION AND EXPENSES.
(a) As compensation for the service to be performed by Employee under this
Agreement, Company shall pay Employee, and Employee shall accept from Company, a
base salary of 145,000 dollars ($145,000) per annum paid on a bi-weekly
basis.
(b) In addition to the base salary, some employees shall be entitled to
earn additional compensation pursuant to a bonus plan, and an employee stock
option plan. If Employee is eligible for either a bonus plan or the stock option
plan, copies of the plan will be provided to Employee.
(c) The Employee shall be provided the same benefits and on the same basis
as other employees of the Company including, but not limited to, the 401(k)
plan, life insurance, disability insurance and health insurance.
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<PAGE> 3
(d) Employee's salary, bonuses and allowances may be modified, as agreed
upon between Employee and Company, from time to time, and any such modifications
made during the term of this Agreement shall be incorporated as part of the
Agreement.
(e) Company shall reimburse Employee for all other reasonable, ordinary and
necessary expenses incurred by Employee on Company's behalf pursuant to
Company's directions and subject to Company's restrictions and requirements.
SECTION 5. FUNDS COLLECTED BY EMPLOYEE. Employee does explicitly understand and
agree that all funds received by him on behalf of Company, as may be authorized
by Company from time to time, shall be held in trust by Employee and shall
immediately be remitted to Company by Employee. Additionally, Employee shall be
responsible for any and all technical data, books, equipment, or other property
of Company which may come into his possession by reason of his or her
employment. In the event this employment is terminated for any reason
whatsoever, Employee shall immediately turn in to Company and account for all
such funds, equipment and property which may be in the possession of Employee at
such termination.
SECTION 6. RESTRICTIVE COVENANTS.
(a) Covenant not to Compete. The Employee hereby expressly covenants and
agrees, which covenants and agreements are of the essence of this contract, that
he or she will not, during the term of this Agreement and for a period of two
(2) years immediately following the termination of this Agreement, for any
reason whatsoever, directly or indirectly, for himself or herself, or on behalf
of, or in conjunction with, any other person, persons, company, partnership or
corporation:
(1) call upon any customer or customers of Company solicited or contacted
by Employee while at the Companyor whose account was serviced by
Employee while at the Company, pursuant to his or her employment
hereunder, for the purpose of soliciting, selling or servicing any
programs or services of the type sold and serviced by Company during
the term hereof within the state of Florida and such other states in
which the Company shall conduct business;
(2) nor will Employee divert, solicit or take away any customer or
customers of Company or the business or patronage of any such
customers of the Company for the purpose of selling or servicing any
programs or services of the type sold and serviced by Company during
the term hereof,
(3) nor will Employee call upon any prospective customer or customers of
the Company, solicited or contacted by Employee or Employee's staff
pursuant to his or her employment hereunder, for the purpose of
soliciting, selling or servicing programs or services of the type sold
and serviced by Company during the term hereof within the State of
Florida and such other states in which the Company shall conduct
business. For purposes of this Agreement, it is agreed between the
parties hereto that prospective customers are defined as those called
upon by Employee or by Employee's staff two (2) times or more during
any part of the six (6) month period next preceding the termination of
this Agreement for any reasons whatsoever, or those prospective
customers as listed by Employee or by Employee's staff as active
potential prospects on Employee's weekly or monthly
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<PAGE> 4
sales call reports submitted to Company during any part of the six (6)
month period next preceding the termination of this Agreement for any
reasons whatsoever;
(4) nor upon termination of Employee's employment from Company, whether by
resignation, discharge, or otherwise, and for a period of two (2)
years from the date of termination, shall Employee, directly or
indirectly, for himself or herself or on behalf of, or in conjunction
with, any other person, persons, company, partnership or corporation:
solicit, approach, or call upon any Company employee for the purpose
of retaining or hiring the Company employee in any capacity. In the
event of a breach or threatened breach by Employee of the provisions
of this paragraph, Company shall be entitled to an injunction
restraining Employee from directly or indirectly soliciting,
approaching, or calling upon any Company employee for the purpose of
retaining or hiring the Company employee in any capacity and/or in
fact hiring the Company employee in any capacity; and, in addition to
obtaining an injunction, Company shall be entitled to recover damages
from Employee. In the event any Court determines the specified time
period to be unreasonable, arbitrary, or against public policy, a
lesser time period which is determined to be reasonable, non-arbitrary
and not against public policy may be enforced against Employee by
injunction, as well as by all other legal remedies available to
Company. In the event of any legal action in connection with this
agreement, the prevailing party shall be entitled to recover all of
its legal expenses, including reasonable attorney's fees and costs,
whether the same are incurred in connection with trial or during an
appeal and to have the same awarded as part of the judgment in the
proceeding in which such legal expenses and attorney's fees were
incurred.
(b) Nondisclosure. Employee recognizes and acknowledges that the list of
the Company's customers, trade secrets, data processing systems, computer
software, computer programs, or other systems, data, methods, or procedures
developed or used by the Company, as they may exist from time to time, are
valuable, special and unique assets of the Company's business. The Employee will
not, during or after the term of his or her employment without the prior written
consent of the Company, which consent may be arbitrarily withheld, and except to
the extent necessary to accomplish assignments on behalf of the Company in which
the Employee is, at any given time during the term of Employee's tenure with the
Company, currently and actively engaged, possess, transmit, copy, reproduce, or
disclose the list of the Company's customers or any part thereof or any of the
Company's present or future trade secrets, or any data processing systems,
computer software, computer programs or other systems, data, methods, or
procedures to any person, firm, corporation, association, or any other entity
for any reason or purpose whatsoever, nor will the undersigned assist anyone
else to do so. In the event of a breach or threatened breach by Employee of the
provisions hereof, the Company shall be entitled to an injunction restraining
Employee from disclosing, in whole or in part, the list of the Company's
customers or the Company's trade secrets, or from rendering any services to any
person, firm, corporation, association, or other entity to whom such list or
such trade secrets, in whole or in part, has been disclosed or is threatened to
be disclosed and requiring the return to the Company of all copies of customer
lists, manuals, data, software,
4
<PAGE> 5
computer programs, or written procedures in the possession of Employee. Nothing
herein shall be construed as prohibiting the Company from pursuing any other
remedies available to it for such breach or threatened breach, including the
recovery of damages from the Employee. The existence of any claim or cause of
action of Employee against the Company shall not constitute a defense to the
enforcement by the Company of this covenant. No failure of the Company to
exercise any right given hereunder shall be taken or construed as a waiver of
its right to seek any remedies by reason of any past, present, or future
breaches of the Agreement on the part of Employee.
SECTION 7. SEVERABILITY OF RESTRICTIVE COVENANTS. Company and Employee agree
that the restrictive covenants contained in Section 6, or any of its
sub-paragraphs, are severable and separate and the unenforceability of any
specific covenant therein shall not affect the validity of any other covenants
set forth therein. These covenants on the part of the Employee shall be
construed as an agreement independent of any other provision of this Agreement,
and the existence of any claim or cause of action of the Employee against
Company, whether predicated on this Agreement or otherwise, shall not constitute
a defense to the enforcement by the Company of said covenants. Employee agrees
and acknowledges that any violation by Employee of the covenants set forth in
Section 6 hereof would cause irreparable damage to Company, and Employee further
agrees that upon proof of the existence of such a violation of the covenants set
forth in said Section 6 hereof Company will be entitled to injunctive relief
against the Employee by any Court of competent jurisdiction. In the event any
Court of competent jurisdiction should determine that the territorial
restrictions set forth in Sections 6 hereof, and/or their durations, are
unreasonable in their scope, then, and in that event, the territorial
restrictions, and/or their duration, shall be limited to such territory and/or
duration as may be determined reasonable by a Court of competent jurisdiction.
SECTION 8. ATTORNEY'S FEES. The parties hereto agree that, in the event of any
legal action in connection with this Agreement, the prevailing party shall be
entitled to recover all of its legal expenses, including reasonable attorney's
fees and costs, whether the same are incurred in connection with trial or
appeal, and to have the same awarded as part of the judgment in the proceeding
in which such legal expenses and attorney's fees were incurred.
SECTION 9. CHOICE OF LAW AND VENUE. This agreement shall be construed according
to the laws of the State of Florida, without regard to choice of law provisions.
Venue to resolve any dispute under this Agreement shall be Pinellas County,
Florida.
SECTION 10. INVALIDITY OF PRIOR AGREEMENTS. This Agreement supersedes all prior
agreements and understandings between Employee and Company and this Agreement
expresses the whole and entire agreement between the parties with reference to
Employee's employment and it cannot be modified or changed by any oral or verbal
promise by whomsoever made, nor shall any written modification of it be binding
on Company until such written modification shall have been approved in writing
by the President of the Company.
SECTION 11. SEVERABILITY. All agreements and covenants contained herein are
severable and, in the event any of them shall be held to be invalid, illegal or
unenforceable by any
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<PAGE> 6
competent Court, this contract shall be interpreted as if such invalid, illegal
or unenforceable agreement or covenants were not contained herein.
SECTION 12. NON-WAIVER OF RIGHTS. All of the rights of Company and Employee
hereunder shall be cumulative and not alternative, but a waiver or indulgence on
the part of Company or Employee of any rights or entitlement hereunder shall not
be construed as a waiver of any other rights or entitlements hereunder by either
Company or Employee. No notice shall be required by Company or Employee to
enforce strict adherence to all the terms of this agreement.
SECTION 13. MISCELLANEOUS PROVISIONS. The provisions of this Agreement shall
extend to the successors, surviving corporations and assigns of Company.
Singular and masculine pronouns shall include plural, feminine, and artificial
persons and entities whenever the context permits.
SECTION 14. EMPLOYEE'S ACKNOWLEDGMENT. Employee certifies that he is over
twenty-one (21) years of age and hereby acknowledges having read the entire
contents of this Agreement before signing his name below and that he has
received a copy hereof for his own use.
IN WITNESS WHEREOF, the Company and Employee have affixed their hands and
seals on this, the day and year first above written, the Company acting through
its duly authorized officers.
Signed, Sealed and Delivered in the Presence of:
WITNESSES: "COMPANY"
Insurance Management Solutions Group, Inc.
By: /s/ David K. Meehan
- ----------------------------------- ---------------------------------------
As Its: Chairman
- ----------------------------------- -----------------------------------
Date: June 11, 1998
-------------------------------------
WITNESSES: "EMPLOYEE"
/s/ Jeffrey S. Bragg
- ----------------------------------- ------------------------------------------
Date: 6/11/98
- ----------------------------------- -------------------------------------
6
<PAGE> 1
EXHIBIT 10.78
EMPLOYMENT AGREEMENT
AGREEMENT made effective this 11th day of June, 1998 between INSURANCE
MANAGEMENT SOLUTIONS GROUP, INC., a Florida corporation, which corporation,
together with its subsidiary companies, shall hereinafter be referred to as
"Company" and Kelly King, of ____________, Florida, hereinafter referred to
as "Employee".
R E C I T A L S :
1. Company is engaged in the business of providing comprehensive
outsourcing services to the property and casualty insurance industry with an
emphasis on providing full third party administration outsourcing services for
flood insurers and is also a provider of flood zone determination and ancillary
services primarily to insurance companies and financial institutions throughout
the State of Florida and such other states as the Company shall deem
appropriate.
2. The Company's business requires secrecy in connection with the methods
and systems employed, and, for the proper protection of the Company, it is
absolutely necessary and essential (which necessity Employee expressly
recognizes) that all matters connected with, arising out of, or pertaining to
the business of the Company, its methods and systems and the names of its
customers be kept secret and confidential as goodwill belonging to the Company.
3. The Company will sustain great loss and damage, if during the term of
this Agreement, or for a period of two (2) years immediately following its
termination for any reason whatsoever, the Employee should, for himself or
herself, or on behalf of any other person, persons, company, partnership or
corporation, call upon the customers or clientele of the Company for the purpose
of soliciting, selling or servicing any of the programs or services of the
Company as described in Section 1 hereof, or the solicitation of any Company
employee for the purpose of hiring such employee, for which loss and damage, by
reason of his or her financial circumstances, Employee could not be compelled by
law to respond to damages in any action at law.
NOW, THEREFORE, Company and Employee, in consideration of the covenants and
agreements herein contained and in further consideration of the benefits and
advantages flowing from each to the other, covenant and agree as follows:
SECTION 1. EMPLOYMENT OF EMPLOYEE. Company hereby agrees to employ Employee
as VP/CFO.
SECTION 2. EMPLOYEE'S BEST EFFORTS. Employee hereby accepts employment by
Company, and agrees to devote his or her entire time and best efforts to this
employment. Employee agrees to perform such other duties as are customarily
performed by one holding such position in other, same or similar businesses as
that engaged in by Company, and shall also render such other and unrelated
services and duties as may be assigned to him or her from time to time by
Company.
<PAGE> 2
SECTION 3. TERMS OF EMPLOYMENT.
(a) Company and Employee understand and agree that the term of employment
of this Agreement shall be for a period of three years from the date hereof and
thereafter shall continue indefinitely until terminated by either party pursuant
to the terms herein.
(b) Said employment may be terminated with cause, and no notice or
severance is owed. Involuntary termination with cause is defined as a dismissal
at any time based on failure to conform to the conditions of employment,
material breach of this Agreement, gross misconduct or willful violation of
Company policy or procedure as outlined in Section 2.12 on Involuntary
Termination contained in the Company's Human Resources Policies and Procedures
Manual, as amended from time to time.
(c) In the event this Agreement is terminated without cause, then the
Employee shall be entitled to any payments payable under Section 4 which have
been earned but not yet paid,and in addition, Employee shall be entitled to
severance pay equal to Employee's then current salary payable in accordance with
the Company's usual payroll practices for a period equal to twelve (12) months
(the "Severance Payment"). In the event that Employee is entitled to a Severance
Payment pursuant to this Section 3(c) and Employee secures employment at any
time during the twelve (12) months following termination (the "Severance
Period"), then the Company shall be entitled to a credit against its obligations
to make the Severance Payment in the amount up to seventy-five percent (75%) of
Employee's base salary during the Severance Period paid to him by his new
employer.
(d) Notwithstanding anything contained herein to the contrary, in the event
Company shall discontinue operating its business, then this Agreement shall
terminate as of the last day of the month on which Company ceases operations
with the same force and effect as if such last day of the month were originally
set as the termination date hereof.
SECTION 4. EMPLOYEE'S COMPENSATION AND EXPENSES.
(a) As compensation for the service to be performed by Employee under this
Agreement, Company shall pay Employee, and Employee shall accept from Company, a
base salary of 125,000 dollars ($125,000) per annum paid on a bi-weekly
basis.
(b) In addition to the base salary, some employees shall be entitled to
earn additional compensation pursuant to a bonus plan, and an employee stock
option plan. If Employee is eligible for either a bonus plan or the stock option
plan, copies of the plan will be provided to Employee.
(c) The Employee shall be provided the same benefits and on the same basis
as other employees of the Company including, but not limited to, the 401(k)
plan, life insurance, disability insurance and health insurance.
2
<PAGE> 3
(d) Employee's salary, bonuses and allowances may be modified, as agreed
upon between Employee and Company, from time to time, and any such modifications
made during the term of this Agreement shall be incorporated as part of the
Agreement.
(e) Company shall reimburse Employee for all other reasonable, ordinary and
necessary expenses incurred by Employee on Company's behalf pursuant to
Company's directions and subject to Company's restrictions and requirements.
SECTION 5. FUNDS COLLECTED BY EMPLOYEE. Employee does explicitly understand and
agree that all funds received by him on behalf of Company, as may be authorized
by Company from time to time, shall be held in trust by Employee and shall
immediately be remitted to Company by Employee. Additionally, Employee shall be
responsible for any and all technical data, books, equipment, or other property
of Company which may come into his possession by reason of his or her
employment. In the event this employment is terminated for any reason
whatsoever, Employee shall immediately turn in to Company and account for all
such funds, equipment and property which may be in the possession of Employee at
such termination.
SECTION 6. RESTRICTIVE COVENANTS.
(a) Covenant not to Compete. The Employee hereby expressly covenants and
agrees, which covenants and agreements are of the essence of this contract, that
he or she will not, during the term of this Agreement and for a period of two
(2) years immediately following the termination of this Agreement, for any
reason whatsoever, directly or indirectly, for himself or herself, or on behalf
of, or in conjunction with, any other person, persons, company, partnership or
corporation:
(1) call upon any customer or customers of Company solicited or contacted
by Employee while at the Companyor whose account was serviced by
Employee while at the Company, pursuant to his or her employment
hereunder, for the purpose of soliciting, selling or servicing any
programs or services of the type sold and serviced by Company during
the term hereof within the state of Florida and such other states in
which the Company shall conduct business;
(2) nor will Employee divert, solicit or take away any customer or
customers of Company or the business or patronage of any such
customers of the Company for the purpose of selling or servicing any
programs or services of the type sold and serviced by Company during
the term hereof,
(3) nor will Employee call upon any prospective customer or customers of
the Company, solicited or contacted by Employee or Employee's staff
pursuant to his or her employment hereunder, for the purpose of
soliciting, selling or servicing programs or services of the type sold
and serviced by Company during the term hereof within the State of
Florida and such other states in which the Company shall conduct
business. For purposes of this Agreement, it is agreed between the
parties hereto that prospective customers are defined as those called
upon by Employee or by Employee's staff two (2) times or more during
any part of the six (6) month period next preceding the termination of
this Agreement for any reasons whatsoever, or those prospective
customers as listed by Employee or by Employee's staff as active
potential prospects on Employee's weekly or monthly
3
<PAGE> 4
sales call reports submitted to Company during any part of the six (6)
month period next preceding the termination of this Agreement for any
reasons whatsoever;
(4) nor upon termination of Employee's employment from Company, whether by
resignation, discharge, or otherwise, and for a period of two (2)
years from the date of termination, shall Employee, directly or
indirectly, for himself or herself or on behalf of, or in conjunction
with, any other person, persons, company, partnership or corporation:
solicit, approach, or call upon any Company employee for the purpose
of retaining or hiring the Company employee in any capacity. In the
event of a breach or threatened breach by Employee of the provisions
of this paragraph, Company shall be entitled to an injunction
restraining Employee from directly or indirectly soliciting,
approaching, or calling upon any Company employee for the purpose of
retaining or hiring the Company employee in any capacity and/or in
fact hiring the Company employee in any capacity; and, in addition to
obtaining an injunction, Company shall be entitled to recover damages
from Employee. In the event any Court determines the specified time
period to be unreasonable, arbitrary, or against public policy, a
lesser time period which is determined to be reasonable, non-arbitrary
and not against public policy may be enforced against Employee by
injunction, as well as by all other legal remedies available to
Company. In the event of any legal action in connection with this
agreement, the prevailing party shall be entitled to recover all of
its legal expenses, including reasonable attorney's fees and costs,
whether the same are incurred in connection with trial or during an
appeal and to have the same awarded as part of the judgment in the
proceeding in which such legal expenses and attorney's fees were
incurred.
(b) Nondisclosure. Employee recognizes and acknowledges that the list of
the Company's customers, trade secrets, data processing systems, computer
software, computer programs, or other systems, data, methods, or procedures
developed or used by the Company, as they may exist from time to time, are
valuable, special and unique assets of the Company's business. The Employee will
not, during or after the term of his or her employment without the prior written
consent of the Company, which consent may be arbitrarily withheld, and except to
the extent necessary to accomplish assignments on behalf of the Company in which
the Employee is, at any given time during the term of Employee's tenure with the
Company, currently and actively engaged, possess, transmit, copy, reproduce, or
disclose the list of the Company's customers or any part thereof or any of the
Company's present or future trade secrets, or any data processing systems,
computer software, computer programs or other systems, data, methods, or
procedures to any person, firm, corporation, association, or any other entity
for any reason or purpose whatsoever, nor will the undersigned assist anyone
else to do so. In the event of a breach or threatened breach by Employee of the
provisions hereof, the Company shall be entitled to an injunction restraining
Employee from disclosing, in whole or in part, the list of the Company's
customers or the Company's trade secrets, or from rendering any services to any
person, firm, corporation, association, or other entity to whom such list or
such trade secrets, in whole or in part, has been disclosed or is threatened to
be disclosed and requiring the return to the Company of all copies of customer
lists, manuals, data, software,
4
<PAGE> 5
computer programs, or written procedures in the possession of Employee. Nothing
herein shall be construed as prohibiting the Company from pursuing any other
remedies available to it for such breach or threatened breach, including the
recovery of damages from the Employee. The existence of any claim or cause of
action of Employee against the Company shall not constitute a defense to the
enforcement by the Company of this covenant. No failure of the Company to
exercise any right given hereunder shall be taken or construed as a waiver of
its right to seek any remedies by reason of any past, present, or future
breaches of the Agreement on the part of Employee.
SECTION 7. SEVERABILITY OF RESTRICTIVE COVENANTS. Company and Employee agree
that the restrictive covenants contained in Section 6, or any of its
sub-paragraphs, are severable and separate and the unenforceability of any
specific covenant therein shall not affect the validity of any other covenants
set forth therein. These covenants on the part of the Employee shall be
construed as an agreement independent of any other provision of this Agreement,
and the existence of any claim or cause of action of the Employee against
Company, whether predicated on this Agreement or otherwise, shall not constitute
a defense to the enforcement by the Company of said covenants. Employee agrees
and acknowledges that any violation by Employee of the covenants set forth in
Section 6 hereof would cause irreparable damage to Company, and Employee further
agrees that upon proof of the existence of such a violation of the covenants set
forth in said Section 6 hereof Company will be entitled to injunctive relief
against the Employee by any Court of competent jurisdiction. In the event any
Court of competent jurisdiction should determine that the territorial
restrictions set forth in Sections 6 hereof, and/or their durations, are
unreasonable in their scope, then, and in that event, the territorial
restrictions, and/or their duration, shall be limited to such territory and/or
duration as may be determined reasonable by a Court of competent jurisdiction.
SECTION 8. ATTORNEY'S FEES. The parties hereto agree that, in the event of any
legal action in connection with this Agreement, the prevailing party shall be
entitled to recover all of its legal expenses, including reasonable attorney's
fees and costs, whether the same are incurred in connection with trial or
appeal, and to have the same awarded as part of the judgment in the proceeding
in which such legal expenses and attorney's fees were incurred.
SECTION 9. CHOICE OF LAW AND VENUE. This agreement shall be construed according
to the laws of the State of Florida, without regard to choice of law provisions.
Venue to resolve any dispute under this Agreement shall be Pinellas County,
Florida.
SECTION 10. INVALIDITY OF PRIOR AGREEMENTS. This Agreement supersedes all prior
agreements and understandings between Employee and Company and this Agreement
expresses the whole and entire agreement between the parties with reference to
Employee's employment and it cannot be modified or changed by any oral or verbal
promise by whomsoever made, nor shall any written modification of it be binding
on Company until such written modification shall have been approved in writing
by the President of the Company.
SECTION 11. SEVERABILITY. All agreements and covenants contained herein are
severable and, in the event any of them shall be held to be invalid, illegal or
unenforceable by any
5
<PAGE> 6
competent Court, this contract shall be interpreted as if such invalid, illegal
or unenforceable agreement or covenants were not contained herein.
SECTION 12. NON-WAIVER OF RIGHTS. All of the rights of Company and Employee
hereunder shall be cumulative and not alternative, but a waiver or indulgence on
the part of Company or Employee of any rights or entitlement hereunder shall not
be construed as a waiver of any other rights or entitlements hereunder by either
Company or Employee. No notice shall be required by Company or Employee to
enforce strict adherence to all the terms of this agreement.
SECTION 13. MISCELLANEOUS PROVISIONS. The provisions of this Agreement shall
extend to the successors, surviving corporations and assigns of Company.
Singular and masculine pronouns shall include plural, feminine, and artificial
persons and entities whenever the context permits.
SECTION 14. EMPLOYEE'S ACKNOWLEDGMENT. Employee certifies that he is over
twenty-one (21) years of age and hereby acknowledges having read the entire
contents of this Agreement before signing his name below and that he has
received a copy hereof for his own use.
IN WITNESS WHEREOF, the Company and Employee have affixed their hands and
seals on this, the day and year first above written, the Company acting through
its duly authorized officers.
Signed, Sealed and Delivered in the Presence of:
WITNESSES: "COMPANY"
Insurance Management Solutions Group, Inc.
By: /s/ David K. Meehan
- ----------------------------------- ---------------------------------------
As Its: Chairman
- ----------------------------------- -----------------------------------
Date: 6/11/98
-------------------------------------
WITNESSES: "EMPLOYEE"
/s/ Kelly K. King
- ----------------------------------- ------------------------------------------
Date: 6/3/98
- ----------------------------------- -------------------------------------
6
<PAGE> 1
EXHIBIT 10.79
[SEAL]
STATE OF FLORIDA
DEPARTMENT OF STATE
I certify the attached is a true and correct copy of the Articles of Merger,
filed on July 2, 1998, for BANKERS HAZARD DETERMINATION SERVICES, INC. which
changed its name to GEOTRAC OF AMERICA, INC., the surviving Florida
corporation, as shown by the records of this office.
I further certify the document was electronically received under FAX audit
number H98000012371. This certificate is issued in accordance with section
15.16, Florida Statutes, and authenticated by the code noted below.
The document number of this corporation is M86460.
Given under my hand and the
Great Seal of the State of Florida,
at Tallahassee, the Capital, this the
Eighth day of July, 1998
Authentication Code: 198A00036621-070898-M86460 -1/1
/s/ SANDRA B. MORTHAM
----------------------------
Sandra B. Mortham
Secretary of State
<PAGE> 2
[SEAL]
FLORIDA DEPARTMENT OF STATE
Sandra B. Mortham
Secretary of State
July 8, 1998
GEOTRAC OF AMERICA, INC.
PO BOX 15707
ST PETERSBURG, FL 33733 US
Re: Document Number M86460
The Articles of Merger were filed July 2, 1998, for BANKERS HAZARD DETERMINATION
SERVICES, INC. which changed its name to GEOTRAC OF AMERICA, INC., the surviving
Florida corporation.
The certification you requested is enclosed. To be official, the certification
for a certified copy must be attached to the original document that was
electronically submitted and filed under FAX audit number H98000012371.
Should you have any further questions concerning this matter, please feel free
to call (850) 487-6050, the Amendment Filing Section.
Darlene Connell
Corporate Specialist
Division of Corporations Letter Number: 198A00036621
Division of Corporations - P.O. Box 6327 - Tallahassee, Florida 32314
<PAGE> 3
[SEAL]
FLORIDA DEPARTMENT OF STATE
Sandra B. Mortham
Secretary of State
ARTICLES OF MERGER
Merger Sheet
- ---------------------------------------------------------------------------
MERGING:
GEOTRAC, INC., an Ohio corporation not qualified to transact business in the
State of Florida
INTO
BANKERS HAZARD DETERMINATION SERVICES, INC. which changed its name to
GEOTRAC OF AMERICA, INC., a Florida corporation, M86460
File date: July 2, 1998
Corporate Specialist: Darlene Connell
<PAGE> 4
ARTICLES OF MERGER
ARTICLES OF MERGER, merging GEOTRAC, INC., an Ohio corporation into
BANKERS HAZARD DETERMINATION SERVICES, INC., a Florida corporation.
1. THESE ARTICLES OF MERGER are filed pursuant to Florida Statute Section
607.1101 et. seq.
2. Geotrac, Inc., an Ohio corporation and Bankers Hazard Determination
Services, Inc., a Florida corporation have duly adopted the Agreement and Plan
of Merger, a copy of which is attached hereto as Exhibit "A" and by reference
made a part hereof:
3. Geotrac, Inc. shall be merged into Bankers Hazard Determination
Services, Inc., and Bankers Hazard Determination Services, Inc. shall be the
surviving corporation; provided that Bankers Hazard Determination Services,
Inc. shall change it's name to Geotrac of America, Inc. as set forth in
Paragraph 4 hereof.
4. The Articles of Incorporation of Bankers Hazard Determination Services,
Inc. are hereby amended, by deleting Article I thereof in it's entirety and
substituting the following Article I in lieu thereof:
ARTICLE 1.
NAME
The name of this corporation is GEOTRAC OF AMERICA, INC.
5. The effective date of the merger shall be as of the close of business
on July 2, 1998.
6. The Agreement and Plan of Merger was duly adopted by the Board of
Directors and the Shareholders of Geotrac, Inc. on May 12, 1998.
7. The Agreement and Plan of Merger was duly adopted by the Board of
Directors and the Shareholders of Bankers Hazard Determination Services, Inc.
on May 29, 1998.
This instrument was prepared by and return to:
C. Anthony Sexton, Esq.
Fla. Bar #120936
PO Box 15707
St. Petersburg, FL 33733
(813) 823-4000 ext. 4894
<PAGE> 5
IN WITNESS WHEREOF, we have hereunto set our hands and seals this 12th day
of May, 1998
BANKERS HAZARD DETERMINATION
SERVICES, INC.
BY: /s/ G. KRISTIN DELANO
--------------------------------
G. Kristin Delano, Secretary
GEOTRAC, INC.
BY: /s/ DANIEL J. WHITE
--------------------------------
Daniel J. White, President
<PAGE> 6
EXHIBIT "A"
PLAN OF MERGER
PLAN OF MERGER between, Bankers Hazard Determination Services, Inc., a
Florida corporation and Geotrac, Inc., an Ohio corporation pursuant to Florida
Statute Section 607.1101.
1. The names of the two corporations planning to merge are Bankers
Determination Services, Inc. and Geotrac, Inc.
2. Geotrac, Inc. shall be merged into Bankers Hazard Determination
Services, Inc., and Bankers Hazard Determination Services, Inc. shall be the
surviving corporation; provided that Bankers Hazard Determination Services, Inc.
shall change it's name to Geotrac of America, Inc. as set forth in Paragraph 4
hereof.
3. The terms and conditions of the proposed merger are as follows:
There are 1000 shares of the common capital stock without par value of
Geotrac, Inc. There being no other stock of Geotrac, Inc. issued and
outstanding, upon the merger all of said shares of Geotrac, Inc. stock shall be
canceled; and
4. The Articles of Incorporation of Bankers Hazard Determination Services,
Inc. are hereby amended, by deleting Article I thereof in its entirety and
substituting the following Article I in lieu thereof:
ARTICLE I.
NAME
The name of this corporation is GEOTRAC OF AMERICA, INC.
The undersigned being the secretaries of Bankers Hazard Determination
Services, Inc. and Geotrac, Inc. respectively, hereby certify that the within
plan of merger is a true, correct and complete copy of said plan as approved by
the Directors and Shareholders of Bankers Hazard Determination Services, Inc.
and the Directors and Shareholders of Geotrac, Inc. all on the 12th day of May,
1998, to be effective the 2nd day of July, 1998.
BANKERS HAZARD DETERMINATION
SERVICES, INC.
BY: /s/ G. KRISTIN DELANO
------------------------------------
G. Kristin Delano, Secretary
<PAGE> 7
Geotrac, Inc.
BY: /s/ DANIEL J. WHITE
--------------------------------------
Daniel J. White, President
STATE OF OHIO
COUNTY OF CUYAHOGA
The foregoing instrument was acknowledged before me this 12th day of May
1998, by G. Kristin Delano as Secretary of Bankers Hazard Determination
Services, Inc., a corporation, on behalf of the corporation. He is personally
known to me or who has produced identification, and did not take an oath.
/s/ IRA KAPLAN
-------------------------------------
Ira Kaplan, Notary Public and
attorney-at-law
My Commission has no expiration date
STATE OF OHIO
COUNTY OF CUYAHOGA
The foregoing instrument was acknowledged before me this 12th day of May
1998, by Daniel J. White, as President of Geotrac, Inc., an Ohio corporation,
on behalf of the corporation. He is personally known to me or who has produced
identification, and did not take an oath.
/s/ IRA KAPLAN
-------------------------------------
Ira Kaplan, Notary Public and
attorney-at-law
My Commission has no expiration date
2
<PAGE> 8
STATE OF OHIO
COUNTY OF CUYAHOGA
The foregoing instrument was acknowledged before me this 12th day of May,
1998, by G. Kristin Delano, as Secretary of Bankers Hazard Determination
Services, Inc., a Florida corporation, on behalf of the corporation
PERSONALLY KNOWN X OR PRODUCED IDENTIFICATION
---
TYPE OF IDENTIFICATION PROVIDED
---------------------
/s/ IRA KAPLAN
-------------------------------------
Ira Kaplan, Notary Public and
attorney-at-law
My Commission has no expiration date
STATE OF OHIO
COUNTY OF CUYAHOGA
The foregoing instrument was acknowledged before me this 12th day of May,
1998, by Daniel J. White, as President of Geotrac, Inc., an Ohio corporation, on
behalf of the corporation
PERSONALLY KNOWN X OR PRODUCED IDENTIFICATION
---
TYPE OF IDENTIFICATION PROVIDED
---------------------
/s/ IRA KAPLAN
-------------------------------------
Ira Kaplan, Notary Public and
attorney-at-law
My Commission has no expiration date
3
<PAGE> 1
EXHIBIT 10.80
[SEAL]
Prescribed by Approved_______
Bob Taft, Secretary of State Date___________
30 East Broad Street, 14th Floor Fee____________
Columbus, Ohio 43266-0418
Form MER (July 1994)
CERTIFICATE OF MERGER
In accordance with the requirements of 0hio law, the undersigned
corporations, limited liability companies and/or limited partnerships, desiring
to effect a merger, set forth the following facts:
I. SURVIVING ENTITY
A. The name of the entity surviving the merger is:
Bankers Hazard Determination Services, Inc.
------------------------------------------------------------------------
------------------------------------------------------------------------
(if the surviving entity is an Ohio limited partnership or qualified
foreign limited partnership, its registration number must be provided)
B. Name change: As a result of this merger, the name of the surviving
entity has been changed to the following: Geotrac of America, Inc.
-------------------------
-------------------------------------------------------------------
(complete only if the name of surviving entity is changing through
the merger)
C. The surviving entity is a: (Please check the appropriate box and
fill in the appropriate blanks)
[ ] Domestic (Ohio) corporation
[ ] Foreign (Non-Ohio) corporation incorporated under the laws of the
state/country of and licensed to transact business in the
--------
state of Ohio.
[X] Foreign (Non-Ohio) corporation incorporated under the laws of the
state/country of Florida, and NOT licensed to transact business in
-------
the state of Ohio.
[ ] Domestic (Ohio) limited liability company
[ ] Foreign (Non-Ohio) limited liability company organized under the
laws of the state/country of , and registered to do
----------------
business in the state of Ohio.
[ ] Foreign (Non-Ohio) limited liability company organized under the
laws of the state/country of , and NOT registered to do
-----------
business in the state of Ohio.
[ ] Domestic (Ohio) limited partnership, registration number
---------
<PAGE> 2
[ ] Foreign (Non-Ohio) limited partnership organized under the laws of
the state/country of , and registered to do business
-----------------
in the state of Ohio, under registration number
--------------------
[ ] Foreign (Non-Ohio) limited partnership organized under the laws of
the state/country of , and NOT registered to do
-----------------
business in the state of Ohio.
II. Merging Entities
The name, type of entity, and state/country of incorporation or
organization, respectively, of each entity, other than the survivor, which
is a party to the merger are as follows: (If insufficient space to cover
this item, please attach a separate sheet listing the merging entities;
Ohio registered or foreign qualified limited partnerships must include
registration number)
Name State/Country of Organization Type of Entity
Geotrac, Inc. Ohio corporation
- ---------------------- ----------------------- ----------------------
- ---------------------- ----------------------- ----------------------
- ---------------------- ----------------------- ----------------------
- ---------------------- ----------------------- ----------------------
- ---------------------- ----------------------- ----------------------
III. Merger Agreement on File
The name and mailing address of the person or entity from whom/which
eligible persons may obtain a copy of the agreement of merger upon written
request:
Name Address
Geotrac, Inc.
Daniel J. White 3900 Laylin Road
- ------------------ ---------------------------------------------
(street and number)
Norwalk, Ohio 44057
---------------------------------------------
(city, village or township) (state) (zip code)
IV. Effective Date of Merger
This merger is to be effective:
On July 31, 1998 (if a date is specified, the date must be a date on or
-------------
after the date of filing; the effective date of the merger cannot be earlier
than the date of filing; if no date is specified, the date of filing will be
the effective date of the merger).
<PAGE> 3
V. Merger Authorized
The laws of the state or country under which each constituent entity
exists, permits this merger.
This merger was adopted, approved and authorized by each of the constituent
entities in compliance with the laws of the state under which it is organized,
and the persons signing this certificate on behalf of each of the constituent
entities are duly authorized to do so.
VI. Statutory Agent
The name and address of the surviving entity's statutory agent upon whom
any process, notice or demand may be served is:
Name Address
- ------------------------- -------------------------------------------------
(complete street address)
-------------------------------------------------
(city, village or township) (zip code)
(This item MUST he completed if the surviving entity is foreign entity which is
not licensed, registered or otherwise authorized to conduct or transact business
in the State of Ohio)
Acceptance of Agent
The undersigned, named herein as the statutory agent for the above
referenced surviving entity, hereby acknowledges and accepts the appointment of
statutory agent for said entity.
--------------------------------------------------
Signature of Agent
(The acceptance of agent must he completed by domestic surviving entities if
through this merger the statutory agent for the surviving entity has changed, or
the named agent differs in any way from the name reflected on the Secretary of
State's records.)
VII. Statement of Merger
Upon filing, or upon such later date as specified herein, the merging
entity/entities listed herein shall merge into the listed surviving entity.
VIII. Amendments
The articles of incorporation, articles of organization or certificate of
limited partnership (strike the inapplicable terms) of the surviving domestic
entity herein, are amended as set forth in the attached "Exhibit A"
(Please note that any amendments to articles of incorporation, articles of
organization or to a certificate of limited partnership MUST be attached if
the surviving entity is a DOMESTIC corporation, limited liability company, or
limited partnership.)
<PAGE> 4
IX. Qualificafion or Licensure of Foreign Surviving Entity
A. The listed surviving foreign corporation, limited liability company, or
limited partnership desires to transact business in Ohio as a foreign
corporation, foreign limited liability company, or foreign limited
partnership, and hereby appoints the following as its statutory agent upon whom
process, notice or demand against the entity may be served in the State of
Ohio. The name and complete address of the statutory agent is:
2300 BP America Building
ACFB Incorporated 200 Public Square
- ----------------------------------------------------------------------------
(name) (street and number)
Cleveland , Ohio 44114
- -------------------------------- -----------------------------------
(city, village or township) (zip code)
The subject surviving foreign corporation, limited liability company or
limited partnership irrevocably consents to service of process on the statutory
agent listed above as long as the authority of the agent continues, and to
service of process upon the Secretary of State if the agent cannot be found, if
the corporation, limited liability company or limited partnership fails to
designate another agent when required to do so, or if the corporation's,
limited liability company's, or limited partnership's license or registration
to do business in Ohio expires or is cancelled.
B. The qualifying entity also states as follows: (complete only if
applicable)
1. Foreign Qualifying Limited Liability Company (If the qualifying
entity is a foreign limited liability company, the following
information must be completed)
a. The name of the limited liability company in its state of
organization/registration is
----------------------------
---------------------------------------------------------
b. The name under which the limited liability company desires
to transact business in Ohio is
--------------------------
c. The limited liability company was organized or registered on
-----------------------------------------------------------
month day year
under the laws of the state/country of
--------------------.
d. The address to which interested persons may direct request
for copies of the articles of organization, operating
agreement, bylaws, or other charter documents of the company
is:
---------------------------------------------------------
------------------------------------------------------------
<PAGE> 5
2. Foreign Qualifying Limited Partnership
(If the qualifying entity is a foreign limited partnership, the
following information must be completed)
a. The name of limited partnership is
------------------------
-----------------------------------------------------------
b. The limited partnership was formed on
----------------------
month day year
under the laws of the state/country of
---------------------
c. The address of the office of the limited partnership in its
state/country of organization is
---------------------------
-----------------------------------------------------------
d. The limited partnership's principal office address is
-----------------------------------------------------------
e. The names and business or residence addresses of the GENERAL
partners of the partnership are as follows:
Name Address
-----------------------------------------------------------
-----------------------------------------------------------
-----------------------------------------------------------
(If insufficient space to cover this item, please attach a
separate sheet listing the general partners and their
respective addresses)
f. The address of the office where a list of the names and
business or residence addresses of the limited partners and
their respective capital contributions is to be maintained
is:
-----------------------------------------------------------
-----------------------------------------------------------
The limited partnership hereby certifies that it shall
maintain said records until the registration of the limited
partnership in Ohio is cancelled or withdrawn.
<PAGE> 6
The undersigned constituent entities have caused this certificate of merger
to be signed by its duly authorized officers, partners and representatives on
the date(s) stated below.
Bankers Hazard Determination Services, Inc. Geotrac, Inc.
- ------------------------------------------- ----------------------------------
exact name of entity exact name of entity
By: /s/ G. Kristin Delano By: /s/ Daniel J. White
--------------------------------------- -------------------------------
Its: Corporate Secretary Its: President
-------------------------------------- -----------------------------
Date: 5/12/98 Date: 7/1/98
-------------------------------------- -----------------------------
- ------------------------------------------- ----------------------------------
exact name of entity exact name of entity
By: By:
--------------------------------------- -------------------------------
Its: Its:
-------------------------------------- -----------------------------
Date: Date:
-------------------------------------- -----------------------------
- ------------------------------------------- ----------------------------------
exact name of entity exact name of entity
By: By:
--------------------------------------- -------------------------------
Its: Its:
-------------------------------------- -----------------------------
Date: Date:
-------------------------------------- -----------------------------
- ------------------------------------------- ----------------------------------
exact name of entity exact name of entity
By: By:
--------------------------------------- -------------------------------
Its: Its:
-------------------------------------- -----------------------------
Date: Date:
-------------------------------------- -----------------------------
- ------------------------------------------- ----------------------------------
exact name of entity exact name of entity
By: By:
--------------------------------------- -------------------------------
Its: Its:
-------------------------------------- -----------------------------
Date: Date:
-------------------------------------- -----------------------------
(Please note that the chairman of the board, the president, vice president,
secretary or an assistant secretary must sign on behalf of each constituent
corporation, and at least one general partner must sign on behalf of each
constituent limited partnership; if insufficient space for signature, a
separate sheet should be attached containing such signatures)
<PAGE> 1
EXHIBIT 10.81
GUARANTY OF PAYMENT OF DEBT
This Guaranty of Payment of Debt (the "Agreement") is made and entered into
this 31st day of July 1998, by Insurance Management Solutions Group, Inc.
("IMSG"), a Florida corporation and Bankers Insurance Group, Inc. ("BIG"), a
Florida corporation. IMSG and BIG are collectively referred to herein as the
"Guarantors."
WHEREAS, on May 12, 1998, the Guarantors, Bankers Hazard Determination
Services, Inc. ("Bankers"), Geotrac, Inc. ("Geotrac") and Daniel J. and Sandra
White (the "Whites") entered into an Agreement and Plan of Merger (the "Merger
Agreement") pursuant to which Geotrac merged (the "Merger") with and into
Bankers with Bankers being the surviving corporation and changing its name to
Geotrac, Inc. (the "Company");
WHEREAS, as part of the merger consideration, for their shares of Geotrac,
the Whites received a Subordinated Promissory Note in the principal amount of
$1,500,000 issued by the Company (the "Note");
WHEREAS, as a condition to the consummation of the Merger, the Guarantors
agreed to guaranty all of the Company's obligations pursuant to or arising out
of the Note to the Whites (the "Debt");
NOW, THEREFORE, in consideration of the foregoing premises and other
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Guarantors agree as follows:
1. GUARANTY OF DEBT. Guarantors hereby absolutely and unconditionally, jointly
and severally, guaranty the prompt payment in full of all of the Debt as and
when the respective parts thereof become due and payable. If the Debt or any
part thereof shall not be paid in full when due and payable, the Whites in each
case shall have the right to proceed directly against either Guarantor under
this instrument to collect the payment in full of the Debt, regardless of
whether or not the Whites shall have theretofore proceeded or shall then be
proceeding against the Company or any other obligor, if any, or any of the
foregoing, it being understood that the Whites, in their sole discretion may
proceed against any obligor, and may exercise each right, power or privilege
that the Whites may then have, either simultaneously or separately, and, in any
event, at such time or times and as often and in such order as the Whites in
their sole discretion may from time to time deem expedient to collect the
payment in full of the Debt.
2. GUARANTORS' OBLIGATIONS ABSOLUTE AND UNCONDITIONAL. Regardless of the
duration of time, regardless of whether the Company may from time to time cease
to be indebted to the Whites and irrespective of any act, omission or course of
dealing whatever on the part of the Whites, Guarantors' liabilities and other
obligations under this instrument shall remain in full effect until the payment
in full of the Debt. Without limiting the generality of the foregoing:
<PAGE> 2
2.1. Guarantors' Waiver of Notice Presentment, etc. Each Guarantor waives
(a) presentment, demand for payment and notice of dishonor of the Debt or any
part thereof, or any other indebtedness incurred by the Company to the Whites,
(b) notice of any indulgence granted to any obligor and (c) any other notice to
which such Guarantor might, but for this waiver, be entitled;
2.2. The Whites's Rights Not Prejudiced by Action or Omission. The Whites
in their sole discretion may, without any prejudice to their rights under this
instrument, at any time or times, without notice to or the consent of either
Guarantor, (a) grant the Company whatever financial accommodations that the
Whites may from time to time deem advisable, even if the Company might be in
default in any respect and even if those financial accommodations might not
constitute indebtedness the payment of which is guaranteed hereunder, (b)
assent to any renewal, extension, consolidation or refinancing of the Debt or
any part thereof, (c) release any obligor, if any, irrespective of the
consideration, if any, received therefor, (d) grant any waiver or consent or
forbear from exercising any right, power or privilege that the Whites may have
or acquire, (e) assent to any amendment, deletion, addition, supplement or
other modification in, to or of any writing evidencing or securing any Debt or
pursuant to which any Debt is created, (f) grant any other indulgence to any
obligor, (g) accept any collateral for, or any other obligor upon, the Debt or
any part thereof, and (h) fail, neglect or omit in any way to realize upon any
collateral or to protect the Debt or any part thereof or any collateral
therefor;
2.3. Liabilities Absolute and Unconditional. Each Guarantor's liabilities
and other obligations under this instrument shall be absolute and unconditional
irrespective of any lack of validity or enforceability of the Note, or any
other agreement, instrument or document evidencing the obligations of the
Company to the Whites or related thereto, or any other defense available to
either Guarantor in respect of this instrument.
3. REPRESENTATIONS AND WARRANTIES. Each Guarantor represents and warrants that
(a) such Guarantor has the corporate power and right to execute and deliver this
instrument and to perform and observe the provisions hereof and that all
requisite corporate action has been taken; (b) this instrument, when executed,
is legal and binding upon such Guarantor in every respect; (c) no litigation or
proceeding is pending or threatened against such Guarantor before any court or
any administrative agency which, in the opinion of such Guarantor's counsel, is
reasonably expected to have a material adverse effect on such Guarantor's
financial condition; (d) such Guarantor is not insolvent as defined in any
applicable state or federal statute, nor will such Guarantor be rendered
insolvent by the execution and delivery of this instrument to the Whites; and
(e) such Guarantor does not intend to, nor does such Guarantor believe that such
Guarantor will, incur debts beyond such Guarantor's ability to pay them as they
mature.
4. BANKRUPTCY OF OBLIGOR. Without limiting the generality of any of the other
provisions hereof, each Guarantor specifically agrees that upon the filing or
other commencement of any bankruptcy or insolvency proceedings by, for or
against any obligor, including without limitation, any assignment for the
benefit of creditors or other proceedings intended to liquidate
-2-
<PAGE> 3
or rehabilitate any obligor, and the Whites, in their sole discretion, may
declare the unpaid principal balance of and accrued interest on the Debt to be
forthwith due and payable in full without notice.
5. TERMINATION. Notwithstanding any of the provisions contained herein, in the
event of a closing of an underwritten public offering of the capital stock of
IMSG that results in the capital stock of IMSG becoming registered under the
Securities Exchange Act of 1934, as amended, (the "IPO"), the obligations of BIG
under this Agreement shall be terminated and cease to exist on and after the
consummation of the IPO.
6. WAIVER OF GUARANTORS' RIGHTS AGAINST BORROWER AND COLLATERAL. To the extent
permitted by law, each Guarantor waives any claim or other right which either
Guarantor might now have or hereafter acquire against the Company or any other
obligor which arises from the existence or performance of either Guarantor's
liabilities or other obligations under this instrument, including, without
limitation, any right of subrogation, reimbursement, exoneration, contribution,
indemnification, and any right to participate in any claim or remedy of the
Whites against the Company whether or not such claim, remedy or right arises in
equity, or under contract, statute or common law.
7. NOTICE. All notices, requests, demands and other communications provided
for hereunder shall be in writing and, if to either Guarantor, mailed or
delivered to it, addressed to it at the address specified on the signature page
of this instrument, or if to the Whites, mailed or delivered to it, addressed to
the address of the Whites specified on the notice provisions of the Merger
Agreement. All notices, statements, requests, demands and other communications
provided for hereunder shall be deemed to be given or made when delivered or
forty-eight (48) hours after being deposited in the mails with postage prepaid
by registered or certified mail, addressed as aforesaid, or sent by facsimile
with telephonic confirmation of receipt, except that notices from either
Guarantor to the Whites pursuant to any of the provisions hereof shall not be
effective until received by the Whites.
8. MISCELLANEOUS. This instrument shall bind both Guarantors and both
Guarantors' successors and assigns and shall inure to the benefit of the Whites
and their heirs, executors, successors and assigns, including (without
limitation) each holder of any note evidencing any Debt. The provisions of this
instrument and the respective rights and duties of Guarantors and the Whites
hereunder shall be interpreted and determined in accordance with Ohio law,
without regard to principles of conflict of laws. However, jurisdiction and
venue for any action brought to enforce the terms and conditions of this
Agreement shall be the domicile of the defendant or respondent in any such
action. If at any time one or more provisions of this instrument is or becomes
invalid, illegal or unenforceable in whole or in part, the validity, legality
and enforceability of the remaining provisions shall not in any way be affected
or impaired thereby. This instrument constitutes a final written expression of
all of the terms of this instrument, is a complete and exclusive statement of
those terms and supersedes all oral representations, negotiations and prior
writings, if any, with respect to the subject matter hereof. The captions
-3-
<PAGE> 4
herein are for convenience of reference only and shall be ignored in
interpreting the provisions of this instrument.
Executed and delivered to the Whites as of the date first written above, at
Cleveland, Ohio.
INSURANCE MANAGEMENT
SOLUTIONS GROUP, INC.
By: /s/ Jeffrey S. Bragg
---------------------------
Its: COO
--------------------------
BANKERS INSURANCE GROUP, INC.
By: /s/ G. Kristin Delano
---------------------------
Its: Corp. Secretary
--------------------------
-4-
<PAGE> 1
EXHIBIT 10.82
SECRECY AND CONFIDENTIALITY AGREEMENT
THIS AGREEMENT is made as of this 8th day of October, 1993 by and between
GEOTRAC, INC., 3900 Laylin Rd. Norwalk, Ohio 44857 (hereinafter referred to as
"Geotrac"), and Kirloskar Computer Services LTD, Laxmanrao Kirloskar Rd., Pune
411003 India, (hereinafter referred to as "Vendor").
RECITALS
Geotrac is a privately owned business engaged in development, research,
organization, engineering, merchandising, production, marketing and sale
(hereinafter along with "know-how" collectively referred to as "the secret
information"), principally to financial institutions Insurance concerns and
governmental agencies, and their suppliers, of a variety of computerized
geographical, topographical, and other mapping products and technologies;
Geotrac has developed and obtained certain valuable technology and "know-how"
relating to the field of Tax Mapping, Tax or Parcel Information Systems, Current
Agricultural Use Valuation (CAUV), Flood Disaster Protection Act (FDPA) Flood
Zone Determinations, Flood Disaster Protection Act (FDPA) Flood Zone Databases,
911 systems, and related Geographic Information Systems (GIS), and other such
products, including process parameters and specific methodologies and programs
and equipment used in the production process which "know-how" is not a matter of
general knowledge and is confidential information;
Vendor, in performing its functions for Geotrac, will necessarily be given
access to the secret information and "know-how", which will be identified by
Geotrac as such;
Vendor understands and agrees that the use of the secret information and
"know-how" by, or its disclosure to, any person or organization other than
Geotrac, and its employees or contractors would be highly detrimental and
damaging to Geotrac;
Vendor seeks to perform services or provide products or materials to Geotrac
which will be paid for by Geotrac.
NOW, THEREFORE, in consideration of the foregoing and the mutual promises
contained in this Agreement, Geotrac and Vendor do hereby agree as follows:
(1) Vendor agrees that all maps, data, and data files (whether graphic or
tabular, paper or machine readable) provided by Geotrac, developed for Geotrac
as interim or final products are and remain the property of Geotrac
(2) Vendor agrees that neither it nor any of its principals, subsidiaries,
divisions, employees, agents, independent contractors or other persons or
organizations over which it has control, will at any time during or after its
relationship with Geotrac, directly or indirectly use any of the secret
information or "know-how" for any purposes not associated with Geotrac's
activities, or disseminate or disclose any of the secret information or
"know-how" to any person or organization not connected with Geotrac, without the
prior express written consent of Geotrac. Vendor also agrees that it will
undertake all necessary and appropriate steps to ensure that the secrecy of the
secret information and "know-how" in its possession will be maintained.
1
<PAGE> 2
(3) Upon termination of its relationship with Geotrac, Vendor agrees that all
documents, records, notebooks and similar repositories of or containing secret
information or "know-how", including copies thereof, then in its possession,
whether prepared by it or others, will be delivered to Geotrac.
(4) For a period of five (5) years after termination of its relationship with
Geotrac, Vendor agrees that neither it nor any of its principals, subsidiaries,
divisions, employees, agents, independent contractors or other persons or
organizations over which it has control, will, directly or indirectly, become
engaged in the research or development, production, marketing or selling of a
product, process or service relating to Tax or Current Agricultural Use
Valuation (CAUV), Flood Disaster Protection Act (FDPA) Flood Zone
Determinations, Flood Disaster Protection Act (FDPA) Flood Zone Databases, or
911 systems.
(5) Vendor agrees that because of the confidential and secret nature of its
relationship with Geotrac and the trust that Geotrac will place in Vendor, and
the damages that Geotrac is likely to sustain if such confidential information
were divulged to competitors of Geotrac, Vendor shall not, at any time during
the term of this Agreement, any renewal thereof, or after the termination of
this Agreement, for any reason, directly or indirectly, divulge or reveal to any
person, firm or corporation, any information which Vendor may have secured
during the course of its association with Geotrac in regard to the secret
information or "know-how" and technology used by Geotrac and that in the event
Vendor shall breach this nondisclosure agreement, or in the event that such
breach appears to be an imminent possibility, Geotrac shall be entitled to all
legal and equitable remedies afforded it by law as a result thereof, and may, in
addition to any and all other forms of relief, recover from Vendor all
reasonable costs and attorneys' fees encountered by it in seeking any such
remedy and Vendor further understands and agrees that damages are not an
adequate remedy for breach of the provisions of this Agreement.
(6) This Agreement shall be governed for all purposes by the laws of the State
of Ohio. If any provision of this Agreement is declared void or otherwise
unenforceable, such provision shall be deemed to have been severed from this
Agreement, which shall otherwise remain in full force and effect.
(7) This Agreement shall be binding upon the parties hereto and upon their
respective executors, administrators, legal representatives, successors and
assigns.
IN WITNESS WHEREOF, the parties have executed this Agreement by their duly
authorized officers as of the day and year first above written.
GEOTRAC, INC.
By /s/ Daniel J. White Date: 10/8/93
----------------------- ---------
President
Kirloskar Computer Services LTD
By /s/ Parth Amin Date: 10/21/93
----------------------- ---------
Title
IN THE PRESENCE OF: Managing Director Date: 10/21/93
-------------------------- ---------
/s/ Illegible Signature 10/21/93
2
<PAGE> 3
STATEMENT OF CONFIDENTIALITY
Geotrac wishes to provide certain technical and operational information it
considers confidential to Kirloskar Computer Services LTD, Laxmanrao Kirloskar
Rd., Pune 411003 India so that the two parties may explore the possibility of a
working relationship.
Kirloskar Computer Services LTD hereby agrees to maintain confidentiality in
regard to any and all technical and operational information for a period of four
years. In addition, Kirloskar Computer Services LTD agrees to maintain
confidentiality, and not to use for its own purposes, technical and operational
information it may gain through its interaction with Geotrac, for a similar
period of four years, provided that such information is not previously known to
Kirloskar Computer Services LTD. It is not the intention of Kirloskar Computer
Services LTD to obtain such technical and operational information from Geotrac
for any use other than the evaluation of a potential relationship with Geotrac.
Kirloskar Computer Services LTD agrees not to reproduce or distribute any
written material, drawings, maps or machine readable data file provided to it
without the express written authorization of Geotrac, and to return such
material upon request.
Kirloskar Computer Services LTD hereby agrees that this agreement shall apply to
all it Directors, Officers, employees and representatives.
By: /s/ Parth Amin
---------------------------------
Title: Managing Director
Date: 10/21/93
-------------------------------
<PAGE> 1
EXHIBIT 21.1
LIST OF SUBSIDIARIES
OF INSURANCE MANAGEMENT SOLUTIONS GROUP, INC.
NAME STATE OF INCORPORATION
---- ----------------------
1. Insurance Management Solutions, Inc. Florida
2. Geotrac of America, Inc. Florida
<PAGE> 1
EXHIBIT 23.2
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We have issued our report dated May 29, 1998 (except for Notes 1 and 3 as to
which the date is July 31, 1998), accompanying the consolidated financial
statements of Insurance Management Solutions Group, Inc. and Subsidiaries
contained in the Registration Statement and Prospectus. We consent to the use of
the aforementioned report in the Registration Statement and Prospectus, and to
the use of our name as it appears under the caption "Experts".
GRANT THORNTON LLP
Tampa, Florida
September 4, 1998
<PAGE> 1
EXHIBIT 23.3
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We have issued our report dated May 29, 1998, accompanying the financial
statements of Geotrac, Inc. contained in the Registration Statement and
Prospectus. We consent to the use of the aforementioned report in the
Registration Statement and Prospectus and to the use of our name as it appears
under the caption "Experts".
GRANT THORNTON LLP
Tampa, Florida
September 4, 1998
<PAGE> 1
EXHIBIT 23.4
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We have issued our report dated May 29, 1998, accompanying the financial
statements of SMS Geotrac, Inc. contained in the Registration Statement and
Prospectus. We consent to the use of the aforementioned report in the
Registration Statement and Prospectus, and to the use of our name as it appears
under the caption "Experts".
GRANT THORNTON LLP
Tampa, Florida
September 4, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM INSURANCE
MANAGEMENT SOLUTIONS GROUP, INC. AND SUBSIDIARIES CONSOLIDATED FINANCIAL
STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 1997 AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH S-1
</LEGEND>
<RESTATED>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 115,070
<SECURITIES> 0
<RECEIVABLES> 1,218,741
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 10,276,694
<PP&E> 3,666,915
<DEPRECIATION> (1,335,579)
<TOTAL-ASSETS> 19,531,705
<CURRENT-LIABILITIES> 10,425,061
<BONDS> 0
0
6,750,000
<COMMON> 200,000
<OTHER-SE> (30,009)
<TOTAL-LIABILITY-AND-EQUITY> 19,531,705
<SALES> 0
<TOTAL-REVENUES> 38,505,979
<CGS> 0
<TOTAL-COSTS> 32,806,473
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 378,660
<INCOME-PRETAX> 5,521,855
<INCOME-TAX> 2,112,200
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,409,655
<EPS-PRIMARY> .17
<EPS-DILUTED> .17
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM INSURANCE
MANAGEMENT SOLUTIONS GROUP, INC. AND SUBSIDIARIES CONSOLIDATED FINANCIAL
STATEMENTS FOR THE SIX MONTHS ENDED JUNE 30, 1998 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FORM S-1
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<CASH> 207,243
<SECURITIES> 0
<RECEIVABLES> 1,153,074
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 15,280,791
<PP&E> 7,424,516
<DEPRECIATION> (2,192,074)
<TOTAL-ASSETS> 28,514,228
<CURRENT-LIABILITIES> 25,602,574
<BONDS> 0
0
0
<COMMON> 200,000
<OTHER-SE> (30,009)
<TOTAL-LIABILITY-AND-EQUITY> 28,514,228
<SALES> 0
<TOTAL-REVENUES> 22,396,723
<CGS> 0
<TOTAL-COSTS> 19,347,224
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 614,433
<INCOME-PRETAX> 3,026,456
<INCOME-TAX> 1,069,800
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,956,656
<EPS-PRIMARY> .10
<EPS-DILUTED> .10
</TABLE>
