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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.).
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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:
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"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
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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.
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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
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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
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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
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Title: V.P.
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BORROWER GEOTRAC, INC.,
an Ohio corporation
By: /s/ Karen R. Kiedrowicz
--------------------------------
Name: Karen R. Kiedrowicz
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Title: Vice President
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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.
Approximate current
principal outstanding
Jurisdiction: FL - State of Florida as of 7/1/98
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(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
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SCHEDULE 1
PERMITTED INDEBTEDNESS
Bankers Hazard Determination Services
??? of Notes Payable - Current and Long Term Portion
Of. # 207009
June 30, 1998
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
- -------------------------------------------------------------- -------- ---------- ------ -------- ------- -------
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
---------- --------- --------- ---------- ---------- ----------
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* 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.