-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Uw0C3RQVncXQdntGvRLckRrWqOk1wMq2582Ee5rlt79LipNU3Gv4mGXqDNsb/tql mhwwMc+Rgmn53kKJcTXBsg== 0000950144-99-010409.txt : 19990817 0000950144-99-010409.hdr.sgml : 19990817 ACCESSION NUMBER: 0000950144-99-010409 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 7 CONFORMED PERIOD OF REPORT: 19990630 FILED AS OF DATE: 19990816 FILER: COMPANY DATA: COMPANY CONFORMED NAME: INSURANCE MANAGEMENT SOLUTIONS GROUP INC CENTRAL INDEX KEY: 0001063167 STANDARD INDUSTRIAL CLASSIFICATION: FIRE, MARINE & CASUALTY INSURANCE [6331] IRS NUMBER: 593422536 STATE OF INCORPORATION: FL FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-25273 FILM NUMBER: 99693286 BUSINESS ADDRESS: STREET 1: 360 CENTRAL AVENUE CITY: ST PETERSBURG STATE: FL ZIP: 33701 BUSINESS PHONE: 8138234000 MAIL ADDRESS: STREET 1: 360 CENTRAL AVENUE CITY: ST PETERSBURG STATE: FL ZIP: 33701 10-Q 1 INSURANCE MANAGEMENT SOLUTIONS GROUP, INC. 1 =============================================================================== SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 10-Q (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 1999 or [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _________ to __________ COMMISSION FILE NUMBER: 000-25273 INSURANCE MANAGEMENT SOLUTIONS GROUP, INC. ------------------------------------------ (Exact name of registrant as specified in its charter) FLORIDA 59-3422536 ------- ---------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 360 CENTRAL AVENUE, ST. PETERSBURG, FLORIDA 33701 - ------------------------------------------- ----- (Address of Principal Executive Offices) (Zip Code) (727) 803-2040 -------------- Registrant's telephone number, including area code Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES [X] NO [ ] Indicate the number of shares outstanding of each of the issuer's classes of common stock as of the latest practicable date: Class: Common Stock, $.01 par value Outstanding at August 12, 1999: 12,678,743 =============================================================================== 2 INSURANCE MANAGEMENT SOLUTIONS GROUP, INC. FORM 10-Q QUARTERLY REPORT TABLE OF CONTENTS
Page Number ----------- PART I. FINANCIAL INFORMATION Item 1. Financial Statements.................................................................. 1 Consolidated Balance Sheets as of December 31, 1998 and June 30, 1999..................................................................... 1 Consolidated Statements of Income for the three months and six months ended June 30, 1998 and 1999........................................... 2 Consolidated Statement of Shareholders' Equity for the year ended December 31, 1998 and the six months ended June 30, 1999......................................................................... 3 Consolidated Statements of Cash Flows for the six months ended June 30, 1998 and 1999................................................... 4 Notes to Consolidated Financial Statements............................................ 5 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations................................................... 8 Item 3. Quantitative and Qualitative Disclosures about Market Risk............................ 13 PART II. OTHER INFORMATION Item 1. Legal Proceedings..................................................................... 14 Item 2. Changes in Securities and Use of Proceeds............................................. 14 Item 4. Submission of Matters to a Vote of Security Holders................................... 14 Item 6. Exhibits and Reports on Form 8-K...................................................... 15
The statements contained in this report on Form 10-Q that are not purely historical are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, including statements regarding the Company's expectations, hopes, beliefs, intentions, or strategies regarding the future. Forward-looking statements include statements regarding, among other things: (i) the potential loss of material customers; (ii) the failure to properly manage growth and successfully integrate acquired businesses; (iii) the Company's financing plans; (iv) trends affecting the Company's financial condition or results of operations; (v) the Company's growth and operating strategies; (vi) the ability to attract and retain qualified sales, information services and management personnel; (vii) the impact of competition from new and existing competitors; (viii) the financial condition of the Company's clients; (ix) potential increases in the Company's costs; (x) the declaration and payment of dividends; (xi) the potential for unfavorable interpretation of existing government regulations or new government legislation; (xii) the ability of the Company and its significant suppliers and large customers to address the Year 2000 Issue; (xiii) the impact of general economic conditions and interest rate fluctuations on the demand for the Company's services, including flood zone determination services; and (xiv) the outcome of certain litigation and administrative proceedings involving the Company's principal customer. Prospective investors are cautioned that any such forward-looking statements are not guarantees of future performance and involve risks and uncertainties, and that actual results may differ materially from those projected in the forward-looking statements as a result of various factors. All forward-looking statements included in this document are based on information available to the Company on the date hereof and the Company assumes no obligation to update any such forward-looking statement. Among the factors that could cause actual results to differ materially are the factors detailed in Item 2 of this report and the risks discussed under the caption "Risk Factors" included in the Company's Registration Statement on Form S-1, as amended (Reg. No. 333-57747). Prospective investors should also consult the risks described from time to time in the Company's Reports on Form 10-Q, 8-K and 10-K and Annual Reports to Shareholders. i 3 PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS INSURANCE MANAGEMENT SOLUTIONS GROUP, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS
DECEMBER 31, JUNE 30, 1998 1999 ----------- ----------- (UNAUDITED) ASSETS CURRENT ASSETS Cash and cash equivalents. . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,868,867 $10,210,513 Accounts receivable, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,549,044 3,732,111 Due from affiliates. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 570,139 3,853,616 Note and interest receivable - affiliate . . . . . . . . . . . . . . . . . . . . 5,271,406 -- Income taxes recoverable . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,148,902 -- Prepaid expenses and other assets. . . . . . . . . . . . . . . . . . . . . . . . 859,684 1,339,274 ----------- ----------- Total current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . 13,268,042 19,135,514 PROPERTY AND EQUIPMENT, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,507,897 7,699,212 OTHER ASSETS Goodwill, net. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,515,785 16,402,600 Customer contracts, net. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,316,667 1,216,667 Deferred tax assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 967,191 483,391 Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,326,273 1,162,154 ----------- ----------- Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $39,901,855 $46,099,538 =========== =========== LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Current portion of long-term debt. . . . . . . . . . . . . . . . . . . . . . . . $ 3,026,944 $ 550,706 Current portion of notes and interest payable - affiliates . . . . . . . . . . . 9,180,743 -- Accounts payable, trade. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 831,674 1,048,241 Due to affiliates. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,748,509 36,520 Employee related accrued expenses. . . . . . . . . . . . . . . . . . . . . . . . 1,804,677 2,645,910 Other accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 755,436 650,085 Income taxes payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -- 382,287 Deferred revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 214,891 214,891 ----------- ----------- Total current liabilities. . . . . . . . . . . . . . . . . . . . . . . . 17,562,874 5,528,640 LONG-TERM DEBT, less current portion. . . . . . . . . . . . . . . . . . . . . . . . 7,470,539 7,088,997 NOTES PAYABLE - AFFILIATES, less current portion. . . . . . . . . . . . . . . . . . 5,527,677 -- DEFERRED REVENUE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 651,602 761,850 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, 10,524,198 and 12,678,743 shares issued and outstanding at December 31, 1998 and June 30, 1999, respectively . . . . . . . . . . . . . . 105,242 126,787 Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,830,930 26,673,282 Retained earnings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,752,991 5,919,982 ----------- ----------- Total shareholders' equity . . . . . . . . . . . . . . . . . . . . . . . 8,689,163 32,720,051 ----------- ----------- Total liabilities and shareholders' equity . . . . . . . . . . . . . . . $39,901,855 $46,099,538 =========== ===========
The accompanying notes are an integral part of these consolidated statements. 1 4 INSURANCE MANAGEMENT SOLUTIONS GROUP, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME
THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30, 1998 1999 1998 1999 ------------ ------------ ------------ ------------ (UNAUDITED) (UNAUDITED) REVENUES Outsourcing services - affiliated ............ $ 8,811,470 $ 12,944,426 $ 17,305,258 $ 22,730,540 Outsourcing services ......................... 287,577 1,016,699 448,808 4,046,194 Flood zone determination services ............ 6,315,710 4,404,611 12,943,128 9,612,538 Flood zone determination services - affiliated 310,814 112,272 547,182 194,055 ------------ ------------ ------------ ------------ Total revenues ....................... 15,725,571 18,478,008 31,244,376 36,583,327 ------------ ------------ ------------ ------------ EXPENSES Cost of outsourcing services ................. 6,366,739 8,328,025 12,794,276 17,297,365 Cost of flood zone determination services .... 3,015,588 2,111,891 6,082,313 4,325,325 Selling, general and administrative .......... 1,855,352 2,912,356 3,540,194 5,424,474 Management services from Parent .............. 690,445 592,795 1,369,017 1,198,355 Deferred compensation (non-recurring item) ... 728,069 -- 728,069 -- Depreciation and amortization ................ 1,131,093 1,398,693 1,764,210 2,731,949 ------------ ------------ ------------ ------------ Total expenses ....................... 13,787,286 15,343,760 26,278,079 30,977,468 ------------ ------------ ------------ ------------ OPERATING INCOME ................................ 1,938,285 3,134,248 4,966,297 5,605,859 ------------ ------------ ------------ ------------ MINORITY INTEREST ............................... (17,190) -- (441,986) -- OTHER INCOME (EXPENSE): Interest income .............................. 106,356 101,208 106,356 222,238 Interest expense ............................. (580,263) (140,408) (986,211) (480,506) ------------ ------------ ------------ ------------ Total other income (expense) ......... (473,907) (39,200) (879,855) (258,268) INCOME BEFORE PROVISION FOR INCOME TAXES ........ 1,447,188 3,095,048 3,644,456 5,347,591 PROVISION FOR INCOME TAXES ...................... 598,900 1,246,600 1,687,800 2,180,600 ------------ ------------ ------------ ------------ NET INCOME ...................................... $ 848,288 $ 1,848,448 $ 1,956,656 $ 3,166,991 ============ ============ ============ ============ NET INCOME PER COMMON SHARE ..................... $ .08 $ .15 $ .20 $ .26 ============ ============ ============ ============ Weighted average common shares outstanding ...... 10,000,000 12,678,743 10,000,000 12,213,801 ============ ============ ============ ============
The accompanying notes are an integral part of these consolidated statements. 2 5 INSURANCE MANAGEMENT SOLUTIONS GROUP, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
ADDITIONAL COMMON PAID-IN RETAINED STOCK CAPITAL EARNINGS TOTAL -------- ----------- ----------- ------------ Balance at January 1, 1998 ........................ $100,000 $ 69,991 $ -- $ 169,991 Cash dividends to Parent ...................... -- -- (1,100,000) (1,100,000) Issuance of Common Stock as partial consideration for the acquisition of Geotrac, Inc. ............................... 5,242 5,760,939 -- 5,766,181 Net income .................................... -- -- 3,852,991 3,852,991 -------- ----------- ----------- ------------ Balance at December 31, 1998 ...................... 105,242 5,830,930 2,752,991 8,689,163 Issuance of Common Stock as partial consideration for the acquisition of ........ 1,545 1,698,455 -- 1,700,000 Colonial Claims (Note 3) (unaudited) ........ Initial public offering of Common Stock, net of offering costs (Note 2) (unaudited) .. 20,000 19,143,897 -- 19,163,897 Net income (unaudited) ........................ -- -- 3,166,991 3,166,991 -------- ----------- ----------- ------------ Balance at June 30, 1999 (unaudited) .............. $126,787 $26,673,282 $ 5,919,982 $ 32,720,051 ======== =========== =========== ============
The accompanying notes are an integral part of this consolidated statement. 3 6 INSURANCE MANAGEMENT SOLUTIONS GROUP, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED JUNE 30, 1998 1999 ------------ ------------ (UNAUDITED) CASH FLOWS FROM OPERATING ACTIVITIES: Net income ................................................. $ 1,956,656 $ 3,166,991 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization ........................... 1,036,724 2,731,949 Loss on disposal of property and equipment .............. 37,501 47,485 Equity in earnings of Geotrac, Inc. ..................... (485,034) -- Deferred income taxes, net .............................. (160,200) 377,411 Changes in assets and liabilities: Accounts receivable ................................... 65,667 817,826 Income taxes recoverable .............................. -- 1,148,902 Prepaid expenses and other current assets ............. (570,572) (151,272) Other assets .......................................... (518,149) 101,420 Accounts payable, trade ............................... (135,182) 198,742 Employee related accrued expenses ..................... (41,423) 841,233 Other accrued expenses ................................ 739,988 (789,443) Income taxes payable .................................. 1,232,358 382,287 Deferred revenue ...................................... 121,551 110,248 ------------ ------------ Net cash provided by operating activities .......... 3,279,885 8,983,779 ------------ ------------ CASH FLOWS FROM INVESTING ACTIVITIES: Acquisition of Colonial Claims, net of cash acquired ....... -- 1,092 Repayment of acquisition debt .............................. -- (500,000) Payment of dividend to prior Colonial Claims shareholders .. -- (670,000) Purchases of property and equipment ........................ (723,616) (1,346,862) ------------ ------------ Net cash used in investing activities .............. (723,616) (2,515,770) ------------ ------------ CASH FLOWS FROM FINANCING ACTIVITIES: Net proceeds received from initial public offering ......... -- 19,163,897 Net borrowings under line of credit ........................ -- 6,668,322 Repayment of debt .......................................... (1,101,035) (9,526,102) Repayment of affiliated notes and interest payable ......... -- (14,708,420) Collection of affiliated note and interest receivable ...... -- 5,271,406 Cash dividends paid to Parent .............................. (1,100,000) -- Net repayments to affiliates ............................... (263,061) (4,995,466) ------------ ------------ Net cash provided by (used in) financing activities (2,464,096) 1,873,637 ------------ ------------ INCREASE IN CASH AND CASH EQUIVALENTS ................................................. 92,173 8,341,646 CASH AND CASH EQUIVALENTS, beginning of period ................ 115,070 1,868,867 ------------ ------------ CASH AND CASH EQUIVALENTS, end of period ...................... $ 207,243 $ 10,210,513 ============ ============ SUPPLEMENTAL DISCLOSURES OF CASH FLOW ACTIVITIES: Cash paid for interest.................................. $ 172,527 $ 940,922 ============ ============ SUPPLEMENTAL DISCLOSURES OF NON-CASH INVESTING AND FINANCING ACTIVITIES: Purchase of net assets of Colonial Claims: Total consideration consists of: Common Stock................................................................. $ 1,700,000 Cash......................................................................... 500,000 Short term obligation........................................................ 500,000 ------------ 2,700,000 ============ Fair value of assets acquired................................................ 1,846,555 Liabilities assumed.......................................................... 1,478,306 ------------ Net assets................................................................... 368,249 Goodwill..................................................................... 2,331,751 ------------ $ 2,700,000 ============
The accompanying notes are an integral part of these consolidated statements. 4 7 INSURANCE MANAGEMENT SOLUTIONS GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation The accompanying consolidated financial statements of Insurance Management Solutions Group, Inc. and subsidiaries (the "Company") have been prepared in accordance with the instructions to Form 10-Q and, accordingly, do not include all of the disclosures required by generally accepted accounting principles. In the opinion of management, the accompanying unaudited consolidated financial statements include all adjustments, consisting of normal and recurring adjustments necessary for a fair presentation of the consolidated financial position, results of operations and cash flows for the periods presented. The accompanying consolidated financial statements should be read in conjunction with the Company's Annual Report on Form 10-K for the year ended December 31, 1998, as filed with the Securities and Exchange Commission on March 31,1999. The results of operations for the three month and six month periods ended June 30, 1999 are not necessarily indicative of the results that should be expected for a full fiscal year. Principles of Consolidation During July, 1998, the Company acquired the remaining 51% interest in Geotrac, Inc. For the three month and six month periods ended June 30, 1998, the operations of Geotrac, Inc. have been consolidated in the Company's statements of income, with minority interest deductions representing the net income of Geotrac, Inc. allocable to the 51% interest held by the majority stockholders prior to the Company acquiring the remaining interest. Net Income Per Common Share Net income per common share, which represents both basic and diluted earnings per share ("EPS"), 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:
THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30, 1998 1999 1998 1999 ----------- ----------- ----------- ----------- Numerator: Net income ................................... $ 848,288 $ 1,848,448 $ 1,956,656 $ 3,166,991 =========== =========== =========== =========== Denominator: Weighted average number of Common Shares used in basic EPS ........................ 10,000,000 12,678,743 10,000,000 12,213,801 Diluted stock options ........................ -- -- -- -- ----------- ----------- ----------- ----------- Weighted average number of Common Shares and diluted potential Common Shares used in diluted EPS ............................... 10,000,000 12,678,743 10,000,000 12,213,801 =========== =========== =========== ===========
For the six months ended June 30, 1999, options to purchase 719,000 shares of Common Stock were outstanding during the period but were not included in the computation of diluted earnings per share because the options' exercise prices were greater than the average market price of the Common Stock, and therefore, the effect would be antidilutive. NOTE 2. INITIAL PUBLIC OFFERING In February, 1999, the Company completed an initial public offering ("IPO") of 3,350,000 shares of Common Stock at a price of $11 per share. Of the 3,350,000 shares sold, 1,350,000 were sold by Venture Capital Corporation, a Cayman Islands company. The IPO generated net proceeds to the Company of approximately $19,164,000, after deducting offering expenses paid by the Company of approximately $1,296,000. Such offering expenses were charged to additional paid-in capital against the proceeds from the IPO. Refer to notes 6, 7, and 8 in the Company's consolidated financial statements included in the Annual Report on Form 10-K for the year ended December 31, 1998, for a description of the use of the net proceeds from the IPO. 5 8 INSURANCE MANAGEMENT SOLUTIONS GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED) (UNAUDITED) NOTE 3. ACQUISITION Effective January 7, 1999, the Company, through a wholly-owned subsidiary, acquired all of the issued and outstanding capital stock of Colonial Catastrophe Claims Corporation, a Florida corporation ("Colonial Catastrophe"), in exchange for (i) 154,545 shares of Common Stock, (ii) cash in the amount of $500,000, (iii) a promissory note in the principal amount of $500,000, and (iv) an additional payment of $300,000, payable in additional shares of Common Stock, based upon the net income before taxes of Colonial Claims (as hereinafter defined) for the year ending December 31, 1999. On January 15, 1999, Colonial Catastrophe was merged into the acquiring subsidiary and the name of the acquiring subsidiary was changed to "Colonial Claims Corporation" (hereinafter "Colonial Claims"). The total purchase price of the acquisition was allocated in accordance with the provisions of Accounting Principles Board Opinion No. 16, "Business Combinations", and accordingly was based on the fair value of the net tangible assets acquired on the date of acquisition. Had the acquisition of Colonial Claims occurred on January 1, 1998, the pro forma results of operations for the three and six month periods ended June 30, 1998 and 1999 would not have been materially different from the Company's historical results of operations. NOTE 4. LONG-TERM DEBT In June, 1999, the Company entered into a revolving line of credit agreement ("LOC") with a financial institution that provides for borrowings of up to two times the rolling four quarter earnings before interest, taxes, depreciation and amortization ("EBITDA"), but in no event more than $12,000,000. The LOC bears interest at a specified percentage over LIBOR (6.70% at June 30, 1999) based on the ratio of funded debt (as defined) to EBITDA. Interest payments are payable monthly and the remaining unpaid principal balance is due in full in July, 2001. The LOC is collateralized by substantially all of the Company's assets and is subject to certain quarterly financial covenants requiring the Company to maintain the following minimum ratios: (i) interest bearing debt to EBITDA of not more than 2.0 to 1.0, (ii) total liabilities to tangible net worth of not more than 1.0 to 1.0, and (iii) fixed charge coverage (as defined) of not less than 2.5 to 1.0. Net borrowings under the LOC, which totaled $6,664,084 as of June 30, 1999, are included in "Long-term debt, less current portion" in the accompanying June 30, 1999 consolidated balance sheet. NOTE 5. CONTINGENCIES Bankers Insurance Company ("BIC"), the Company's principal customer and a wholly-owned subsidiary of Bankers Insurance Group, Inc. (together with its subsidiaries, "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 Insurance Management Solutions, Inc. and several of whom are now employees of the Company) have been subpoenaed on behalf of the Federal Emergency Management Agency ("FEMA") to produce documentation or testify in connection with its investigation of certain cash management and claims processing practices of BIC. BIC is currently involved in discussions relating to the resolution of certain matters raised in the investigation. If the parties are unable to reach agreement in these matters, the United States could file suit under the False Claims Act and/or various common law and equitable theories. 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. The Company, based on information provided by BIG, does 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. It is impossible at this time to predict the ultimate outcome of these investigations. 6 9 INSURANCE MANAGEMENT SOLUTIONS GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED) (UNAUDITED) NOTE 6. RELATED PARTY TRANSACTIONS Effective April 1, 1999, the Company amended its existing service agreements with affiliated insurers to provide for minimum aggregate quarterly service fee payments through December 31, 1999 with respect to certain lines of business, provided that certain key tasks are performed timely. If such minimum service fee requirements with respect to said lines of business under the agreements had not been implemented as of April 1, 1999, aggregate affiliated outsourcing services revenues, which totaled $12.9 million and $22.7 million for the three month and six month periods ended June 30, 1999, respectively, would have been $11.1 million and $20.9 million for the three and six month periods ended June 30, 1999, respectively, in accordance with the terms of the affiliated service agreements as in effect prior to April 1, 1999. During the quarter ended June 30, 1999, the Company also entered into a Technical Support Services Agreement with BIG pursuant to which the Company provides BIG with certain technical support services, computer programming and systems analysis services. Under this agreement, such services are charged to BIG on a time and materials basis. During the quarter ended June 30, 1999, revenue from technical support services provided to BIG under this agreement totaled approximately $1.3 million, which is included in affiliated outsourcing services revenue in the accompanying consolidated statements of income. NOTE 7. SEGMENT INFORMATION The following table presents summarized financial information for the Company's reportable segments:
INTERCOMPANY OUTSOURCING FLOOD ZONE ELIMINATIONS CONSOLIDATED SERVICES DETERMINATIONS AND OTHER TOTALS ----------- -------------- ------------- ------------ THREE MONTHS ENDED JUNE 30, 1998 - - (UNAUDITED) Operating revenues - affiliated .. $ 9,189,502 $ 310,814 $ (378,032) $ 9,122,284 Operating revenues - unaffiliated 287,577 6,315,710 -- 6,603,287 Operating income ................. 562,177 1,376,108 -- 1,938,285 Identifiable assets .............. 18,663,358 13,071,726 (3,220,856) 28,514,228 THREE MONTHS ENDED JUNE 30, 1999 - - (UNAUDITED) Operating revenues - affiliated .. $13,070,948 $ 112,272 $ (126,522) $ 13,056,698 Operating revenues - unaffiliated 1,016,699 4,404,611 -- 5,421,310 Operating income ................. 2,375,694 758,554 -- 3,134,248 Identifiable assets .............. 31,800,787 25,469,111 (11,170,360) 46,099,538 SIX MONTHS ENDED JUNE 30, 1998 - - (UNAUDITED) Operating revenues - affiliated .. $17,992,154 $ 547,182 $ (686,896) $ 17,852,440 Operating revenues - unaffiliated 448,808 12,943,128 -- 13,391,936 Operating income ................. 1,260,824 3,705,473 -- 4,966,297 Identifiable assets .............. 18,663,358 13,071,726 (3,220,856) 28,514,228 SIX MONTHS ENDED JUNE 30, 1999 - - (UNAUDITED) Operating revenues - affiliated .. $22,953,095 $ 194,055 $ (222,555) $ 22,924,595 Operating revenues - unaffiliated 4,046,194 9,612,538 -- 13,658,732 Operating income ................. 3,486,993 2,118,866 -- 5,605,859 Identifiable assets .............. 31,800,787 25,469,111 (11,170,360) 46,099,538
7 10 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND 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:
THREE MONTHS ENDED SIX MONTHS ENDED JUNE 30, JUNE 30, -------------------- -------------------- 1998 1999 1998 1999 ----- ----- ----- ----- REVENUES Outsourcing services ................... 57.9% 75.6% 56.8% 73.2% Flood zone determination services ...... 42.1 24.4 43.2 26.8 ----- ----- ----- ----- Total revenues ..................... 100.0 100.0 100.0 100.0 ----- ----- ----- ----- EXPENSES Cost of outsourcing services ............. 40.5 45.1 40.9 47.3 Cost of flood zone determination services 19.2 11.4 19.5 11.8 Selling, general and administrative ...... 11.8 15.8 11.3 14.8 Management services from Parent .......... 4.4 3.2 4.4 3.3 Deferred compensation (non-recurring item) 4.6 -- 2.3 -- Depreciation and amortization ............ 7.2 7.6 5.6 7.5 ----- ----- ----- ----- Total expenses ..................... 87.7 83.1 84.0 84.7 ----- ----- ----- ----- Operating income ......................... 12.3 16.9 16.0 15.3 Minority interest ........................ (0.1) -- (1.4) -- Interest income .......................... 0.7 0.5 0.3 0.6 Interest expense ......................... (3.7) (0.8) (3.2) (1.3) ----- ----- ----- ----- Income before provision for income taxes . 9.2 16.6 11.7 14.6 Provision for income taxes ............... 3.8 6.6 5.4 5.9 ----- ----- ----- ----- Net income ............................... 5.4% 10.0% 6.3% 8.7% ===== ===== ===== =====
COMPARISON OF THE THREE MONTHS ENDED JUNE 30, 1998 AND 1999 Outsourcing Services Revenues. Outsourcing services revenues for the second quarter of 1999 increased 53.4% to $14.0 million from $9.1 million for the comparable period in 1998. The increase was primarily attributable to (i) revenue generated under an affiliated technical support services arrangement for both personal and commercial lines of insurance entered into effective April 1, 1999, (ii) growth in affiliated and unaffiliated flood premium processed by the Company, and (iii) incremental revenues from the recently acquired Colonial Claims. Effective April 1, 1999, the Company amended its existing service agreements with affiliated insurers to provide for minimum aggregate quarterly service fee payments through December 31, 1999 with respect to certain lines of business, provided that certain key tasks are performed timely. If such minimum service fee requirements with respect to said lines of business under the agreements had not been implemented as of April 1, 1999, aggregate affiliated outsourcing services revenues, which totaled $12.9 million for the three months ended June 30, 1999, would have been $11.1 million in accordance with the terms of the affiliated service agreements as in effect prior to April 1, 1999. Such minimums were established to compensate the Company for maintaining an infrastructure to process certain lines of business of affiliated insurers that have not grown as rapidly as originally forecasted. Flood Zone Determination Services Revenues. Flood zone determination services revenues for the second quarter of 1999 decreased 31.8% to $4.5 million from $6.6 million for the comparable period in 1998. The decrease in flood zone determination revenue was primarily attributable to a decrease in the demand for refinancing of mortgage loans which began in the second half of 1998 and has continued through the first half of 1999. Additionally, during the second quarter of 1999, the Company experienced a reduction in flood zone determination revenue from several large customers that are experiencing financial difficulties. Cost of Outsourcing Services. Cost of outsourcing services for the second quarter of 1999 increased 30.8% to $8.3 million from $6.4 million for the comparable period in 1998. As a percentage of outsourcing services revenues, cost of outsourcing services decreased during the second quarter of 1999 to 59.7% from 70.0% for the comparable period in 1998. The increase in cost of outsourcing services was primarily attributable to (i) incremental expenses incurred by the recently acquired Colonial Claims, (ii) increases in information technology costs due to staff additions and use of contract programmers to develop new unaffiliated programs, and (iii) incremental direct costs (primarily personnel) incurred to service the growth of both affiliated and unaffiliated flood premium business. 8 11 Cost of Flood Zone Determination Services. Cost of flood zone determination services for the second quarter of 1999 decreased 30.0% to $2.1 million from $3.0 million for the comparable period in 1998. As a percentage of flood zone determination revenues, cost of flood zone determination services increased during the second quarter of 1999 to 46.8% from 45.5% for the comparable period in 1998. The decrease in cost of flood zone determination services resulted primarily from the merger of Bankers Hazard Determination Services, Inc. ("BHDS") and Geotrac, Inc. in July, 1998 and a subsequent elimination of certain duplicated functions and facilities, as well as a redesign of certain production workflows in April, 1999 that enabled the Company to increase employee productivity and reduce expenses. Selling, General and Administrative Expense. Selling, general and administrative expenses for the second quarter of 1999 increased 57.0% to $2.9 million from $1.9 million for the comparable period in 1998. The increase in selling, general and administrative expenses was primarily attributable to (i) additional wages and related benefits associated with adding executive management, accounting, sales and marketing and other administrative staff to support the Company's expanded operations, (ii) incremental expenses incurred by the Company's direct marketing subsidiary, which was formed in August, 1998, (iii) incremental expenses incurred by the recently acquired Colonial Claims, and (iv) incremental expenses related to the addition of certain accounting and internal audit functions which were previously provided to the Company under the management service agreement with BIG. Management Services from Parent. Management services from Parent (i.e., BIG) for the second quarter of 1999 decreased 14.1% to $593,000 from $690,000 for the comparable period in 1998. The decrease was primarily related to an amendment to the management service agreement, which became effective January 1, 1999, pursuant to which certain accounting and internal audit functions are no longer performed by the Parent (such functions are currently performed by the Company directly). Depreciation and Amortization Expense. Depreciation and amortization expense for the second quarter of 1999 increased 23.7% to $1.4 million from $1.1 for the comparable period in 1998. The increase was primarily related to (i) additional goodwill amortization recognized during the second quarter of 1999 as a result of the purchase of the remaining 51% of Geotrac, Inc. in July, 1998 and (ii) goodwill amortization resulting from the purchase of Colonial Claims in January, 1999. Minority Interest. During July, 1998, the Company purchased the remaining 51% of Geotrac, Inc. However, the Company has elected to reflect the operations of Geotrac, Inc. prior to the July, 1998 acquisition on a consolidated basis with the Company, with the net income of Geotrac, Inc. allocable to the 51% interest held by the prior majority stockholders during the three months ended June 30, 1998 reflected as minority interest. Provision for Income Taxes. The Company's effective income tax rates were 41.4% and 40.3% for the three months ended June 30, 1998 and 1999, respectively. Income before provision for income taxes in 1998, excluding minority interest which is presented net of tax in the accompanying unaudited consolidated financial statements, resulted in an effective income tax rate of 40.9% for the three months ended June 30, 1998. COMPARISON OF THE SIX MONTHS ENDED JUNE 30, 1998 AND 1999 Outsourcing Services Revenues. Outsourcing services revenues for the first six months of 1999 increased 50.8% to $26.8 million from $17.8 million for the comparable period in 1998. The increase was primarily attributable to (i) incremental revenues from the recently acquired Colonial Claims, (ii) growth in both affiliated and unaffiliated flood premium, (iii) revenue generated under an affiliated software development and maintenance arrangement for both personal and commercial lines of insurance entered into effective April 1, 1999, (iv) revenue generated under an affiliated technical support services arrangement for both personal and commercial lines of insurance entered into on April 1, 1999, and (v) claims fee income associated with the settlement of flood and wind damage claims resulting from Hurricane Georges in late September, 1998. Effective April 1, 1999, the Company amended its existing service agreements with affiliated insurers to provide for minimum aggregate quarterly service fee payments through December 31, 1999 with respect to certain lines of business, provided that certain key tasks are performed timely. If such minimum service fee requirements with respect to said lines of business under the agreements had not been implemented as of April 1, 1999, aggregate affiliated outsourcing services revenues, which totaled $22.7 million for the six months ended June 30, 1999, would have been $20.9 million in accordance with the terms of the affiliated service agreements as in effect prior to April 1, 1999. Such minimums were established to compensate the Company for maintaining an infrastructure to process certain lines of business of affiliated insurers that have not grown as rapidly as originally forecasted. 9 12 Flood Zone Determination Services Revenues. Flood zone determination services revenues for the first six months of 1999 decreased 27.3% to $9.8 million from $13.5 million for the comparable period in 1998. The decrease in flood zone determination revenue was primarily attributable to a decrease in the demand for refinancing of mortgage loans which began in the second half of 1998 and has continued through the first half of 1999. Additionally, during the first six months of 1999, the Company experienced a reduction in flood zone determination revenue from several large customers that are experiencing financial difficulties. The decrease in flood zone determination services revenues during the first six months of 1999 was partially offset by a novation of the Company's life-of-loan insurance policy in which an estimate of the present value of future losses to be claimed under the policy (approximately $500,000) was paid to the Company in exchange for a release of liability for such future losses under the policy. Cost of Outsourcing Services. Cost of outsourcing services for the first six months of 1999 increased 35.2% to $17.3 million from $12.8 million for the comparable period in 1998. As a percentage of outsourcing services revenues, cost of outsourcing services decreased during the first six months of 1999 to 64.6% from 72.1% for the comparable period in 1998. The increase in cost of outsourcing services was primarily attributable to (i) incremental expenses incurred by the recently acquired Colonial Claims, (ii) increases in information technology costs due to staff additions and use of contract programmers to develop new unaffiliated programs, and (iii) incremental direct costs (primarily personnel) incurred to service the growth of both affiliated and unaffiliated flood premium. 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 $282,015 during the three months ended March 31, 1998, 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 for the first six months of 1999 decreased 28.9% to $4.3 million from $6.1 million for the comparable period in 1998. As a percentage of flood zone determination revenues, cost of flood zone determination services decrease during the first six months of 1999 to 44.1% from 45.1% for the comparable period in 1998. The decrease in cost of flood zone determination services resulted primarily from the merger of Bankers Hazard Determination Services, Inc. ("BHDS") and Geotrac, Inc. in July, 1998 and a subsequent elimination of certain duplicated functions and facilities, as well as a redesign of certain production workflows in April, 1999 that enabled the Company to increase employee productivity and reduce expenses. Selling, General and Administrative Expense. Selling, general and administrative expenses for the first six months of 1999 increased 53.2% to $5.4 million from $3.5 million for the comparable period in 1998. The increase in selling, general and administrative expenses was primarily attributable to (i) additional wages and related benefits associated with adding executive management, accounting, sales and marketing and other administrative staff to support the Company's expanded operations, (ii) incremental expenses incurred by the Company's direct marketing subsidiary, which was formed in August, 1998, (iii) incremental expenses incurred by the recently acquired Colonial Claims, and (iv) incremental expenses related to the addition of certain accounting and internal audit functions which were previously provided to the Company under the management service agreement with BIG. Management Services from Parent. Management services from Parent for the first six months of 1999 decreased 12.5% to $1.2 million from $1.4 million for the comparable period in 1998. The decrease was primarily related to an amendment to the management service agreement, which became effective January 1, 1999, pursuant to which certain accounting and internal audit functions are no longer performed by the Parent (such functions are currently performed by the Company directly). Depreciation and Amortization Expense. Depreciation and amortization expense for the first six months of 1999 increased 54.9% to $2.7 million from $1.8 million for the comparable period in 1998. The increase was primarily related to (i) additional goodwill amortization recognized during 1999 as a result of the purchase of the remaining 51% of Geotrac, Inc. in July, 1998, (ii) goodwill amortization resulting from the purchase of Colonial Claims in January, 1999, and (iii) depreciation related to assets, consisting of telephone equipment and computer hardware and software that were purchased by the Company from BIG in April, 1998 for use in its business. Prior to April 1, 1998, the depreciation for such equipment, which totaled $282,015 during the three months ended March 31, 1998, was charged to the Company under an arrangement similar to an operating lease and was included in cost of outsourcing services. Minority Interest. During July, 1998, the Company purchased the remaining 51% of Geotrac, Inc. However, the Company has elected to reflect the operations of Geotrac, Inc. prior to the July, 1998 acquisition on a consolidated basis with the Company, with the net income of Geotrac, Inc. allocable to the 51% interest held by the prior majority stockholders during the six months ended June 30, 1998 reflected as minority interest. 10 13 Provision for Income Taxes. The Company's effective income tax rates were 46.3% and 40.8% for the six months ended June 30, 1998 and 1999, respectively. Income before provision for income taxes in 1998, excluding minority interest which is presented net of tax in the accompanying unaudited consolidated financial statements, resulted in an effective income tax rate of 41.3% for the six months ended June 30, 1998. LIQUIDITY AND CAPITAL RESOURCES At June 30, 1999, the Company's principal sources of liquidity consisted of cash on-hand, cash flows from operations and available borrowings under the Company's revolving credit facility. Prior to 1999, the Company funded its operations through cash generated from operations and receipt of service fees advanced from BIG. Bank borrowings were used to finance fixed asset purchases. In February, 1999, the Company completed an initial public offering ("IPO") of 3,350,000 shares of Common Stock at a price of $11 per share. Of the 3,350,000 shares sold, 1,350,000 were sold by Venture Capital Corporation (the "Selling Shareholder"), a Cayman Islands company. The offering generated net proceeds to the Company of approximately $19.2 million after deducting offering expenses paid by the Company of approximately $1.3 million. The Company used a portion of the net proceeds from the offering, together with funds received from BIG from proceeds made available to BIG by a subsidiary of the Selling Shareholder, to repay all obligations with BIG and its affiliates. Additionally, the Company used a portion of the IPO proceeds to repay certain debt obligations. In June, 1999, the Company entered into a revolving line of credit agreement ("LOC") with a financial institution that provides for borrowings of up to two times the rolling four quarter earnings before interest, taxes, depreciation and amortization ("EBITDA"), but in no event more than $12,000,000. The LOC bears interest at a specified percentage over LIBOR (6.70% at June 30, 1999) based on the ratio of funded debt (as defined) to EBITDA. Interest payments are payable monthly and the remaining unpaid principal balance is due in full in July, 2001. The LOC is collateralized by substantially all of the Company's assets and is subject to certain quarterly financial covenants requiring the Company to maintain the following minimum ratios: (i) interest bearing debt to EBITDA of not more than 2.0 to 1.0, (ii) total liabilities to tangible net worth of not more than 1.0 to 1.0, and (iii) fixed charge coverage (as defined) of not less than 2.5 to 1.0. On June 11, 1999, the Company used $6,664,084 of the available LOC to repay an existing term loan. Subsequent to June 30, 1999, the Company used the remaining IPO proceeds, together with excess cash reserves, to repay the LOC. The Company believes that cash on-hand, cash flows from operations and available borrowings under the Company's LOC facility will be sufficient to satisfy currently anticipated working capital and capital expenditure requirements for the next twelve months. Unanticipated rapid expansion, business or systems development, or potential acquisitions may cause the Company to require additional funds. In addition, prior to the IPO, the Company at times relied upon advances against the future service fees it charged its affiliates to support working capital needs, which primarily included payroll costs. Since the IPO, the Company has discontinued this practice. The Company identifies and assesses, in the normal course of business, potential acquisitions of technologies or businesses which it believes to strategically fit its business plan. The Company may enter into such transactions should opportunities present themselves in the future. 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 Year 2000 and beyond, and the inability of non-information technology systems to function properly when the Year 2000 arrives. Information concerning the Company's (1) state of readiness, (2) cost of addressing Year 2000 issues, (3) risk of Year 2000 issues, and (4) contingency plans is provided below. The discussion is divided into two parts: the first part addresses the Company's outsourcing operations, and the second part addresses the Company's flood zone determination operations. Outsourcing Operations. With respect to both information technology ("IT") and non-information technology ("non-IT") systems associated with its outsourcing operations, the Company has developed a detailed Year 2000 Project Plan (the "Plan") and is in the process of carrying out the Plan. During January, 1999, an independent accounting firm was engaged to validate the Plan. The recommendations stemming from their review have been incorporated into the Plan, which calls for testing, validation and modification of the Company's systems in order to ensure Year 2000 compliance. For IT hardware systems, the Plan addresses the Year 2000 Problem with respect to: production servers; imaging servers; communication servers; development servers; Q&A servers; wide-area network and network infrastructure; AS/400 processors and tape drives; desk-top personal computers; telecommunications 11 14 equipment, including voice, fax and modems; and printers. For IT software systems, this Plan addresses the Year 2000 Problem with respect to: AS/400 operating and applications systems; personal computer applications software, including spreadsheets, "macros," "uploads" and "downloads"; and electronic forms. Testing has commenced and is expected to continue through the fourth quarter of 1999. The Company is already issuing policies with terms extending beyond the Year 2000 and believes it will not experience any difficulty in processing business on its core processing systems. For non-IT systems, the Plan provides for testing of elevators, generators, utilities, card key access, alarms, uninterrupted power source, air conditioning/heating units and thermostats. Non-IT systems testing is underway and is expected to be completed during the third quarter of 1999. The Plan also provides for certification of Year 2000 compliance by the Company's business partners. Such partners provide office supplies, paper supplies, copy center support, off-site tape management and disaster recovery services. The Plan also provides for detailed questionnaires and follow-up letters to be sent to all outside software vendors requiring responses, and ultimately certification, as to their Year 2000 readiness. A review of these responses by Company management will lead to decisions regarding the retention or replacement of vendors and/or their products. Such decisions are expected to be made prior to September 30, 1999. The Company will replace such vendors and products if it believes their state of Year 2000 readiness poses a risk to the Company sufficient to warrant doing so. The Company does not anticipate any difficulty in securing adequate replacements for such vendors or products. Costs associated with addressing the Year 2000 Problem were immaterial prior to 1998. For internally built applications software, the Company has consistently accounted for the Year 2000 date as a normal part of program development. Nearly all costs associated with addressing the Year 2000 Problem are internal expenses, with the exception of the costs of engaging the independent accounting firm. The Company currently estimates direct costs associated with addressing the Year 2000 Problem for its outsourcing operations to be in the range of $300,000 to $400,000. The Company does not anticipate the total replacement of any core system. In the event an outside vendor's software is targeted for replacement, the Company may incur additional costs relating to the purchase price of new software (which may be inflated if demand is high), conversion of data to the new system, and training of personnel on the new system. Management does not expect these costs to materially adversely affect the Company's business or financial condition. The most reasonably likely worse case scenario for the Company's outsourcing operation is the possibility that the Company will be required to manually process applications for insurance, which will result in increased costs of issuing insurance policies. Manually-processed applications would increase data entry and also increase customer service intervention as representatives of the Company seek to obtain complete and accurate customer information in order to issue correct insurance policies. These increased responsibilities may require overtime on the part of customer service representatives and supervisors. Moreover, the Company may be required to perform additional internal cash processing if its lockbox vendor is required to operate in a manual environment. The flood insurance product may require manual flood zone searches in lieu of automatic determinations in the event such automated flood zone processes become unavailable. In addition, the Company may be required, for a period of time, to issue manual checks for return premiums, claims payments and producers' commissions as well as to perform manual policy assembly. Such activities may result in a substantial increase in overtime wages for a significant percentage of the Company's workforce as well as require the addition of a significant number of temporary employees. Non-computer generated forms, manual check stock, retrieval of physical records rather than electronic facsimiles and manual processing would supplant computer processing until such systems are adapted to address the Year 2000 Problem. Risks associated with a manual environment as described above could have a material adverse effect on the Company's business, financial condition or results of operations. The Company is in the process of developing a contingency plan to deal with situations that may require manual processing. This plan, expected to be substantially completed by the end of the third quarter of 1999, will incorporate each processing department's needs in the event it must convert to manual systems from automated systems. Such needs may include overtime hours, temporary employees, additional space, paper forms in replacement of computer generated forms, blank paper stock, physical file space, additional copiers and fax machines, additional equipment, greater support for data reconciliation and cash reconciliation processes in the absence of computer-generated production data, and greater use of fiche and fiche readers. Flood Zone Determination Operations. The Company has also adopted a detailed plan (the "Project Plan") to address the Year 2000 Problem with respect to its flood zone determination operation. The Project Plan also calls for testing, validation and modification of the IT and non-IT systems associated with the Company's flood zone determination operations in order to ensure Year 2000 compliance. 12 15 For IT hardware systems, the Project Plan addresses the Year 2000 Problem with respect to: IBM AS/400 processors and tape drives; production servers; communication servers; development servers; wide area network and network infrastructure hardware; modems; printers; tape drives; desktop personal computers; and fax servers. For IT software systems, the Plan addresses the Year 2000 Problem with respect to: network operating systems; software development packages and third-party vendor software packages; in-house developed software packages; GeoCompass(R), the Company's flood zone determination electronic ordering and delivery package; and GMaS internal production routing. The Company has reviewed and validated the Year 2000 compliance of the IBM AS/400 business system used in its flood zone determination operations. This process involved reviewing all internally developed application code, modules, databases, and reports for correct date handling, changing all date fields to handle the four digit century format, and upgrading the operating system to the Year 2000 compliant version. The Company's internally developed GeoCompass(R) and GMaS software packages have also been assessed for Year 2000 readiness and were upgraded to Year 2000 compliant versions during the second quarter of 1999. The Company's flood zone determination network operating systems were also upgraded to Year 2000 compliant versions during the second quarter of 1999. The Company is in the process of having its other flood zone determination hardware and software components validated for Year 2000 compliance by the vendors that supply those products. The non-IT systems used in the Company's flood zone determination operations include: internal telephone systems, auxiliary power supplies, security systems, environmental control systems, and postal equipment. The Company has contacted the various vendors providing such systems regarding validation of their systems. Testing methodology of existing internal systems includes the identification of programs and Year 2000 critical dates for date rollover testing. An initial test was completed in February, 1999 of a mirrored production environment. This environment tested AS/400 applications, communication and data transfer systems, electronically generated faxes and data files, LAN and WAN connections, and production flow within the Company. All tests have been documented, errors corrected and retested, signed-off. The Company has a number of flood zone determination clients with which it electronically exchanges data. The clients that use a proprietary method for communicating data have been contacted by the Company regarding their need to upgrade their interfaces. Most of the Company's flood zone determination clients utilize its Compass product line. Version 3.x of that software has been tested and verified for Year 2000 compliance. Users of non-compliant versions of such software are expected to be upgraded to Year 2000 compliant versions by September 30, 1999. The Company currently estimates direct costs (computing costs, network and telephone support, office supplies, programming support and project coordination) associated with addressing the Year 2000 Problem for its flood zone determination operations to be in the range of $150,000 to $250,000. Nearly all costs, whether incurred or to be incurred, are internal to the Company. The Company does not anticipate the total replacement of any core system. In the event an outside vendor's software is targeted for replacement, the Company may incur additional costs relating to acquisition of replacement software, conversion of data, and personnel training. Management does not expect these costs to materially adversely affect the Company's business or financial condition. The most reasonably likely worst case scenario for the Company's flood zone determination operations is the possibility that the Company will be unable to electronically exchange data with its clients. Such circumstances would require the Company to revert to manually exchanging requests for searches and remitting completed determinations to clients. This increase in manual operations would likely result in significant increases in the cost of clerical support (temporary employees), data entry (overtime wages), paper supplies, fax machines and telephone customer service support (overtime wages). Moreover, the inability to electronically exchange data with certain clients could result in a material loss of revenue. The Company is in the process of developing a contingency plan relating to manual preparedness in the event of the impairment of its flood zone determination IT systems. This plan involves construction of adequate staffing models that provide an accurate indication of the number of additional employees required to process determinations manually on a short-term basis. The plan also addresses potential alternative forms of data exchange, such as faxes and data tapes. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The Company has not entered into any transactions using derivative financial instruments or derivative commodity instruments and believes that its exposure to market risk associated with other financial instruments (such as variable rate debt) are not material. 13 16 PART II. OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS There has been no material change to the disclosure set forth under the caption "Item 3. Legal Proceedings" in the Company's Annual Report on Form 10-K for the year ended December 31, 1998. ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS On June 11, 1999, the Company entered into a revolving line of credit agreement ("LOC") with a financial institution that provides for borrowings of up to $12,000,000. Under the LOC, the Company is restricted from making any distributions or dividends payable in cash or capital stock of the Company on any shares of any class of its capital stock or apply any of its property or assets to the purchase, redemption or other retirement of any shares of any class of capital stock or any partnership interest when the ratio of interest bearing debt to earnings before interest, taxes, depreciation, and amortization exceeds 1.0 either before or as a result of the distribution. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS At the Company's 1999 Annual Meeting of Shareholders held on May 25, 1999, one matter was submitted to a vote of shareholders. David K. Meehan, Daniel J. White and John A. Grant, Jr. were elected as Directors of the Company for three-year terms expiring in 2002. The following table sets forth certain information with respect to the election of directors at the 1999 Annual Meeting of Shareholders:
Shares Withholding Name of Nominee Shares Voted For Authority --------------- ---------------- --------- David K. Meehan 10,509,745 9,600 Daniel J. White 10,510,095 9,250 John A. Grant, Jr. 10,515,645 3,700
The following table sets forth the other Directors of the Company whose terms of office continued after the 1999 Annual Meeting of Shareholders:
Name of Director Term Expires ---------------- ------------ Robert M. Menke 2000 William D. Hussey 2000 E. Ray Solomon, Ph.D., CLU 2000 Jeffrey S. Bragg 2001 Robert G. Menke 2001 Alejandro M. Sanchez 2001
14 17 ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K a) Exhibits EXHIBIT NO. DESCRIPTION 10.1 Second Addendum to Service Agreements, effective as of April 1, 1999, by and between Insurance Management Solutions, Inc. and each of Bankers Insurance Company, First Community Insurance Company and Bankers Security Insurance Company. 10.2 Technical Support Services Agreement, dated April 1, 1999, by and between Insurance Management Solutions, Inc. and Bankers Insurance Group, Inc. and its subsidiaries. 10.3 Loan Agreement, dated June 11, 1999, by and between Insurance Management Solutions Group, Inc. (including its Subsidiaries) and NationsBank, N.A. 10.4 Security Agreement, dated June 11, 1999, by and between Insurance Management Solutions Group, Inc. (including its Subsidiaries) and NationsBank, N.A. 10.5 Promissory Note of Insurance Management Solutions Group, Inc. (including its Subsidiaries), dated June 11, 1999, in favor of NationsBank, N.A. 27.1 Financial Data Schedule (for SEC use only) b) Reports on Form 8-K None 15 18 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Date: August 16, 1999 INSURANCE MANAGEMENT SOLUTIONS GROUP, INC. (Registrant) By: /s/ DAVID K. MEEHAN --------------------------------------- David K. Meehan Chairman of the Board and Chief Executive Officer (Duly Authorized Officer) By: /s/ KELLY K. KING --------------------------------------- Kelly K. King Senior Vice President, Chief Financial Officer, Treasurer and Secretary (Principal Financial and Accounting Officer) 19 EXHIBIT INDEX
EXHIBIT NUMBER DESCRIPTION 10.1 -- Second Addendum to Service Agreements, effective as of April 1, 1999, by and between Insurance Management Solutions, Inc. and each of Bankers Insurance Company, First Community Insurance Company and Bankers Security Insurance Company. 10.2 -- Technical Support Services Agreement, dated April 1, 1999, by and between Insurance Management Solutions, Inc. and Bankers Insurance Group, Inc. and its subsidiaries. 10.3 -- Loan Agreement, dated June 11, 1999, by and between Insurance Management Solutions Group, Inc. (including its Subsidiaries) and NationsBanks, N.A. 10.4 -- Security Agreement, dated June 11, 1999, by and between Insurance Management Solutions Group, Inc. (including its Subsidiaries) and NationsBank, N.A. 10.5 -- Promissory Note of Insurance Management Solutions Group, Inc. (including its Subsidiaries), dated June 11, 1999, in favor of NationsBank, N.A. 27.1 -- Financial Data Schedule (for SEC use only)
EX-10.1 2 SECOND ADDENDUM TO SERVICE AGREEMENTS 1 EXHIBIT 10.1 SECOND ADDENDUM TO SERVICE AGREEMENTS This Second Addendum to Service Agreements ("Second Addendum"), by and between Insurance Management Solutions, Inc. ("IMS") and each of Bankers Insurance Company ("BIC"), First Community Insurance Company ("FCIC") and Bankers Security Insurance Company ("BSIC"), hereby modifies and supplements those certain Service Agreements, effective January 1, 1998, by and between IMS and each of BIC, FCIC and BSIC (hereinafter collectively, the "Agreements"), and shall be attached to and form a part of the Agreements. WHEREAS, effective January 1, 1998, each of BIC, FCIC and BSIC entered into separate Agreements with IMS; and WHEREAS, the parties desire to further amend those Agreements, effective April 1, 1999, pursuant to rights granted under Section 6 of the Agreements. NOW, THEREFORE, in consideration of the promises and the mutual covenants contained in the Agreements and in this Second Addendum, and intending to be legally bound hereby, IMS, BIC, FCIC and BSIC agree as follows: 1. Applicability. This Second Addendum shall only be applicable to the following lines of insurance ("Applicable Lines"): o Non-Standard Automobile Insurance o Non-Standard Automobile Insurance for certain General Agents o All Other Lines of Business, as defined in the Agreements (but specifically excluding: Homeowners, Flood and Workers Compensation) 2. Exhibit "A" to each of the Agreements shall be amended to add the following language: Notwithstanding any other provision of the Agreements (including this Exhibit A thereto), BIC, FCIC and BSIC covenant and agree, jointly and severally, to pay IMS aggregate minimum service fees for the above Applicable Lines (exclusive of reimbursed costs and expenses, data processing charges and mailroom, policy assembly, cash office and records management service fees) as follows: A. For the period April 1, 1999 through June 30, 1999: $5,057,000; B. For the period July 1, 1999 through September 30, 1999: $2,792,000 and C. For the period October 1, 1999 through December 31, 1999: $3,093,000. Any service fees paid to IMS during any of the above stated periods that are based upon actual direct written premium for the Applicable Lines shall offset any amount due to IMS as a minimum service fee for such period. 3. The above minimum service fees are dependent upon IMS completing certain key tasks ("Deliverables") within a specified period of time. The Deliverables are specified in "Attachment 1" to this Addendum, which is referenced herein and hereby incorporated by reference. If IMS fails to perform the Deliverables within the specified period of time, then the parties shall make a good faith effort to adjust the minimum service fees to be paid under this Addendum. 4. General Agreement. Except for the terms of this Second Addendum, all other terms of the Agreement shall remain in full force and effect. 2 IN WITNESS WHEREOF, the parties have caused this Second Addendum to the Service Agreements to be executed by their respective duly authorized officers effective as of April 1, 1999. WITNESSES: Insurance Management Solutions, Inc. /s/ Richard Torra BY: /s/ Jeffrey S. Bragg - ------------------------------------- --------------------------------- /s/ Christopher P. Breakiron ITS: COO - ------------------------------------- -------------------------------- WITNESSES: Bankers Insurance Company /s/ Richard Torra BY: /s/ G. Kristen Delano - ------------------------------------- --------------------------------- /s/ Judith A. Peterson ITS: Secretary - ------------------------------------- -------------------------------- WITNESSES: First Community Insurance Company /s/ Richard Torra BY: /s/ G. Kristen Delano - ------------------------------------- --------------------------------- /s/ Judith A. Peterson ITS: Secretary - ------------------------------------- -------------------------------- WITNESSES: Bankers Security Insurance Company /s/ Richard Torra BY: /s/ G. Kristen Delano - ------------------------------------- --------------------------------- /s/ Judith A. Peterson ITS: Secretary - ------------------------------------- -------------------------------- 2 3 ATTACHMENT 1 DELIVERABLES Non Standard Automobile Insurance o No later than 8/6/99, correction and re-release of the Texas Rating disk. o Implementation of scheduled 8/15/99 Florida rate change, including functioning rating disks. o Implementation of scheduled 9/15/99 Louisiana rate change, including functioning rating disks. Commercial Products o Implementation of the Florida rate change which was effective July 1, 1999. o By 9/1/99, delivery of functional BOP processing system and resolution of all significant outstanding programming issues which may hinder the processing of business. o Delivery of automated inland marine for the Vector product, scheduled for 10/1/99. o Implementation of the Commercial Auto rate change effective 10/1/99, including the rating disk. EX-10.2 3 TECHNICAL SUPPORT SERVICES AGREEMENT 1 EXHIBIT 10.2 TECHNICAL SUPPORT SERVICES AGREEMENT This Technical Support Services Agreement (the "Agreement") is entered into this 1ST day of April, 1999, by and between Insurance Management Solutions, Inc., (herein, "IMS"), a Florida corporation, with its principal place of business at 360 Central Avenue, St. Petersburg, Florida, 33701, and, Bankers Insurance Group, Inc. and its subsidiaries (collectively, the "BIG Entities"), a Florida corporation, whose principal place of business is located at 360 Central Avenue, St. Petersburg, Florida, 33701. WHEREAS, IMS offers technical support services relating to computer programming, systems analysis and other related matters (collectively, "Services"); and WHEREAS, the BIG Entities are desirous of contracting with IMS for the aforementioned Services. NOW, THEREFORE, the parties hereto, in consideration of the covenants and agreements contained herein and in further consideration of the benefits and advantages flowing from each to the other, covenant and agree as follows: SECTION 1 SERVICES PROVISIONS A. Services. IMS agrees to provide Services reasonably requested from time to time by one or more BIG Entities. IMS shall provide such Services utilizing its own employees and/or independent contractors mutually acceptable to IMS and the applicable BIG Entity(ies). Such Services may include writing and designing new programs, trouble-shooting existing and new programs, maintaining existing programs, testing and approving any suggested programs, and generally advising the BIG Entities, regarding systems either built or maintained for the BIG Entities. IMS shall be solely responsible for directing and supervising all aspects of its employees' job performance. 1. BIG Entities may exercise discretion in the employment by IMS of independent contract programmers for purposes of completing specific projects under required scheduling deadlines. 2. This Agreement shall serve as a "master" agreement between IMS and the BIG Entities for purposes of establishing an ongoing technical services arrangement. Individual addenda shall be attached to this Agreement for each specific project requested by any BIG Entity(ies) and shall be substantially in the form attached hereto as Exhibit "A". B. Project Management. Each party shall designate on Exhibit "A" one or more individuals to serve as "Project Manager". From time to time, at its discretion, each party may designate replacement Project Managers. The Project Managers shall have authority to give and receive any notices, approvals, or other communications required hereunder, and issue and approve any changes and otherwise manage the project. On a regular basis and as 2 mutually agreed to by the parties, the Project Managers, and any other appropriate or necessary personnel shall conduct project reviews to discuss in person or by other means the progress on the project and any other matters that need to be brought to the attention of one party by the other. C. Term; Termination. IMS and the BIG Entities understand and agree that either IMS or the BIG Entities may terminate this Agreement upon sixty (60) days written notice of such termination given to the other party. In addition, both parties agree that (i) either IMS or the BIG Entities may terminate this Agreement if the other party materially breaches any of the provisions of this Agreement and fails to correct such breach within fifteen (15) business days after receipt of written notice of breach from the non-breaching party, and (ii) the BIG Entities may terminate this Agreement if, in their reasonable discretion, the BIG Entities determine that the employees and/or independent contractors being utilized by IMS are unable to perform the Services, and IMS fails to take corrective action within fifteen (15) business days after receipt of written notice from the BIG Entities. SECTION 2 COMPENSATION A. Compensation. The BIG Entities shall compensate IMS on the basis of the number of hours worked by IMS employees in performing Services for the Big Entities and for any other expenses reasonably incurred by IMS in performing the Services for the BIG Entities, as set forth on an invoice submitted by IMS. The basis for the invoice will be hourly time sheets completed by such individuals. Such time sheets shall be made available at reasonable times for review, upon request by the BIG Entities. The hourly rate of compensation shall be as indicated on the attached Exhibit "A", which shall specify the hourly rate and job function with particularity. B. Travel. Reasonable travel and overnight lodging shall be reimbursed only if authorized by the BIG Entities and specified in Exhibit "A" for the project. C. Payment. Payment of all fees for Services performed and expenses that are invoiced to the BIG Entities shall be due thirty (30) days from the invoice date. All payments due IMS hereunder shall be due in United States dollars and shall be directed to the IMS Accounting Department. IMS reserves the right to charge interest on any unpaid balance at the rate of 1.5% per month, or at the maximum rate permitted by law if such maximum rate is less than 1.5% per month. If the BIG Entities have a dispute regarding amounts owed by the BIG Entities under this Agreement, the BIG Entities shall pay any undisputed amounts owed by the BIG Entities without set-off or hold back for any disputed amounts. D. Taxes. The BIG Entities shall be responsible for the payment of all applicable taxes except those based solely on the income of IMS. 2 3 SECTION 3 CONFIDENTIALITY AND NONDISCLOSURE IMS recognizes and acknowledges that the list of the BIG Entities' customers, trade secrets, data processing systems, computer software, computer programs, or other systems, data, methods, or procedures developed or used by IMS, as they may exist from time to time, are valuable, special and unique assets of the BIG Entities' business. IMS will not, during or after the term of this Agreement without the prior written consent of the BIG Entities, which consent may be arbitrarily withheld, and except to the extent necessary to accomplish assignments on behalf of the BIG Entities in which IMS is, at any given time during the term of this Agreement, currently and actively engaged, possess, transmit, copy, reproduce, or disclose the list of the BIG Entities' customers or any part thereof or any of the BIG Entities present or future trade secrets, or any of the BIG Entities 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 addition, IMS will take all reasonable precautions to ensure that its employees comply with the aforementioned restrictions. In the event of a breach or threatened breach by IMS of the provisions hereof, the BIG Entities shall be entitled to an injunction restraining IMS from disclosing, in whole or in part, the list of the BIG Entities' customers or the BIG Entities' 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 BIG Entities of all copies of customer lists, manuals, data, software, computer programs, or written procedures in the possession of IMS. Nothing herein shall be construed as prohibiting the BIG Entities from pursuing any other remedies available to it for such breach or threatened breach, including the recovery of damages from IMS. The existence of any claim or cause of action of IMS against the BIG Entities shall not constitute a defense to the enforcement by the BIG Entities of this covenant. No failure of the BIG Entities 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 IMS. SECTION 4 TITLE AND INTELLECTUAL PROPERTY RIGHTS A. Subject to IMS's rights in its background technology and generic technology, all programs and software written for the BIG Entities or created or modified for the BIG Entities in anyway whatsoever, shall at all times be and remain the exclusive property of the BIG Entities. B. Background Technology. The BIG Entities acknowledge that IMS owns or holds a license to use and sublicense various pre-existing or independently developed tools, routines, subroutines, software objects, source code, object code, and other programs, data, and materials that IMS may provide as part of the Services delivered to the BIG Entities. The 3 4 BIG Entities agree that IMS shall retain any and all title rights it may have in such background technology, and that this background technology, per se, does not constitute the BIG Entities' trade secrets. IMS hereby grants the BIG Entities a nonexclusive, perpetual, fully paid-up worldwide license to make, use, perform, display, reproduce, modify, distribute copies, and make derivative works of the background technology in the programs serviced and software authored under this Agreement in connection with the use of those serviced or authored programs. C. Generic Technology. The BIG Entities acknowledge that IMS will, in performing Services under this Agreement, develop various tools, routines, subroutines, software objects, and other programs, data and materials that are generic in nature. The BIG Entities agrees that this generic technology, per se, shall not constitute the BIG Entities' trade secrets and that IMS shall retain any and all rights to such generic technology. IMS hereby grants the BIG Entities a nonexclusive, perpetual, fully paid-up, worldwide license to make, use, perform, display, reproduce, modify, distribute copies and make derivative works of the generic technology in the programs serviced or authored under this Agreement in connection with the use of the those serviced or authored programs. SECTION 5 INSURANCE AND TAXES A. IMS shall be solely responsible for the withholding and payment of all taxes, both state and federal, all workers' compensation and unemployment insurance premiums and taxes, all social security taxes and any other employment fees, taxes or premiums of any kind relating to any employees of IMS providing Services hereunder. At no time shall employees of IMS be considered employees of the BIG Entities. B. IMS agrees to maintain minimum limits or participate on an appropriate percentage basis with the BIG Entities regarding insurance coverage during the term of this Agreement as follows: 1. Workers' Compensation insurance 2. Employers Liability - $250,000 limits 3. Comprehensive General Liability to include both bodily injury and property damage - $500,000 limits IMS agrees to hold the BIG Entities harmless from direct out-of-pocket expenses of the BIG Entities which may result from IMS' failure to withhold these taxes or failure to conduct itself in accordance with applicable state and federal law in the performance of Services hereunder. However, IMS shall not be liable in any event for the BIG Entities' loss of profits, business good will or other consequential, special or incidental damages. 4 5 SECTION 6 SAFE WORK ENVIRONMENT A. IMS agrees that it will comply with all health and safety laws, regulations, ordinances, directives and rules imposed by controlling Federal, state and local governments. B. IMS agrees to comply, at its expense, with any specific directives from its workers' compensation carrier, or any government agency having jurisdiction over the work place, health or safety. C. IMS shall provide and insure use of all personal protective equipment, as required by Federal, state or local law, regulations, ordinances, directives or rules or as deemed necessary by the BIG Entities or by the BIG Entities' workers' compensation carrier. SECTION 7 WARRANTIES IMS represents and warrants that all Services rendered by it in connection with the projects will be provided in accordance with professional standards for care and skill and in a diligent manner. The BIG Entities acknowledge that data processing and software coding entails the likelihood of some human and machine error, omissions, delays, and losses. The BIG Entities represent and warrant that it shall adopt reasonable measures to limit its exposure with respect to such potential losses and damages, including, without limitation, examining results from serviced programs prior to use thereof and providing for the identification and correction of errors. SECTION 8 DISCLAIMER OF ALL OTHER WARRANTIES IMS DOES NOT WARRANT THAT IT WILL BE ABLE TO MEET OR RESOLVE ANY OR ALL ERRORS, QUESTIONS, OR REQUESTS. All SERVICES ARE PROVIDED "AS IS". EXCEPT FOR THE EXPRESS WARRANTIES THAT ARE SET FORTH ABOVE, IMS MAKES NO ADDITIONAL WARRANTIES, EXPRESS OR IMPLIED, WITH RESPECT TO THE SERVICES, AND ANY ACCOMPANYING CODE AND DOCUMENTATION. IN PARTICULAR, IMS DOES NOT WARRANT THAT THE OPERATION OF SERVICED PROGRAMS OR NEWLY AUTHORED PROGRAMS WILL AT ALL TIMES BE UNINTERRUPTED AND ERROR-FREE. IMS EXPRESSLY DISCLAIMS THE IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE. 5 6 SECTION 9 LIMITATION OF LIABILITY IN THE EVENT OF A DEFAULT BY IMS RELATED TO THE SERVICES TO BE PROVIDED HEREUNDER, THE BIG ENTITIES SOLE AND EXCLUSIVE REMEDY SHALL BE THE REPERFORMANCE OF THE SERVICES TO BE PROVIDED BY IMS HEREUNDER OR, AT IMS'S OPTION, THE RETURN OF THE FEES ALLOCABLE TO THAT PORTION OF THE SERVICES THAT IS NONCONFORMING. IF THE ABOVE LIMITATION OF LIABILITY IS INEFFECTIVE, IN NO EVENT SHALL IMS'S LIABILITY FOR DAMAGES ARISING OUT OF OR RELATED TO ANY DEFAULT OF IMS HEREUNDER, WHETHER IN AN ACTION IN CONTRACT, TORT, OR OTHERWISE, EXCEED THE TOTAL FEES ACTUALLY PAID BY THE BIG ENTITIES TO IMS HEREUNDER FOR THE SPECIFIC PROJECT TO WHICH THE DEFAULT RELATED DURING THE TWELVE (12) MONTHS IMMEDIATELY PRECEDING THE DATE OF SUCH DEFAULT BY IMS. THE SECTIONS ON LIMITATIONS ON LIABILITY, WARRANTIES, AND DISCLAIMERS OF WARRANTIES ALLOCATE THE RISKS OF THE PARTIES. THIS ALLOCATION IS REFLECTED IN THE PRICING OF THIS AGREEMENT AND IS AN ESSENTIAL ELEMENT OF THE BASIS OF THE BARGAIN BETWEEN THE PARTIES. SECTION 10 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. 6 7 SECTION 11 ATTORNEYS' 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 attorneys' fees were incurred. SECTION 12 CHOICE OF LAW This Agreement shall be construed in accordance with and governed by the laws of the State of Florida, with the exception of the conflict of laws provisions. The state and federal courts of competent jurisdiction in Pinellas County, Florida, will have sole and exclusive jurisdiction for any claims or suits arising out of this Agreement. The venue for any action brought to enforce any of the provisions hereof shall be Pinellas County, Florida and any action commenced in any other forum shall be removed to a court of competent jurisdiction in Pinellas County, Florida. SECTION 13 RELATIONSHIP OF THE PARTIES No agency, partnership, joint venture, or employment relationship is created between IMS and the BIG Entities by this Agreement. Neither party has any authority, express or implied, to create any obligation or responsibility on behalf of the other party. This Agreement creates no third party beneficiary right of action upon any person or entity in any manner whatsoever. SECTION 14 ENTIRE AGREEMENT This Agreement including the exhibits and addenda hereto expresses the whole and entire agreement between the parties and supersedes all prior agreements and understandings. This Agreement cannot be modified or changed by oral agreement. Any modification or amendment shall be in writing and signed by all parties. 7 8 IN WITNESS WHEREOF, the parties hereto, through their respective duly authorized officers, have caused this Agreement to be executed as of the day and year first above set forth. Bankers Insurance Group, Inc. Attest: /s/ Richard Torra By: /s/ G. Kristen Delano - ------------------------------------- -------------------------------- Title: Secretary ----------------------------- Witness: Insurance Management Solutions, Inc. /s/ Christopher P. Breakiron By: Jeffrey S. Bragg - ------------------------------------- -------------------------------- Title: COO ----------------------------- 8 9 EXHIBIT "A" 1. Internal Associates: Hourly Rate = $125.00 2. External Contractors: Actual Cost Plus 5% 9 10 No. ----- ADDENDUM TO TECHNICAL SUPPORT SERVICES AGREEMENT DATED APRIL, 1, 1999 IMS Project Manager: --------------------------------------------------- BIG Project Manager: --------------------------------------------------- Travel is authorized to ------------------------------------------------ Description of services to be designed, developed, maintained, or enhanced: Estimated Cost $ $ ----------- Estimated Hours to Complete ----------- Both estimated hours and costs represent a good faith effort on the part of IMS to estimate the time and cost necessary to complete the assignment. IMS based its estimates on information provided by BIG [put in specific BIG Entity]. Final costs and hours may differ from the above estimates. BIG [put in specific BIG Entity] shall have the right to review both the hours and the costs associated with the project on an ongoing basis. Bankers Insurance Group, Inc. Attest: By: - ------------------------------------- --------------------------------- Title: ------------------------------ Witness: Insurance Management Solutions, Inc. By: - ------------------------------------- --------------------------------- Title: ------------------------------ 10 EX-10.3 4 LOAN AGREEMENT 1 EXHIBIT 10.3 NATIONSBANK, N.A. LOAN AGREEMENT This Loan Agreement (the "Agreement") dated as of June 11, 1999, by and between NationsBank, N.A., a national banking association ("Bank") and the Borrower described below. In consideration of the Loan or Loans described below and the mutual covenants and agreements contained herein, and intending to be legally bound hereby, Bank and Borrower agree as follows: I. DEFINITIONS AND REFERENCE TERMS. In addition to any other terms defined herein, the following terms shall have the meaning set forth with respect thereto: A. ACCOUNTING TERMS. All accounting terms not specifically defined or specified herein shall have the meanings generally attributed to such terms under generally accepted accounting principles ("GAAP"), as in effect from time to time, consistently applied, with respect to the financial statements referenced in Section III.H. hereof. B. [Intentionally deleted] C. AUTHORIZED REPRESENTATIVE. Authorized Representative means any of the President, Chief Executive Officer, the Treasurer, the Secretary, and, with respect to financial matters, the Chief Financial Officer or Controller of the Borrower, as the case may be, or any other person expressly designated by the Board of Directors of the Borrower (or the appropriate committee thereof) as an Authorized Representative of the Borrower. D. BASIS POINT. Basis Point means the amount equal to .01%. (By way of example, 50 Basis Points shall be equal to one half of one percent, or .5%). E. BORROWER: Insurance Management Solutions Group, Inc., a Florida corporation, Insurance Management Solutions, Inc., a Florida corporation, Geotrac of America, Inc., a Florida corporation, IMS Direct, Inc., a Florida corporation, Colonial Claims Corporation, a Florida corporation, and any and all Subsidiaries, existing now or acquired in the future. F. BORROWER'S ADDRESS: Corporate Headquarters: 360 Central Avenue, St. Petersburg, Florida 33701. G. BUSINESS DAY: Business Day means any day which is not a Saturday, Sunday or a day on which banks in the State of Florida are authorized or obligated by law, executive order or governmental decree to be closed. H. CASH FLOW: Cash flow means earnings before interest expense, taxes and lease expenses based upon the previous four quarters. I. CURRENT ASSETS. Current Assets means the aggregate amount of all of Borrower's assets which would, in accordance with GAAP, properly be defined as current assets. 1 2 J. CURRENT LIABILITIES. Current Liabilities means the aggregate amount of all current liabilities as determined in accordance with GAAP, but in any event shall include all liabilities except those having a maturity date which is more than one year from the date as of which such computation is being made. K. [Intentionally omitted] L. EBITDA. EBITDA means (i) Net Income (or Net Loss) plus (ii) interest expense plus (iii) state and federal taxes on income plus (iv) depreciation and amortization, all determined on a consolidated basis in accordance with Generally Accepted Accounting Principles applied on a consistent basis. EBITDA will be computed on a rolling four quarter basis and shall include the EBITDA of each acquisition as if such acquisition had been owned for an entire twelve (12) month time period. M. FIXED CHARGE COVERAGE RATIO. Fixed Charge Coverage Ratio means the ratio of [the sum of EBITDA plus lease expenses, less distributions, plus cash capital contributions] all divided by [the sum of interest expense, current maturities of long term debt, and capital and operating leases]. N. FIXED CHARGES. Fixed Charges means interest and capital and operating lease expense based on the previous four quarters. O. GENERALLY ACCEPTED ACCOUNTING PRINCIPLES OR GAAP. GAAP means those principles of accounting set forth in pronouncements of the Financial Accounting Standards Board, the Accounting Principles Board of the American Institute of Certified Public Accountants or successor organization and are applicable in the circumstances as of the date of a report, as such principles are from time to time supplemented and amended. P. HAZARDOUS MATERIALS. Hazardous Materials include all materials defined as hazardous materials or substances under any local, state or federal environmental laws, rules or regulations, and petroleum, petroleum products, oil and asbestos. Q. INTEREST BEARING DEBT. Interest Bearing Debt means the sum of any principal outstanding under the Loan, plus any and all other interest bearing debt now existing or existing in the future, all as defined by Generally Accepted Accounting Principles, computed on a consolidated basis (including, but not limited to, term loans and lines of credit). R. INTEREST RATE PROTECTION AGREEMENT. Interest Rate Protection Agreement means any and all interest rate swap agreements, interest cap agreements, interest rate collar agreements, exchange agreements, forward currency exchange agreements, forward rate currency or interest rate options, foreign currency hedge, or any similar agreements or arrangements entered into by Borrower and Bank in connection with the Loan to hedge the risk of variable interest rate volatility or fluctuations of interest rates, as such agreements or arrangements may be modified, supplemented, and in effect from time to time, and any and all cancellations, buy backs, reversals, terminations, or assignments of any of the foregoing. 2 3 S. LOAN. Any loan described in Section II hereof and any subsequent loan which states that it is subject to this Loan Agreement. T. LIBOR RATE. LIBOR Rate means the offered rate for deposits in United States dollars in the London Interbank market for a one month period which appears on the Telerate Screen Page 3750 as of 11:00 a.m. (London time) on the date that is two London Banking days (as defined herein) preceding the first Banking Business Day (as defined herein of the Interest Period. If at least two such offered rates appear on the Telerate Screen Page 3750, the rate will be the arithmetic mean of such offered rates. The Lender may, in its discretion, use any other publicly available index or reference rate showing rates offered for United States dollar deposits in the London Interbank market as of the applicable date. In addition, the Lender may, in its discretion, use rate quotations for daily or annual period in lieu of quotations for substantially equivalent monthly periods. a. "Business Banking Day" shall mean each day other than a Saturday, a Sunday or any holiday on which commercial banks in Jacksonville, Florida are closed for business. b. "Interest Period" shall mean each period commencing on each Interest Rate Adjustment Date and ending on the next Interest Rate Adjustment Date. c. "Interest Rate Adjustment Date" shall mean the 5th day of July, 1999 and the 5th day of each month thereafter. d. "London Banking Day" shall mean each day other than a Saturday, a Sunday or any holiday on which commercial banks in London, England are closed for business. U. LOAN DOCUMENTS. Loan Documents means this Loan Agreement and any and all promissory notes executed by Borrower in favor of Bank and all other documents, instruments, guarantees, certificates and agreements executed and/or delivered by Borrower, any guarantor or third party in connection with any Loan. V. NET WORTH. Net Worth means the total net worth of Borrower, subsidiaries and any acquired entities. W. OBLIGATIONS: Obligations means the obligations, liabilities and indebtedness of the Borrower with respect to (i) the principal and interest on the Loans and (ii) the payment and performance of all other obligations, liabilities and indebtedness of the Borrower and any Subsidiary to the Bank hereunder, under any one or more of the other Loan Documents or with respect to the Loans. X. PERSON: Person means an individual, partnership, corporation, trust, unincorporated organization, association, joint venture or a government or agency or political subdivision thereof. Y. SUBSIDIARY: Subsidiary means any corporation or other entity (i) in which more than 50% of its outstanding voting stock or more than 50% of all equity interests is owned directly or indirectly by the Borrower. 3 4 II. LOANS. A. LOAN. Subject to the terms and conditions set forth in this Agreement and the other Loan Documents, Bank hereby agrees to make a loan or loans to Borrower in the maximum aggregate principal amount of Twelve Million Dollars ($12,000,000.00). The obligation to repay the loan is evidenced by a promissory note or notes dated of even date herewith (the promissory note or notes together with any other promissory notes heretofore or hereafter executed by Borrower in favor of Bank and any and all renewals, extensions or rearrangements thereof being hereafter collectively referred to as the "Note") having a maturity date, repayment terms and interest rate as set forth herein and in the Note. B. PURPOSE OF LOAN. Borrower hereby covenants and warrants to Bank that all loan proceeds of the Note shall be used for refinance of existing debt, general corporate purposes, future corporate acquisitions and the start-up of new offices and working capital, as well as provide additional short term working capital. C. SECURITY FOR THE LOAN. This loan shall be secured by a first priority security interest in all of Borrower' business assets, including, but not limited to, accounts receivable, chattel paper, inventory, equipment, contract rights and general intangibles owned by each and every one of the Borrowers or hereafter acquired and all replacements and substitutions thereof, as well as proceeds therefrom. D. REVOLVING CREDIT FEATURE. The Loan provides for a revolving line of credit (the "Line") under which Borrower may from time to time, borrow, repay and re-borrow funds. Borrower may borrow, repay, and re-borrow under the Loan at any time, up to a maximum aggregate amount outstanding at any one time equal to the amount of the Loan as set forth in subsection A above; provided, however, that Borrower is not in Default under any provision of the Note, any other Loan Documents, or any other obligation of Borrower to Bank, and provided the borrowings do not exceed any other limitations on borrowings by Borrower. Bank shall have no liability for its refusal to advance funds based upon its determination that any conditions of such further advances have not been met. Bank's records of the amounts borrowed from time to time shall be conclusive proof thereof. E. REPAYMENT OF THE LOAN. Interest shall be paid monthly commencing on August 5, 1999, and continuing on the fifth (5th) day of each successive month thereafter. Principal payments may be paid at any time; provided, however, that all unpaid principal shall be paid in full when the Facility matures on July 5, 2001 (the "Maturity Date"). F. RATE. Interest shall accrue on the unpaid balance of the Facility at the LIBOR Rate (as defined herein) plus the Applicable Margin, calculated in accordance with the requirements set out below. 1. Applicable Margin. The Applicable Margin shall be a function of the Borrower's ratio of Interest Bearing Debt divided by EBITDA and shall be calculated quarterly based upon the Borrower's internally-prepared financial statement or if available, Borrower's annual audited financial statement. Upon Bank's receipt of said financial statement, Bank shall calculate the Applicable Margin and inform Borrower of same. The monthly interest payment shall be adjusted and the adjusted Applicable Margin shall be in effect on 4 5 the first day of the month immediately following receipt of the financial information for the preceding fiscal quarter. The Interest Bearing Debt portion of the calculation will be determined based on the then-current quarter end; whereas the EBITDA portion of the calculation will be determined based on the previous four fiscal quarters. 2. Quarterly Adjustment: (1) If the ratio of Interest Bearing Debt to EBITDA (hereafter, "IBD/EBITDA") is less than 1.00 to 1.00, the Applicable Margin for the LIBOR Rate shall be one hundred seventy-five Basis Points (1.75%). (2) If the ratio of IBD/ EBITDA is greater than 1.00 to 1.00 (inclusive) and less than 1.50 to 1.00, the Applicable Margin for the LIBOR Rate shall be two hundred Basis Points (2.00%). (3) If the ratio of IBD/ EBITDA is greater than 1.50 (inclusive) to 1.00 and less than 2.00 (inclusive) to 1.00, the Applicable Margin for the LIBOR Rate shall be two hundred twenty-five Basis Points (2.25%). G. ADVANCES. Advances under the Note shall be made by telephone (confirmed in writing) electronically via Autoborrow, facsimile or written communication to Bank from any Authorized Representative; provided, however, that Bank shall have the right to rely upon telephonic representations that the person claiming to be an Authorized Representative is, in fact, that person. Unless otherwise agreed by the Bank, all advances under the Note will be made by way of a credit into Borrower's demand deposit account maintained at the Bank. Each advance will be subject to the Borrower' Borrowing Base (as defined below), a certified statement of which will be submitted no less than quarterly. To the extent that the total advances outstanding hereunder at any time exceed the Borrowing Base formula, Borrower shall immediately prepay this Loan to such extent. H. AVAILABILITY OF FUNDS. Notwithstanding the maximum amount of the Loan, as stated above, the total advances outstanding under the Loan at any time shall not exceed the lesser of: (i) $12,000,000.00; or (ii) an amount which is equal to two times the rolling four (4) quarter EBITDA of Borrower (the "Borrowing Base"). I. UNUSED COMMITMENT FEE. Beginning on October 15, 1999, and as additional consideration for the making of this Loan, Borrower shall pay to Bank an additional fee equal to [$12,000,000 minus the average daily principal amount outstanding under the Loan for the calendar quarter ending September 30, 1999] multiplied by a specific number of Basis Points (determined on an annual basis), depending on the ratio of IBD/ EBITDA, as more specifically set forth below: a. If the ratio of IBD/ EBITDA is less than 1.00 to 1.00: ten Basis Points (.10%). 5 6 b. If the ratio of IBD/ EBITDA is greater than 1.00 to 1.00 (inclusive) and less than 1.50 to 1.00: twenty-five Basis Points (.25%). c. If the ratio of IBD/EBITDA is greater than 1.50 (inclusive) to 1.00 and less than 2.00 (inclusive) to 1.00: thirty-seven and one-half Basis Points (.375%). Thereafter, for so long as the Loan is in place, Borrower shall pay a fee on a quarterly basis, determined in accordance with the above formula, which shall be due within 15 days from the end of said calendar quarter. J. CONDITIONS TO FIRST ADVANCE. The obligation of the Bank to make the initial advance under the Loan is subject to the conditions precedent that the Bank shall have received on the Closing Date, in form and substance satisfactory to the Bank, the following: 1. Executed originals of each of this Agreement, the Note and the other Loan Documents, together with any and all schedules and exhibits thereto. 2. Written opinion of counsel to the Borrower dated as of the Closing Date, addressed to the Bank and satisfactory to Tew, Zinober, Barnes, Zimmet & Unice, special counsel to the Bank. 3. Resolutions of the boards of directors or other appropriate governing body (or of the appropriate committee thereof) of each member of Borrower certified by its respective secretary or assistant secretary or other appropriate official as of the Closing Date, approving and adopting the Loan Documents and authorizing the execution and delivery thereof. 4. Specimen signatures of officers of the Borrower executing the Loan Documents on behalf of such Person, certified by the respective secretary or assistant secretary or other appropriate official of the Borrower. 5. The charter documents of the Borrower certified as of a recent date by the Secretary of State or other appropriate Governmental Authority of its jurisdiction of incorporation. 6. The By-laws (including any amendments thereto) of the Borrower certified as of the Closing date as true and correct by the respective secretary or assistant secretary of the Person to whom such by-laws relate. 7. Certificates issued as of a recent date by the Secretary of State or other appropriate Governmental Authority of its jurisdiction of incorporation as to the due existence and good standing of the Borrower. 8. Appropriate certificates of qualification to do business, good standing and, where appropriate, authority to conduct business under assumed name, issued in respect of the Borrower as of a recent date by the Secretary of State or other appropriate Governmental Authority of each jurisdiction in which the failure to be qualified to do business or authorized so to conduct business could materially adverse affect the business, operations or conditions, financial or otherwise, of the Borrower. 6 7 9. Evidence of insurance required by the Loan Documents. 10. All fees payable by the Borrower on the Closing Date to the Bank. 11. With respect to real and personal property owned by Borrower or any member of the Borrower, evidence as to the validity, enforceability and priority of Bank's security interest therein and that there are no priority security interests in any of the assets of Borrower except as specifically acknowledged and approved by Bank. 12. Such other documents, financial statements, notices, instruments, certificates and opinions as the Bank may reasonably request on or prior to the Closing Date in connection with the consummation of the transactions contemplated hereby, or have been recorded or filed in all necessary places and sent to or received by all necessary persons, as the case may be. K. CONDITIONS TO EACH ADVANCE. Prior to the disbursement by the Bank of any advances to Borrower under this Loan, the Bank shall have determined that there exist no event of default which has not been cured during any applicable curative period; the representations and warranties contained in the Loan documents shall be true and accurate as of the date of such advance; there shall have occurred no material adverse change in the financial condition of the Borrower or any other person liable for repayment of the Loan; and the Bank shall have determined that the prospect of payment or performance of the Loan has not been materially impaired. By making request for any advance, Borrower shall be deemed to acknowledge that the representations and warranties of the Borrower set forth in Article III hereof and in each of the other Loan Documents shall be true and correct in all material respects on and as of the date of such additional advance with the same effect as though such representations and warranties had been made on and as of such date, except to the extent that such representations and warranties expressly relate to an earlier date and except that the financial statements shall be deemed to be those financial statements most recently delivered to the Bank. III. REPRESENTATIONS AND WARRANTIES. Borrower hereby represents and warrants to Bank as follows: A. GOOD STANDING. Borrower is a corporation duly organized, validly existing and in good standing under the laws of Florida and has the power and authority to own its property and to carry on its business in each jurisdiction in which Borrower does business. B. AUTHORITY AND COMPLIANCE. Borrower has full power and authority to execute and deliver the Loan Documents and to incur and perform the obligations provided for therein, all of which have been duly authorized by all proper and necessary action of the appropriate governing body of Borrower. No consent or approval of any public authority or other third party is required as a condition to the validity of any Loan Document, and Borrower is in compliance with all laws and regulatory requirements to which it is subject. C. BINDING AGREEMENT. This Agreement and the other Loan Documents executed by Borrower constitute valid and legally binding obligations of Borrower, enforceable in accordance with their terms. 7 8 D. LITIGATION. There is no proceeding involving Borrower pending or, to the knowledge of Borrower, threatened before any court or governmental authority, agency or arbitration authority, except as disclosed to Bank in writing and acknowledged by Bank prior to the date of this Agreement. E. NO CONFLICTING AGREEMENTS. There is no charter, bylaw, stock provision, partnership agreement or other document pertaining to the organization, power or authority of Borrower and no provision of any existing agreement, mortgage, indenture or contract binding on Borrower or affecting its property, which would conflict with or in any way prevent the execution, delivery or carrying out of the terms of this Agreement and the other Loan Documents. F. OWNERSHIP OF ASSETS. Borrower has good title to its assets, and its assets are free and clear of liens, except those granted to Bank, those in favor of Huntington Bank which liens will be satisfied in connection with the closing of this Loan, and except and as disclosed to Bank in writing prior to the date of this Agreement. G. TAXES. All taxes and assessments due and payable by Borrower have been paid or are being contested in good faith by appropriate proceedings and Borrower has filed all tax returns which it is required to file. H. FINANCIAL STATEMENTS. The financial statements of Borrower heretofore delivered to Bank have been prepared in accordance with GAAP applied on a consistent basis throughout the period involved and fairly present Borrower's financial condition as of the date or dates thereof, and there has been no material adverse change in Borrower's financial condition or operations since March 31, 1999. All factual information furnished by Borrower to Bank in connection with this Agreement and the other Loan Documents is and will be accurate and complete on the date as of which such information is delivered to Bank and is not and will not be incomplete by the omission of any material fact necessary to make such information not misleading. I. PLACE OF BUSINESS. Borrower's chief executive office is located at 360 Central Avenue, St. Petersburg, Florida, 33701. J. ENVIRONMENTAL. The conduct of Borrower's business operations and the condition of Borrower's property does not and will not violate any federal laws, rules or ordinances for environmental protection, regulations of the Environmental Protection Agency, any applicable local or state law, rule, regulation or rule of common law or any judicial interpretation thereof relating primarily to the environment or Hazardous Materials. K. CONTINUATION OF REPRESENTATIONS AND WARRANTIES. All representations and warranties made under this Agreement shall be deemed to be made at and as of the date hereof and at and as of the date of any advance under any Loan. IV. AFFIRMATIVE COVENANTS. Until full payment and performance of all obligations of Borrower under the Loan Documents, Borrower will, unless Bank consents otherwise in writing (and without limiting any requirement of any other Loan Document): A. FINANCIAL CONDITION. Maintain Borrower's financial condition as follows, 8 9 determined in accordance with GAAP applied on a consistent basis throughout the period involved except to the extent modified by the following definitions: 1. Borrower shall maintain a ratio of total liabilities to Net Worth of not greater than 1.0 to 1.0. This ratio will be tested quarterly. 2. Borrower shall maintain at all times a ratio of Cash Flow to Fixed Charges of not less than 2.5 to 1.0. 3. Borrower shall maintain at all times a ratio of Interest Bearing Debt divided by EBITDA not greater than 2.0 to 1.0. This ratio will be tested quarterly and calculated on a rolling four (4) quarter basis. B. FINANCIAL STATEMENTS AND OTHER INFORMATION. Maintain a system of accounting satisfactory to Bank and in accordance with GAAP applied on a consistent basis throughout the period involved, permit Bank's officers or authorized representatives to visit and inspect Borrower's books of account and other records at such reasonable times and as often as Bank may desire, and pay the reasonable fees and disbursements of any accountants or other agents of Bank selected by Bank for the foregoing purposes. Unless written notice of another location is given to Bank, Borrower's books and records will be located at Borrower's chief executive office set forth above. All financial statements called for below shall be prepared in form and content acceptable to Bank and by independent certified public accountants acceptable to Bank. In addition, Borrower will: 1. Furnish to Bank internally prepared financial statements of Borrower for each quarter on a combined basis, certified by an Authorized Representative, within 45 days after the close of each such fiscal quarter, including a balance sheet and income statement for the quarter and cumulative year to date. 2. Furnish annually to Bank audited and combined financial statements (including a balance sheet, and statements of financial condition, income, cash flows and changes in shareholders' equity), prepared by an independent certified public accountant acceptable to Bank, for each fiscal year of Borrower, within ninety (90) days after the close of the Borrower's fiscal year certified by an Authorized Representative. 3. Furnish to Bank on a quarterly basis, within 45 days of the end of each quarter of Borrower, a borrowing base certificate in the form of that attached hereto as Exhibit "A" identifying i) availability for borrowing based on the Interest Bearing Debt to EBITDA ratio as set out in Section II.F. herein, and ii) the financial covenants required under Section IV.A. herein. 4. Furnish to Bank a compliance certificate for in the form of that attached hereto as Exhibit "B" (and executed by an authorized representative of) Borrower concurrently with and dated as of the date of delivery of each of the financial statements as required in paragraphs i and ii above, containing (a) a certification that the financial statements of even date are true and correct and that the Borrower is not in default under the terms of this Agreement, and (b) computations and conclusions, in such detail as Bank may request, with respect to compliance with this Agreement, and the other Loan 9 10 Documents, including computations of all quantitative covenants. 5. Furnish to Bank promptly copies of all significant servicing contracts within thirty (30) days of its execution. 6. Inform Bank promptly of any actual or potential contingent liabilities in the aggregate amount of $100,000.00. 7. Furnish to Bank promptly such additional information, reports and statements respecting the business operations and financial condition of Borrower, from time to time, as Bank may reasonably request. C. INSURANCE. Maintain insurance with responsible insurance companies on such of its properties, in such amounts and against such risks as is customarily maintained by similar businesses operating in the same vicinity, specifically to include fire and extended coverage insurance covering all assets, business interruption insurance, workers compensation insurance and liability insurance, all to be with such companies and in such amounts as are satisfactory to Bank and providing for at least 30 days prior notice to Bank of any cancellation thereof. Satisfactory evidence of such insurance will be supplied to Bank prior to funding under the Loan(s) and 30 days prior to each policy renewal. D. EXISTENCE AND COMPLIANCE. Maintain its existence, good standing and qualification to do business, where required and comply with all laws, regulations and governmental requirements including, without limitation, environmental laws applicable to it or to any of its property, business operations and transactions. E. ADVERSE CONDITIONS OR EVENTS. Promptly advise Bank in writing of (i) any condition, event or act which comes to its attention that would or might materially adversely affect Borrower's financial condition or operations or Bank's rights under the Loan Documents, (ii) any litigation filed by or against Borrower, (iii) any event that has occurred that would constitute an event of default under any Loan Documents, (iv) any loss of any contract that makes up ten percent (10%) or more of Borrower's revenue and (iv) any uninsured or partially uninsured loss through fire, theft, liability or property damage in excess of an aggregate of $500,000.00. F. TAXES AND OTHER OBLIGATIONS. Pay all of its taxes, assessments and other obligations, including, but not limited to taxes, costs or other expenses arising out of this transaction, as the same become due and payable, except to the extent the same are being contested in good faith by appropriate proceedings in a diligent manner. G. MAINTENANCE. Maintain all of its tangible property in good condition and repair and make all necessary replacements thereof, and preserve and maintain all licenses, trademarks, privileges, permits, franchises, certificates and the like necessary for the operation of its business. H. ENVIRONMENTAL. Immediately advise Bank in writing of (i) any and all enforcement, cleanup, remedial, removal, or other governmental or regulatory actions instituted, completed or threatened pursuant to any applicable federal, state, or local laws, ordinances or regulations relating to any Hazardous Materials affecting Borrower's business operations; and (ii) all claims made or threatened by any third party against Borrower relating to damages, contribution, cost recovery, compensation, loss 10 11 or injury resulting from any Hazardous Materials. Borrower shall immediately notify Bank of any remedial action taken by Borrower with respect to Borrower's business operations. Borrower will not use or permit any other party to use any Hazardous Materials at any of Borrower's places of business or at any other property owned by Borrower except such materials as are incidental to Borrower's normal course of business, maintenance and repairs and which are handled in compliance with all applicable environmental laws. Borrower agrees to permit Bank, its agents, contractors and employees to enter and inspect any of Borrower's places of business or any other property of Borrower at any reasonable times upon three (3) days prior notice for the purposes of conducting an environmental investigation and audit (including taking physical samples) to insure that Borrower is complying with this covenant and Borrower shall reimburse Bank on demand for the costs of any such environmental investigation and audit. Borrower shall provide Bank, its agents, contractors, employees and representatives with access to and copies of any and all data and documents relating to or dealing with any Hazardous Materials used, generated, manufactured, stored or disposed of by Borrower's business operations within five (5) days of the request therefore. I. INTEREST RATE PROTECTION AGREEMENTS. Borrower shall duly punctually perform all covenants, terms and agreements expressed as binding upon Borrower under any Interest Rate Protection Agreements. Borrower acknowledges that Borrower's obligations under any Interest Rate Protection Agreements are obligations may be secured by the collateral identified in the Security Agreement. Further, Borrower acknowledges and agrees that the occurrence of any event of default or defaults under any Interest Rate Protection Agreement shall be a default under this Agreement, and vice versa. V. NEGATIVE COVENANTS. A. Until full payment and performance of all obligations of Borrower under the Loan Documents, Borrower, individually or collectively, will not, without the prior written consent of Bank (and without limiting any requirement of any other Loan Documents): 1. CAPITAL EXPENDITURES. Make capital expenditures during each fiscal year (including capitalized leases) exceeding in the aggregate the sum of $3,000,000.00. 2. TRANSFER OF ASSETS . Sell, lease, assign or otherwise dispose of or transfer any assets greater than $500,000.00 net book value, except in the normal course of its business. 3. LIENS. Grant, suffer or permit any contractual or noncontractual lien on or security interest in its assets, except in favor of Bank, or fail to promptly pay when due all lawful claims, whether for labor, materials or otherwise. 4. EXTENSIONS OF CREDIT. Make or permit any Subsidiary to make, any loan or advance to any person or entity, or purchase or otherwise acquire, or permit any Subsidiary to purchase or other wise acquire, any capital stock, assets, obligations, or other securities of, make any capital contribution to, or otherwise invest in or acquire any interest in any entity, or participate as a partner or joint venturer with any person or entity, except for the purchase of direct obligations of the United States or any agency thereof with maturities of less than one year. 5. BORROWINGS. Except for capital and operating leases of up to $1,000,000.00, create, incur, assume or become liable in any manner for any indebtedness (for borrowed money, deferred 11 12 payment for the purchase of assets, lease payments, as surety or guarantor for the debt for another, or otherwise) other than to Bank, except for normal trade debts incurred in the ordinary course of Borrower's business, and except for existing indebtedness disclosed to Bank in writing and acknowledged by Bank prior to the date of this Agreement. 6. DIVIDENDS AND DISTRIBUTIONS. Make any distribution or dividends payable in cash or capital stock of Borrower on any shares of any class of its capital stock or apply any of its property or assets to the purchase, redemption or other retirement of any shares of any class of capital stock or any partnership interest in Borrower when Interest Bearing Debt to EBITDA exceeds 1.0 either before or as a result of the distribution and based on the formula provided in the financial covenant section herein. 7. CHARACTER OF BUSINESS. Change the general character of business as conducted at the date hereof, or engage in any type of business not reasonably related to its business as presently conducted. B. 1. Until full payment and performance of all obligations of Borrower under the Loan Documents, Borrower shall not enter into any acquisition, merger, or consolidation having a value in excess of $1,000,000.00, unless the following conditions/requirements are satisfied: - ------------------------------------------------------------------------------------------------------------- Size of proposed acquisition, Requirements/conditions merger or consolidation - ------------------------------------------------------------------------------------------------------------- $0 - $1,000,000 Bank approval not required. - ------------------------------------------------------------------------------------------------------------- $1,000,001 - $5,000,000 The Bank must review the proposed transaction and determine that it is in compliance with all other covenants (on a projected basis) and consistent with Borrower's existing operations. If any projected covenant will not be in compliance as a result of the proposed transaction, or if the proposed transaction is inconsistent with existing operations, Bank must approve the proposed transaction. - ------------------------------------------------------------------------------------------------------------- $5,000,001 - $10,000,000 The Bank must review the proposed transaction and determine that it is in compliance with all other covenants (on a projected basis) and consistent with Borrower's existing operations. If the projected ratio of Interest Bearing Debt to EBITDA resulting from the transaction will be greater than 1.5 to 1.0, or if any other projected covenant will not be in compliance as a result of the proposed transaction, or the proposed transaction is inconsistent with existing operations, the Bank must approve the proposed transaction and Borrower may be required by Bank, to provide to Bank, a fairness opinion from an investment banking firm acceptable to Bank. - ------------------------------------------------------------------------------------------------------------- $10,000,000 or more Bank approval and fairness opinion may be required. - -------------------------------------------------------------------------------------------------------------
2. [Purposely Omitted] 12 13 C. In the event of any incorporation (or other formation), acquisition, merger or consolidation which results in a new entity which is not one of the Borrowers then in effect, Borrower shall cause such new entity, within thirty (30) days of the closing of the transaction, to formally join in the execution of this Loan Agreement, and to execute such documents as may be necessary for any such new entity to pledge all of its assets to Bank, it being the intent of the parties that each Borrower, and all Subsidiaries of each Borrower, shall be jointly and severally liable for the Loan and all their respective assets shall act as collateral therefore. Upon joinder, the term "Borrower" shall be read to include any and all new entities. Any such new entity (together with any existing Borrower) shall sign such joinder documents and financing statements as Bank may require, and in such form as the Bank may require, in Bank's reasonable discretion. Any outside legal fees incurred by Bank shall be reimbursed by Borrower. Any breach of this joinder obligation shall constitute a default under this Agreement. VI. DEFAULT. Borrower shall be in default under this Agreement and under each of the other Loan Documents if it shall default in the payment of any amounts due and owing under the Loan or should it fail to timely and properly observe, keep or perform any term, covenant, agreement or condition in any Loan Document or in any other loan agreement, promissory note, security agreement, deed of trust, deed to secure debt, mortgage, assignment or other contract securing or evidencing payment of any indebtedness of Borrower to Bank or any affiliate or subsidiary of NationsBank Corporation. Notwithstanding the above, Borrower shall have a period of ten (10) days to cure any default based on Borrower's failure to pay any monetary obligation due to Bank and thirty (30) days from the date of written notice from Bank to Borrower to cure any other default by Borrower before Bank may pursue its remedies. VII. CROSS-DEFAULT PROVISION. Borrowers jointly and severally acknowledge and agree that a breach of any term, condition, warranty or covenant herein by Borrower shall constitute a default under this Loan Agreement. Furthermore, any breach of or default under this Loan Agreement automatically shall constitute a default under all the other Loan Documents incident to this Facility; similarly, any breach or default by Borrowers under any of the Loan Documents shall be deemed a default under all the other Loan Documents and under this Loan Agreement. A default by Borrower under any loan (term, line of credit or otherwise) with Bank shall constitute a default under this Loan Agreement and all other Loan Documents incident to this Facility, and a default under this Loan shall constitute a default under any other loan from Bank to Borrowers. Upon any such breach or default, Bank shall have the right to exercise any and all remedies allowable under the documents and under Florida law, and may proceed under any document or may proceed to exercise any specific remedy without being required to resort to any other remedy allowable by law or under any specific loan document. Borrower, jointly and severally, agree to pay to Bank all costs of collection in the event of any such breach or default, including, without limitation, a reasonable attorneys' fee for Bank's legal counsel as provided in the Loan Documents. VIII. CROSS-COLLATERALIZATION PROVISION. The Collateral for this Loan also shall 13 14 act as collateral for any future loan from Bank to Borrowers, upon written notice from Bank to Borrowers, at any time, the collateral for any future loan (or any collateralized Interest Rate Protection Agreement) from Bank to Borrowers also shall secure this Loan. IX. REMEDIES UPON DEFAULT. A. If an event of default shall occur, and except as provided in Section VI above, Bank shall have all rights, powers and remedies available under each of the Loan Documents as well as all rights and remedies available at law or in equity. B. Borrower shall have no right of setoff against Bank under the Loan or under this Agreement or under any instruments securing the Note or executed in connection with the Loan. Bank, however, shall have the right, in addition to all other remedies provided herein or at law, immediately and without further action by it, to setoff against the Note or otherwise under this Agreement all monies owned, if any, by Bank in any capacity to Borrower, whether or not then due. In the event the Federal Deposit Insurance Corporation ("FDIC") shall assume control of Bank and seize any deposits of Borrower, the amounts seized shall reduce the indebtedness of Borrower under the Note and this Agreement. X. NOTICES. All notices, requests or demands which any party is required or may desire to give to any other party under any provision of this Agreement must be in writing delivered to the other party at the following address: Borrower: c/o Insurance Management Solutions Group, Inc., a Florida corporation 360 Central Avenue St. Petersburg, Florida 33701 Fax. No. (727) 803-2093 Attn: Mr. Kelly K. King Bank: NationsBank, N.A. 18167 US Hwy 19 North, Suite 600 Clearwater, Florida 33764-6575 Attn: Linda K. Mace Fax: (727) 524-1193 or to such other address as any party may designate by written notice to the other party. Each such notice, request and demand shall be deemed given or made as follows: A. If sent by mail, upon the earlier of the date of receipt or five (5) days after deposit in the U.S. Mail, first class postage prepaid; B. If sent by any other means , upon delivery. XI. COSTS, EXPENSES AND ATTORNEYS' FEES. Borrower shall pay to Bank immediately upon demand the full amount of all costs and expenses, including reasonable attorneys' fees (to include outside counsel fees and all allocated costs of Bank's in-house counsel if permitted by applicable law), incurred by Bank in connection with (a) negotiation and preparation of this Agreement 14 15 and each of the Loan Documents, and (b) all other costs and attorneys' fees incurred by Bank for which Borrower is obligated to reimburse Bank in accordance with the terms of the Loan Documents. XII. MISCELLANEOUS. Borrower and Bank further covenant and agree as follows, without limiting any requirement of any other Loan Document: A. CUMULATIVE RIGHTS AND NO WAIVER. Each and every right granted to Bank under any Loan Document, or allowed it by law or equity shall be cumulative of each other and may be exercised in addition to any and all other rights of Bank, and no delay in exercising any right shall operate as a waiver thereof, nor shall any single or partial exercise by Bank of any right preclude any other or future exercise thereof or the exercise of any other right. Borrower expressly waives any presentment, demand, protest or other notice of any kind, including but not limited to notice of intent to accelerate and notice of acceleration. No notice to or demand on Borrower in any case shall, of itself, entitle Borrower to any other or future notice or demand in similar or other circumstances. B. APPLICABLE LAW. This Loan Agreement and the rights and obligations of the parties hereunder shall be governed by and interpreted in accordance with the laws of Florida (without regard to choice of law principles) and applicable United States federal law. C. AMENDMENT. No modification, consent, amendment or waiver of any provision of this Loan Agreement, nor consent to any departure by Borrower therefrom, shall be effective unless the same shall be in writing and signed by an officer of Bank, and then shall be effective only in the specified instance and for the purpose for which given. This Loan Agreement is binding upon Borrower, its successors and assigns, and inures to the benefit of Bank, its successors and assigns; however, no assignment or other transfer of Borrower's rights or obligations hereunder shall be made or be effective without Bank's prior written consent, nor shall it relieve Borrower of any obligations hereunder. There is no third party beneficiary of this Loan Agreement. D. DOCUMENTS. All documents, certificates and other items required under this Loan Agreement to be executed and/or delivered to Bank shall be in form and content satisfactory to Bank and its counsel. E. PARTIAL INVALIDITY. The unenforceability or invalidity of any provision of this Loan Agreement shall not affect the enforceability or validity of any other provision herein and the invalidity or unenforceability of any provision of any Loan Document to any person or circumstance shall not affect the enforceability or validity of such provision as it may apply to other persons or circumstances. F. INDEMNIFICATION. Notwithstanding anything to the contrary contained in Section 10(G), Borrower shall indemnify, defend and hold Bank and its successors and assigns harmless from and against any and all claims, demands, suits, losses, damages, assessments, fines, penalties, costs or other expenses (including reasonable attorneys' fees and court costs) arising from or in any way related to any of the transactions contemplated hereby, including but not limited to actual or threatened damage to the environment, agency costs of investigation, personal injury or death, or property damage, due to a release or alleged release of Hazardous Materials, arising from Borrower's business operations, any other property owned by Borrower or in the surface or ground water arising from Borrower's business operations, or gaseous emissions arising from Borrower's business operations or any other condition existing or arising from Borrower's business operations resulting from the use or existence of Hazardous Materials, whether 15 16 such claim proves to be true or false. Borrower further agrees that its indemnity obligations shall include, but are not limited to, liability for damages resulting from the personal injury or death of an employee of the Borrower, regardless of whether the Borrower has paid the employee under the workmen' s compensation laws of any state or other similar federal or state legislation for the protection of employees. The term "property damage" as used in this paragraph includes, but is not limited to, damage to any real or personal property of the Borrower, the Bank, and of any third parties. The Borrower's obligations under this paragraph shall survive the repayment of the Loan and any deed in lieu of foreclosure or foreclosure of any Deed to Secure Debt, Deed of Trust, Security Agreement or Mortgage securing the Loan. G. SURVIVABILITY. All covenants, agreements, representations and warranties made herein or in the other Loan Documents shall survive the making of the Loan and shall continue in full force and effect so long as the Loan is outstanding or the obligation of the Bank to make any advances under the Line shall not have expired. H. REFINANCE. In the event Borrower enters into negotiations with another financial institution to "take out" or otherwise refinance the Loan, Borrower hereby agrees to give Bank a first right of refusal to match the terms proposed by any other lender. Upon receipt of a signed commitment letter from another financial institution, Borrower shall deliver a copy to Bank. Bank shall then have ten (10) business days from the date of actual receipt to notify Borrower that Bank is willing to match all material terms contained in the commitment letter; provided, however, that Bank shall have at least twenty (20) days from the date of Bank's notice to Borrower of its willingness to match the terms to "close," notwithstanding any language in the commitment letter to the contrary. XIII. ARBITRATION. ANY CONTROVERSY OR CLAIM BETWEEN OR AMONG THE PARTIES HERETO INCLUDING BUT NOT LIMITED TO THOSE ARISING OUT OF OR RELATING TO THIS INSTRUMENT, AGREEMENT OR DOCUMENT OR ANY RELATED INSTRUMENTS, AGREEMENTS OR DOCUMENTS, INCLUDING ANY CLAIM BASED ON OR ARISING FROM AN ALLEGED TORT, SHALL BE DETERMINED BY BINDING ARBITRATION IN ACCORDANCE WITH THE FEDERAL ARBITRATION ACT (OR IF NOT APPLICABLE, THE APPLICABLE STATE LAW), THE RULES OF PRACTICE AND PROCEDURE FOR THE ARBITRATION OF COMMERCIAL DISPUTES OF J.A.M.S./ENDISPUTE OR ANY SUCCESSOR THEREOF ("J.A.M.S."), AND THE "SPECIAL RULES" SET FORTH BELOW. IN THE EVENT OF ANY INCONSISTENCY, THE SPECIAL RULES SHALL CONTROL. JUDGMENT UPON ANY ARBITRATION AWARD MAY BE ENTERED IN ANY COURT HAVING JURISDICTION. ANY PARTY TO THIS INSTRUMENT, AGREEMENT OR DOCUMENT MAY BRING AN ACTION, INCLUDING A SUMMARY OR EXPEDITED PROCEEDING, TO COMPEL ARBITRATION OF ANY CONTROVERSY OR CLAIM TO WHICH THIS AGREEMENT APPLIES IN ANY COURT HAVING JURISDICTION OVER SUCH ACTION. A. SPECIAL RULES. THE ARBITRATION SHALL BE CONDUCTED IN THE COUNTY OF ANY BORROWER'S DOMICILE AT THE TIME OF THE EXECUTION OF THIS INSTRUMENT, AGREEMENT OR DOCUMENT OR IF THERE IS REAL OR PERSONAL PROPERTY COLLATERAL, IN THE COUNTY WHERE SUCH REAL OR PERSONAL PROPERTY IS LOCATED, AND ADMINISTERED BY J.A.M.S. WHO WILL APPOINT AN ARBITRATOR; IF J.A.M.S. IS UNABLE OR LEGALLY PRECLUDED FROM ADMINISTERING THE ARBITRATION, THEN THE AMERICAN ARBITRATION ASSOCIATION WILL SERVE. ALL ARBITRATION 16 17 HEARINGS WILL BE COMMENCED WITHIN 90 DAYS OF THE DEMAND FOR ARBITRATION; FURTHER, THE ARBITRATOR SHALL ONLY, UPON A SHOWING OF CAUSE, BE PERMITTED TO EXTEND THE COMMENCEMENT OF SUCH HEARING FOR UP TO AN ADDITIONAL 60 DAYS. B. RESERVATION OF RIGHTS. NOTHING IN THIS ARBITRATION PROVISION SHALL BE DEEMED TO (I) LIMIT THE APPLICABILITY OF ANY OTHERWISE APPLICABLE STATUTES OF LIMITATION OR REPOSE AND ANY WAIVERS CONTAINED IN THIS INSTRUMENT, AGREEMENT OR DOCUMENT; OR (II) BE A WAIVER BY BANK OF THE PROTECTION AFFORDED TO IT BY 12 U.S.C. SEC. 91 OR ANY SUBSTANTIALLY EQUIVALENT STATE LAW; OR (III) LIMIT THE RIGHT OF BANK HERETO (A) TO EXERCISE SELF HELP REMEDIES SUCH AS (BUT NOT LIMITED TO) SETOFF, OR (B) TO FORECLOSE AGAINST ANY REAL OR PERSONAL PROPERTY COLLATERAL, OR (C) TO OBTAIN FROM A COURT PROVISIONAL OR ANCILLARY REMEDIES SUCH AS (BUT NOT LIMITED TO) INJUNCTIVE RELIEF, WRIT OF POSSESSION OR THE APPOINTMENT OF A RECEIVER. BANK MAY EXERCISE SUCH SELF HELP RIGHTS, FORECLOSE UPON SUCH PROPERTY, OR OBTAIN SUCH PROVISIONAL OR ANCILLARY REMEDIES BEFORE, DURING OR AFTER THE PENDENCY OF ANY ARBITRATION PROCEEDING BROUGHT PURSUANT TO THIS INSTRUMENT, AGREEMENT OR DOCUMENT. NEITHER THIS EXERCISE OF SELF HELP REMEDIES NOR THE INSTITUTION OR MAINTENANCE OF AN ACTION FOR FORECLOSURE OR PROVISIONAL OR ANCILLARY REMEDIES SHALL CONSTITUTE A WAIVER OF THE RIGHT OF ANY PARTY, INCLUDING THE CLAIMANT IN ANY SUCH ACTION, TO ARBITRATE THE MERITS OF THE CONTROVERSY OR CLAIM OCCASIONING RESORT TO SUCH REMEDIES. XIV. NO ORAL AGREEMENT. THIS WRITTEN LOAN AGREEMENT AND THE OTHER LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. XV. YEAR 2000 REPRESENTATIONS AND WARRANTIES. (A) Borrower has (i) begun analyzing the operations of Borrower and its subsidiaries and affiliates that could be adversely affected by failure to become Year 2000 compliant (that is, that computer applications, imbedded microchips and other systems will be able to perform date-sensitive functions prior to and after December 31, 1999) and; (ii) developed a plan for becoming Year 2000 compliant in a timely manner, the implementation of which is on schedule in all material respects. Borrower reasonably believes that it will become Year 2000 compliant for its operations and those of its subsidiaries and affiliates on a timely basis except to the extent that a failure to do so could not reasonably be expected to have a material adverse effect upon the financial condition of Borrower. (B) Borrower reasonably believes any suppliers and vendors that are material to the operations of Borrower to its subsidiaries and affiliates will be Year 2000 compliant for their own computer applications except to the extent that a failure to do so could not reasonably be expected to have a material adverse effect upon the financial condition of Borrower. (C) Borrower will promptly notify Bank in the event Borrower determines that any computer application which is material to the operations of Borrower, its subsidiaries or any of its material vendors or suppliers will not be fully Year 2000 compliant on a timely basis, except to the extent that such failure could not reasonably be expected to have a material adverse effect upon the financial condition of Borrower. 17 18 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed under seal by their duly authorized representatives as of the date first above written. BORROWER: BANK: Insurance Management Solutions Group, Inc. NationsBank, N.A. a Florida corporation By: /s/ Kelly K. King (Seal) By: /s/ Linda Kibbe Mace (Seal) ------------------------------------- -------------------------------- Kelly K. King, CFO Linda Kibbe Mace, Vice President [Corporate Seal] Insurance Management Solutions, Inc. a Florida corporation By: /s/ Kelly K. King (Seal) ------------------------------------- Kelly K. King, CFO [Corporate Seal] Geotrac of America, Inc., a Florida corporation By: /s/ Kelly K. King (Seal) ------------------------------------- Kelly K. King, CFO [Corporate Seal] IMS Direct, Inc., a Florida corporation By: /s/ Kelly K. King (Seal) ------------------------------------- Kelly K. King, CFO [Corporate Seal] Colonial Claims Corporation, a Florida corporation By: /s/ Kelly K. King (Seal) ------------------------------------- Kelly K. King, CFO [Corporate Seal]
18 19 Exhibit "A" Borrowing Base Certificate [GRAPHIC OMITTED] Borrowing Base Agreement - -------------------------------------------------------------------------------- 1. Borrowing Base The aggregate principal amount of all amounts from time to time advanced pursuant to the terms of that promissory note dated June 11, 1999 in the principal amount of $12,000,000(the "Note") shall not exceed the Maximum Amount. "Maximum Amount" shall mean the lesser of $12,000,000 or the Borrowing Base. The "Borrowing Base" at any time, shall be equal to 2 Times EBITDA where EBITDA is the accumulated previous four quarters EBITDA of IMSG, subsidiaries and acquired subsidiaries. Previous Four Quarter EBITDA Quarter 1 _____________plus Quarter 2 _____________plus Quarter 3 _____________plus Quarter 4 _____________, A. Equals Total EBITDA (A)______________ B. Multiplied by 2, cap of $12,000,000 (B)______________ C. Total Interest Bearing Debt Outstanding (C)______________ D. Availability (Line B less Line C) (D)______________ Mandatory Payment In the event the aggregate principal outstanding balance of advances under the Note exceed the Maximum Amount, Borrower shall immediately and without notice or demand of any kind, make such payments as shall be necessary to reduce the principal balance of the Note below the Maximum Amount. Borrower: Insurance Management Solutions Group, Inc and subsidiaries By: __________________________________________________________(Seal) Name: ________________________________________________________ Title: _______________________________________________________ 19 20 Exhibit "B" Compliance Certificate COMPLIANCE CERTIFICATE This Compliance Certificate is delivered pursuant to Section IV. B.4. of the Loan Agreement dated as of June 11, 1999 (together with all amendments and modifications, if any, from time to time made thereto, the "Loan Agreement"), between Insurance Management Solutions Group, Inc., a Florida corporation, Insurance Management Solutions, Inc., a Florida corporation, Geotrac of America, Inc., a Florida corporation, IMS Direct, Inc., a Florida corporation, Colonial Claims Corporation, a Florida corporation, and any and all Subsidiaries, existing now or acquired in the future (collectively, the "Borrower") and NationsBank, N.A. Unless otherwise defined, terms used herein (including the attachments hereto) have the meanings provided in the Loan Agreement. The undersigned, being the duly elected, qualified and acting ______________ of the Borrower, on behalf of the Borrower and solely in his or her capacity as an officer of the Borrower, hereby certifies and warrants that: 1. He or she is the _____________ of the Borrower and that, as such, he or she is authorized to execute this certificate on behalf of the Borrower. 2. As of ________________, 19____: (a) The Borrower was not in default of any of the provisions of the Loan Agreement during the period as to which this Compliance Certificate relates; (b) The Borrower's Interest Bearing Debt to EBITDA was ______to 1.0 as computed on Attachment 1 hereto; (c) Borrower's ratio of Total Liabilities to Tangible Net Worth was __________ to 1.0 as computed on Attachment 4 hereto; (f) Borrower's Fixed Charge Coverage ratio was ________ to 1.0 as computed on Attachment 5 hereto; (g) Aggregate annual dividends were equal to $___________ and Interest Bearing Debt/EBITDA was less than 1.0 to 1.0. IN WITNESS WHEREOF, the undersigned has executed and delivered this certificate, this ______ day of ______________, 19____. By: __________________________ Title: _______________________ 20 21 ATTACHMENT 1 Period Ending _______________ Ratio of Interest Bearing Debt/EBITDA 1. Interest Bearing Debt (a) period ending $__________ 2. EBITDA (a) quarter ending, plus (b) quarter ending, plus (c) quarter ending, plus (d) quarter ending = $__________ 3. Ratio Interest Bearing Debt to EBITDA = ____________________ Required ratio is Less than 2.0x. 21 22 ATTACHMENT 2 Period Ending ___________ Ratio of Total Liabilities to Tangible Net Worth 1. Total Liabilities: $_____________ 2. Tangible Net Worth: $______________ Ratio: Total liabilities to Tangible Net Worth = ______ to 1.0. Required Ratio: Less than 1.0 to 1.0 22 23 ATTACHMENT 3 Period Ending: __________ Fixed Charge Coverage Ratio 1. Aggregate of net income plus (a) Depreciation $___________ (b) Amortization $___________ (c) Interest Expense $___________ (d) Lease Expense $___________ (e) Taxes $___________ (f) Capital Contributions made in cash $___________ Less (g) Distributions $___________ = $___________ 2. Fixed Charges Leases and Rent, plus $___________ Interest Expense, plus $___________ Current Maturities on Long Term Debt $___________ = $___________ Fixed Charges Ratio = ____________ Required Ratio: not less than 2.5 to 1.0 23 EX-10.4 5 SECURITY AGREEMENT 1 EXHIBIT 10.4 SECURITY AGREEMENT ========================================================================================================== BANK/SECURED PARTY: DEBTOR(S)/PLEDGOR(S): NationsBank, N.A. Insurance Management Solutions Group, Inc., a Florida Banking Center: corporation Insurance Management Solutions, Inc., a Florida corporation 18167 US Hwy 19 North, Suite 600 Geotrac of America, Inc., a Florida corporation Clearwater, Florida 33764-6575 IMS Direct, Inc., a Florida corporation Colonial Claims Corporation, a Florida corporation Pinellas County, Florida and all future subsidiaries hereof as may be joined in the future. 360 Central Avenue St. Petersburg, Florida 33701 Pinellas County, Florida. ========================================================================================================== Debtor/Pledgors are Corporations Address is Debtors'/Pledgors' Chief Executive Office if more than one place of business is 360 Central Avenue, St. Petersburg, Florida, 33701. Collateral (hereinafter defined) is located at: Debtors'/Pledgors' address shown above and the following address: 10551 5th Street North, St. Petersburg, Florida, 33702, 3900 Laylin Road, Norwalk, Ohio, 44857, 156 South Norwalk Road, Norwalk, Ohio, 44857, and 2200 Bayshore Blvd., Dunedin, Florida 34698. ==========================================================================================================
1. SECURITY INTEREST. For good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, Debtors/Pledgors (hereinafter referred to as "Debtor") assigns and grants to Bank (also known as "Secured Party"), a security interest and lien in the Collateral (hereinafter defined) to secure the payment and the performance of the Obligation (hereinafter defined). 2. COLLATERAL. A security interest is granted in the following collateral described in this Item 2 (the "Collateral"): A. TYPES OF COLLATERAL: i. ACCOUNTS: Any and all accounts and other rights of Debtor to the payment for goods sold or leased or for services rendered whether or not earned by performance, including, without limitation, contract rights, book debts, checks, notes, drafts, instruments, chattel paper, acceptances, and any and all amounts due to Debtor from a factor or other forms of obligations and receivables, now existing or hereafter arising. ii. INVENTORY: Any and all of Debtor's goods held as inventory, whether now owned or hereafter acquired, including without limitation, any and all such goods held for sale or lease or being processed for sale or lease in Debtor's business, as now or hereafter conducted, including all materials, goods and work in process, finished goods and other tangible property held for sale or lease or furnished or to be 2 furnished under contracts of service or used or consumed in Debtor's business, along with all documents (including documents of title) covering such inventory. iii. EQUIPMENT: Any and all of Debtor's goods held as equipment, including, without limitation, all machinery, tools, dies, furnishings, or fixtures, wherever located, whether now owned or hereafter acquired, together with all increases, parts, fittings, accessories, equipment, and special tools now or hereafter affixed to any part thereof or used in connection therewith. iv. INSTRUMENTS AND/OR INVESTMENT DOCUMENTS: Any and all of Debtor's instruments, documents, and other writings of any type, which evidence a right to the payment of money and which are of a type that is transferred in the ordinary course of business by delivery with any necessary indorsement or assignment, whether now owned or hereafter acquired, including, without limitation, negotiable instruments, promissory notes, and documents of title owned or to be owned by Debtor, certificates of deposit, and all liens, security agreements, leases and other contracts securing or otherwise relating to any of said instruments or documents. v. GENERAL INTANGIBLES: Any and all of Debtor's general intangible property, whether now owned or hereafter acquired by Debtor or used in Debtor's business currently or hereafter, including, without limitation, all patents, trademarks, service marks, trade secrets, copyrights and exclusive licenses (whether issued or pending), literary rights, contract rights and all documents, applications, materials and other matters related thereto, all inventions, all manufacturing, engineering and production plans, drawings, specifications, processes and systems, all trade names, goodwill and all chattel paper, documents and instruments relating to such general intangibles. B. SUBSTITUTIONS, PROCEEDS AND RELATED ITEMS. Any and all substitutes and replacements for, accessions, attachments and other additions to, tools, parts and equipment now or hereafter added to or used in connection with, and all cash or non-cash proceeds and products of, the Collateral (including, without limitation, all income, benefits and property receivable, received or distributed which results from any of the Collateral, such as dividends payable or distributable in cash, property or stock; insurance distributions of any kind related to the Collateral, including, without limitation, returned premiums, interest, premium and principal payments; redemption proceeds and subscription rights; and shares or other proceeds of conversions or splits of any securities in the Collateral); any and all choses in action and causes of action of Debtor, whether now existing or hereafter arising, relating directly or indirectly to the Collateral (whether arising in contract, tort or otherwise and whether or not currently in litigation); all certificates of title, manufacturer's statements of origin, other documents, accounts and chattel paper, whether now existing or hereafter arising directly or indirectly from or related to the Collateral; all warranties, wrapping, packaging, advertising and shipping materials used or to be used in connection with or related to the Collateral; all of Debtor's books, records, data, plans, manuals, computer software, computer tapes, computer systems, computer disks, computer programs, source codes and object codes containing any information, pertaining directly or indirectly to the Collateral and all rights of Debtor to retrieve data and other information pertaining directly or indirectly to the Collateral from third parties, whether now existing or hereafter arising; and all returned, refused, stopped in transit, or repossessed Collateral, any of which, if received by Debtor, upon request shall be delivered immediately to Bank. 2 3 C. BALANCES AND OTHER PROPERTY. The balance of every deposit account of Debtor maintained with Bank and any other claim of Debtor against Bank, now or hereafter existing, liquidated or unliquidated, and all money, instruments, securities, documents, chattel paper, credits, claims, demands, income, and any other property, rights and interests of Debtor which at any time shall come into the possession or custody or under the control of Bank or any of its agents or affiliates for any purpose, and the proceeds of any thereof. Bank shall be deemed to have possession of any of the Collateral in transit to or set apart for it or any of its agents or affiliates. 3. DESCRIPTION OF OBLIGATION(S). The following obligations ("Obligation" or "Obligations") are secured by this Agreement: (a) All debts, obligations, liabilities and agreements of Debtor to Bank, now or hereafter existing, arising directly or indirectly between Debtor and Bank whether absolute or contingent, joint or several, secured or unsecured, due or not due, contractual or tortious, liquidated or unliquidated, arising by operation of law or otherwise, and all renewals, extensions or rearrangement of any of the above; (b) All costs incurred by Bank to obtain, preserve, perfect and enforce this Agreement and maintain, preserve, collect and realize upon the Collateral; (c) All debt, obligations and liabilities of Debtor/Pledgor to Bank of the kinds described in this Item 3., now existing or hereafter arising; (d) All other costs and attorney's fees incurred by Bank, for which Debtor is obligated to reimburse Bank in accordance with the terms of the Loan Documents (hereinafter defined), together with interest at the maximum rate allowed by law, or if none, 18% per annum; and (e) All amounts which may be owed to Bank pursuant to all other Loan Documents executed between Bank and any other Debtor. If Debtor is not the obligor of the Obligation, and in the event any amount paid to Bank on any Obligation is subsequently recovered from Bank in or as a result of any bankruptcy, insolvency or fraudulent conveyance proceeding, Debtor shall be liable to Bank for the amounts so recovered up to the fair market value of the Collateral whether or not the Collateral has been released or the security interest terminated. In the event the Collateral has been released or the security interest terminated, the fair market value of the Collateral shall be determined, at Bank's option, as of the date the Collateral was released, the security interest terminated, or said amounts were recovered. 4. DEBTOR'S WARRANTIES. Debtor hereby represents and warrants to Bank as follows: A. FINANCING STATEMENTS. Except as may be noted by schedule attached hereto and incorporated herein by reference, and except for a financing statement in favor of Huntington Bank relating to a loan that will be satisfied with a portion of the proceeds of the loan giving rise to this Agreement, no financing statement covering the Collateral is or will be on file in any public office, except the financing statements relating to this security interest, and no security interest, other than the one herein created, has attached or been perfected in the Collateral or any part thereof. B. OWNERSHIP. Debtor owns, or will use the proceeds of any loans by Bank to become the owner of, the Collateral free from any setoff, claim, restriction, lien, security interest or encumbrance except liens for taxes not yet due and the security interest hereunder. C. FIXTURES AND ACCESSIONS. None of the Collateral is affixed to real estate or is an accession to any goods, or will become a fixture or accession, except as expressly set out herein. D. CLAIMS OF DEBTORS ON THE COLLATERAL. All account debtors and other obligors whose debts or obligations are part of the Collateral have no right to setoffs, counterclaims or adjustments, and no defenses in connection therewith. 3 4 E. ENVIRONMENTAL COMPLIANCE. The conduct of Debtor's business operations and the condition of Debtor's property does not and will not violate any federal laws, rules or ordinances for environmental protection, regulations of the Environmental Protection Agency and any applicable local or state law, rule, regulation or rule of common law and any judicial interpretation thereof relating primarily to the environment or any materials defined as hazardous materials or substances under any local, state or federal environmental laws, rules or regulations, and petroleum, petroleum products, oil and asbestos ("Hazardous Materials"). F. POWER AND AUTHORITY. Debtor has full power and authority to make this Agreement, and all necessary consents and approvals of any persons, entities, governmental or regulatory authorities and securities exchanges have been obtained to effectuate the validity of this Agreement. 5. DEBTOR'S COVENANTS. Until full payment and performance of all of the Obligation and termination or expiration of any obligation or commitment of Bank to make advances or loans to Debtor, unless Bank otherwise consents in writing: A. OBLIGATION AND THIS AGREEMENT. Debtor shall perform all of its agreements herein and in any other agreements between it and Bank. B. OWNERSHIP AND MAINTENANCE OF THE COLLATERAL. Debtor shall keep all tangible Collateral in good condition. Debtor shall defend the Collateral against all claims and demands of all persons at any time claiming any interest therein adverse to Bank. Debtor shall keep the Collateral free from all liens and security interests except those for taxes not yet due and the security interest hereby created. C. INSURANCE. Debtor shall insure the Collateral with companies acceptable to Bank. Such insurance shall be in an amount not less than the fair market value of the Collateral and shall be against such casualties, with such deductible amounts as Bank shall approve. All insurance policies shall be written for the benefit of Debtor and Bank as their interests may appear, payable to Bank as loss payee, or in other form satisfactory to Bank, and such policies or certificates evidencing the same shall be furnished to Bank. All policies of insurance shall provide for written notice to Bank at least thirty (30) days prior to cancellation. Risk of loss or damage is Debtor's to the extent of any deficiency in any effective insurance coverage. D. BANK'S COSTS. Debtor shall pay all costs necessary to obtain, preserve, perfect, defend and enforce the security interest created by this Agreement, collect the Obligation, and preserve, defend, enforce and collect the Collateral, including but not limited to taxes, assessments, insurance premiums, repairs, rent, storage costs and expenses of sales, legal expenses, reasonable attorney's fees and other fees or expenses for which Debtor is obligated to reimburse Bank in accordance with the terms of the Loan Documents. Whether the Collateral is or is not in Bank's possession, and without any obligation to do so and without waiving Debtor's default for failure to make any such payment, Bank at its option may pay any such costs and expenses, discharge encumbrances on the Collateral, and pay for insurance of the Collateral, and such payments shall be a part of the Obligation and bear interest at the rate set out in the Obligation. Debtor agrees to reimburse Bank on demand for any costs so incurred. E. INFORMATION AND INSPECTION. Debtor shall (i) promptly furnish Bank any information with respect to the Collateral requested by Bank; (ii) allow Bank or its representatives to inspect the Collateral, at any time and wherever located, and to inspect and copy, or furnish Bank or its representatives with copies of, all records relating 4 5 to the Collateral and the Obligation; (iii) promptly furnish Bank or its representatives such information as Bank may request to identify the Collateral, at the time and in the form requested by Bank; and (iv) deliver upon request to Bank shipping and delivery receipts evidencing the shipment of goods and invoices evidencing the receipt of, and the payment for, the Collateral. F. ADDITIONAL DOCUMENTS. Debtor shall sign and deliver any papers deemed necessary or desirable in the judgment of Bank to obtain, maintain, and perfect the security interest hereunder and to enable Bank to comply with any federal or state law in order to obtain or perfect Bank's interest in the Collateral or to obtain proceeds of the Collateral. G. PARTIES LIABLE ON THE COLLATERAL. Debtor shall preserve the liability of all obligors on any Collateral, shall preserve the priority of all security therefor, and shall deliver to Bank the original certificates of title on all motor vehicles or other titled vehicles constituting the Collateral. Bank shall have no duty to preserve such liability or security, but may do so at the expense of Debtor, without waiving Debtor's default. H. RECORDS OF THE COLLATERAL. Debtor at all times shall maintain accurate books and records covering the Collateral. Debtor immediately will mark all books and records with an entry showing the absolute assignment of all Collateral to Bank, and Bank is hereby given the right to audit the books and records of Debtor relating to the Collateral at any time and from time to time. The amounts shown as owed to Debtor on Debtor's books and on any assignment schedule will be the undisputed amounts owing and unpaid. I. DISPOSITION OF THE COLLATERAL. If disposition of any Collateral gives rise to an account, chattel paper or instrument, Debtor immediately shall notify Bank, and upon request of Bank shall assign or indorse the same to Bank. No Collateral may be sold, leased, manufactured, processed or otherwise disposed of by Debtor in any manner without the prior written consent of Bank, except the Collateral sold, leased, manufactured, processed or consumed in the ordinary course of business. J. ACCOUNTS. Each account held as Collateral will represent the valid and legally enforceable obligation of third parties and shall not be evidenced by any instrument or chattel paper. K. NOTICE/LOCATION OF THE COLLATERAL. Debtor shall give Bank written notice of each office of Debtor in which records of Debtor pertaining to accounts held as Collateral are kept, and each location at which the Collateral is or will be kept, and of any change of any such location. If no such notice is given, all records of Debtor pertaining to the Collateral and all Collateral of Debtor are and shall be kept at the address marked by Debtor above. L. CHANGE OF NAME/STATUS AND NOTICE OF CHANGES. Without the written consent of Bank, Debtor shall not change its name, change its corporate status, use any trade name or engage in any business not reasonably related to its business as presently conducted. Debtor shall notify Bank immediately of (i) any material change in the Collateral, (ii) a change in Debtor's residence or location, (iii) a change in any matter warranted or represented by Debtor in this Agreement, or in any of the Loan Documents or furnished to Bank pursuant to this Agreement, and (iv) the occurrence of an Event of Default (hereinafter defined). M. USE AND REMOVAL OF THE COLLATERAL. Debtor shall not use the Collateral illegally. Debtor shall not, unless previously indicated as a fixture, permit the Collateral to be affixed to real or personal property without the prior 5 6 written consent of Bank. Debtor shall not permit any of the Collateral to be removed from the locations specified herein without the prior written consent of Bank, except for the sale of inventory in the ordinary course of business. N. POSSESSION OF THE COLLATERAL. After a default that has not been timely cured, Debtor shall deliver all investment securities and other instruments, documents and chattel paper which are part of the Collateral and in Debtor's possession to Bank immediately, or if hereafter acquired, immediately following acquisition, appropriately indorsed to Bank's order, or with appropriate, duly executed powers. Debtor waives presentment, notice of acceleration, demand, notice of dishonor, protest, and all other notices with respect thereto. O. CONSUMER CREDIT. If any Collateral or proceeds includes obligations of third parties to Debtor, the transactions giving rise to the Collateral shall conform in all respects to the applicable state or federal law including but not limited to consumer credit law. Debtor shall hold harmless and indemnify Bank against any cost, loss or expense arising from Debtor's breach of this covenant. P. POWER OF ATTORNEY. Debtor appoints Bank and any officer thereof as Debtor's attorney-in-fact with full power in Debtor's name and behalf to do every act which Debtor is obligated to do or may be required to do hereunder; however, nothing in this paragraph shall be construed to obligate Bank to take any action hereunder nor shall Bank be liable to Debtor for failure to take any action hereunder. This appointment shall be deemed a power coupled with an interest and shall not be terminable as long as the Obligation is outstanding and shall not terminate on the disability or incompetence of Debtor. Q. WAIVERS BY DEBTOR. Debtor waives notice of the creation, advance, increase, existence, extension or renewal of, and of any indulgence with respect to, the Obligation; waives presentment, demand, notice of dishonor, and protest; waives notice of the amount of the Obligation outstanding at any time, notice of any change in financial condition of any person liable for the Obligation or any part thereof, notice of any Event of Default, and all other notices respecting the Obligation; and agrees that maturity of the Obligation and any part thereof may be accelerated, extended or renewed one or more times by Bank in its discretion, without notice to Debtor. Debtor waives any right to require that any action be brought against any other person or to require that resort be had to any other security or to any balance of any deposit account. Debtor further waives any right of subrogation or to enforce any right of action against any other Debtor until the Obligation is paid in full. R. OTHER PARTIES AND OTHER COLLATERAL. No renewal or extension of or any other indulgence with respect to the Obligation or any part thereof, no release of any security, no release of any person (including any maker, indorser, guarantor or surety) liable on the Obligation, no delay in enforcement of payment, and no delay or omission or lack of diligence or care in exercising any right or power with respect to the Obligation or any security therefor or guaranty thereof or under this Agreement shall in any manner impair or affect the rights of Bank under the law, hereunder, or under any other agreement pertaining to the Collateral. Bank need not file suit or assert a claim for personal judgment against any person for any part of the Obligation or seek to realize upon any other security for the Obligation, before foreclosing or otherwise realizing upon the Collateral. Debtor waives any right to the benefit of or to require or control application of any other security or proceeds thereof, and agrees that Bank shall have no duty or obligation to Debtor to apply to the Obligation any such other security or proceeds thereof. S. COLLECTION AND SEGREGATION OF ACCOUNTS AND RIGHT TO NOTIFY. Bank hereby authorizes Debtor to collect the Collateral, subject to the direction and control of Bank, but Bank may, without cause or notice, curtail or 6 7 terminate said authority at any time. Upon notice by Bank, whether oral or in writing, to Debtor, Debtor shall forthwith upon receipt of all checks, drafts, cash, and other remittances in payment of or on account of the Collateral, deposit the same in one or more special accounts maintained with Bank over which Bank alone shall have the power of withdrawal. The remittance of the proceeds of such Collateral shall not, however, constitute payment or liquidation of such Collateral until Bank shall receive good funds for such proceeds. Funds placed in such special accounts shall be held by Bank as security for all Obligations secured hereunder. These proceeds shall be deposited in precisely the form received, except for the indorsement of Debtor where necessary to permit collection of items, which indorsement Debtor agrees to make, and which indorsement Bank is also hereby authorized, as attorney-in-fact, to make on behalf of Debtor. In the event Bank has notified Debtor to make deposits to a special account, pending such deposit, Debtor agrees that it will not commingle any such checks, drafts, cash or other remittances with any funds or other property of Debtor, but will hold them separate and apart therefrom, and upon an express trust for Bank until deposit thereof is made in the special account. Bank will, from time to time, apply the whole or any part of the Collateral funds on deposit in this special account against such Obligations as are secured hereby as Bank may in its sole discretion elect. At the sole election of Bank, any portion of said funds on deposit in the special account which Bank shall elect not to apply to the Obligations, may be paid over by Bank to Debtor. At any time, whether Debtor is or is not in default hereunder, Bank may notify persons obligated on any Collateral to make payments directly to Bank and Bank may take control of all proceeds of any Collateral. Until Bank elects to exercise such rights, Debtor, as agent of Bank, shall collect and enforce all payments owed on the Collateral. T. COMPLIANCE WITH STATE AND FEDERAL LAWS. Debtor will maintain its existence, good standing and qualification to do business, where required, and comply with all laws, regulations and governmental requirements, including without limitation, environmental laws applicable to it or any of its property, business operations and transactions. U. ENVIRONMENTAL COVENANTS. Debtor shall immediately advise Bank in writing of (i) any and all enforcement, cleanup, remedial, removal, or other governmental or regulatory actions instituted, completed or threatened pursuant to any applicable federal, state, or local laws, ordinances or regulations relating to any Hazardous Materials affecting Debtor's business operations; and (ii) all claims made or threatened by any third party against Debtor relating to damages, contribution, cost recovery, compensation, loss or injury resulting from any Hazardous Materials. Debtor shall immediately notify Bank of any remedial action taken by Debtor with respect to Debtor's business operations. Debtor will not use or permit any other party to use any Hazardous Materials at any of Debtor's places of business or at any other property owned by Debtor except such materials as are incidental to Debtor's normal course of business, maintenance and repairs and which are handled in compliance with all applicable environmental laws. Debtor agrees to permit Bank, its agents, contractors and employees to enter and inspect any of Debtor's places of business or any other property of Debtor at any reasonable times upon three (3) days prior notice for the purposes of conducting an environmental investigation and audit (including taking physical samples) to insure that Debtor is complying with this covenant and Debtor shall reimburse Bank on demand for the costs of any such environmental investigation and audit. Debtor shall provide Bank, its agents, contractors, employees and representatives with access to and copies of any and all data and documents relating to or dealing with any Hazardous Materials used, generated, manufactured, stored or disposed of by Debtor's business operations within five (5) days of the request therefor. 7 8 6. RIGHTS AND POWERS OF BANK. A. GENERAL. Bank, before or after default, without liability to Debtor, may obtain from any person information regarding Debtor or Debtor's business, which information any such person also may furnish without liability to Debtor. After a default which has not been timely cured, Bank may, without liability to Debtor: require Debtor to give possession or control of any Collateral to Bank; indorse as Debtor's agent any instruments, documents or chattel paper in the Collateral or representing proceeds of the Collateral; contact account debtors directly to verify information furnished by Debtor; take control of proceeds, including stock received as dividends or by reason of stock splits; release the Collateral in its possession to any Debtor, temporarily or otherwise; require additional Collateral; reject as unsatisfactory any property hereafter offered by Debtor as Collateral; set standards from time to time to govern what may be used as after acquired Collateral; designate, from time to time, a certain percent of the Collateral as the loan value and require Debtor to maintain the Obligation at or below such figure; take control of funds generated by the Collateral, such as cash dividends, interest and proceeds or refunds from insurance, and use same to reduce any part of the Obligation and exercise all other rights which an owner of such Collateral may exercise, except the right to vote or dispose of the Collateral before an Event of Default; at any time transfer any of the Collateral or evidence thereof into its own name or that of its nominee; and demand, collect, convert, redeem, receipt for, settle, compromise, adjust, sue for, foreclose or realize upon the Collateral, in its own name or in the name of Debtor, as Bank may determine. Bank shall not be liable for failure to collect any account or instruments, or for any act or omission on the part of Bank, its officers, agents or employees, except for its or their own willful misconduct or gross negligence. The foregoing rights and powers of Bank will be in addition to, and not a limitation upon, any rights and powers of Bank given by law, elsewhere in this Agreement, or otherwise. If Debtor fails to maintain any required insurance, to the extent permitted by applicable law Bank may (but is not obligated to) purchase single interest insurance coverage for the Collateral which insurance may at Bank's option (i) protect only Bank and not provide any remuneration or protection for Debtor directly and (ii) provide coverage only after the Obligation has been declared due as herein provided. The premiums for any such insurance purchased by Bank shall be a part of the Obligation and shall bear interest as provided in 3(d) hereof. B. CONVERTIBLE COLLATERAL. After a default which has not been timely cured, Bank may present for conversion any Collateral which is convertible into any other instrument or investment security or a combination thereof with cash, but Bank shall not have any duty to present for conversion any Collateral unless it shall have received from Debtor detailed written instructions to that effect at a time reasonably far in advance of the final conversion date to make such conversion possible. 7. DEFAULT. A. EVENT OF DEFAULT. An event of default ("Event of Default") shall occur if: (i) there is a loss, theft, damage or destruction of any material portion of the Collateral for which there is no insurance coverage or for which there is insufficient insurance coverage; (ii) Debtor or any other obligor on all or part of the Obligation shall fail to timely and properly pay or observe, keep or perform any term, covenant, agreement or condition in this Agreement or in any other agreement between Debtor and Bank or between Bank and any other obligor on the Obligation, including, but not limited to, any other note or instrument, loan agreement, security agreement, deed of trust, mortgage, promissory note, guaranty, certificate, assignment, instrument, document or other agreement concerning or related to the Obligation (collectively, the "Loan Documents"); (iii) Debtor or such other obligor shall fail to timely and properly pay or observe, keep or perform any term, covenant, agreement or condition in any agreement between 8 9 such party and any affiliate or subsidiary of NationsBank Corporation; (iv) Debtor or such other obligor shall fail to timely and properly pay or observe, keep or perform any term, covenant, agreement or condition in any lease agreement between such party and any lessor pertaining to premises at which any Collateral is located or stored; or (v) Debtor or such other obligor abandons any leased premises at which any Collateral is located or stored and the Collateral is either moved without the prior written consent of Bank or the Collateral remains at the abandoned premises. Consistent with that certain Loan Agreement of even date herewith (but not in addition to any curative periods contained therein), Debtor shall have a period of ten (10) days to cure any monetary default and thirty (30) days from the date of written notice from Secured Party to cure any non-monetary default by Borrower before Secured Party may pursue the remedies set forth below. B. RIGHTS AND REMEDIES. If any Event of Default shall occur, then, in each and every such case, Bank may, without presentment, demand, or protest; notice of default, dishonor, demand, non-payment, or protest; notice of intent to accelerate all or any part of the Obligation; notice of acceleration of all or any part of the Obligation; or notice of any other kind, all of which Debtor hereby expressly waives, (except for any notice required under this Agreement, any other Loan Document or applicable law); at any time thereafter exercise and/or enforce any of the following rights and remedies at Bank's option: i. ACCELERATION. The Obligation shall, at Bank's option, become immediately due and payable, and the obligation, if any, of Bank to permit further borrowings under the Obligation shall at Bank's option immediately cease and terminate. ii. POSSESSION AND COLLECTION OF THE COLLATERAL. At its option: (a) take possession or control of, store, lease, operate, manage, sell, or instruct any Agent or Broker to sell or otherwise dispose of, all or any part of the Collateral; (b) notify all parties under any account or contract right forming all or any part of the Collateral to make any payments otherwise due to Debtor directly to Bank; (c) in Bank's own name, or in the name of Debtor, demand, collect, receive, sue for, and give receipts and releases for, any and all amounts due under such accounts and contract rights; (d) indorse as the agent of Debtor any check, note, chattel paper, documents, or instruments forming all or any part of the Collateral; (e) make formal application for transfer to Bank (or to any assignee of Bank or to any purchaser of any of the Collateral) of all of Debtor's permits, licenses, approvals, agreements, and the like relating to the Collateral or to Debtor's business; (f) take any other action which Bank deems necessary or desirable to protect and realize upon its security interest in the Collateral; and (g) in addition to the foregoing, and not in substitution therefor, exercise any one or more of the rights and remedies exercisable by Bank under any other provision of this Agreement, under any of the other Loan Documents, or as provided by applicable law (including, without limitation, the Uniform Commercial Code as in effect in Florida (hereinafter referred to as the "UCC")). In taking possession of the Collateral Bank may enter Debtor's premises and otherwise proceed without legal process, if this can be done without breach of the peace. Debtor shall, upon Bank's demand, promptly make the Collateral or other security available to Bank at a place designated by Bank, which place shall be reasonably convenient to both parties. Bank shall not be liable for, nor be prejudiced by, any loss, depreciation or other damages to the Collateral, unless caused by Bank's willful and malicious act. Bank shall have no duty to take any action to preserve or collect the Collateral. iii. RECEIVER. Obtain the appointment of a receiver for all or any of the Collateral, Debtor hereby consenting 9 10 to the appointment of such a receiver and agreeing not to oppose any such appointment. iv. RIGHT OF SET OFF. Without notice or demand to Debtor, set off and apply against any and all of the Obligation any and all deposits (general or special, time or demand, provisional or final) and any other indebtedness, at any time held or owing by Bank or any of Bank's agents or affiliates to or for the credit of the account of Debtor or any guarantor or indorser of Debtor's Obligation. Bank shall be entitled to immediate possession of all books and records evidencing any Collateral or pertaining to chattel paper covered by this Agreement and it or its representatives shall have the authority to enter upon any premises upon which any of the same, or any Collateral, may be situated and remove the same therefrom without liability. Bank may surrender any insurance policies in the Collateral and receive the unearned premium thereon. Debtor shall be entitled to any surplus and shall be liable to Bank for any deficiency. The proceeds of any disposition after default available to satisfy the Obligation shall be applied to the Obligation in such order and in such manner as Bank in its discretion shall decide. Debtor specifically understands and agrees that any sale by Bank of all or part of the Collateral pursuant to the terms of this Agreement may be effected by Bank at times and in manners which could result in the proceeds of such sale as being significantly and materially less than might have been received if such sale had occurred at different times or in different manners, and Debtor hereby releases Bank and its officers and representatives from and against any and all obligations and liabilities arising out of or related to the timing or manner of any such sale. If, in the opinion of Bank, there is any question that a public sale or distribution of any Collateral will violate any state or federal securities law, Bank may offer and sell such Collateral in a transaction exempt from registration under federal securities law, and any such sale made in good faith by Bank shall be deemed "commercially reasonable". 8. GENERAL. A. PARTIES BOUND. Bank's rights hereunder shall inure to the benefit of its successors and assigns. In the event of any assignment or transfer by Bank of any of the Obligation or the Collateral, Bank thereafter shall be fully discharged from any responsibility with respect to the Collateral so assigned or transferred, but Bank shall retain all rights and powers hereby given with respect to any of the Obligation or the Collateral not so assigned or transferred. All representations, warranties and agreements of Debtor if more than one are joint and several and all shall be binding upon the personal representatives, heirs, successors and assigns of Debtor. B. WAIVER. No delay of Bank in exercising any power or right shall operate as a waiver thereof; nor shall any single or partial exercise of any power or right preclude other or further exercise thereof or the exercise of any other power or right. No waiver by Bank of any right hereunder or of any default by Debtor shall be binding upon Bank unless in writing, and no failure by Bank to exercise any power or right hereunder or waiver of any default by Debtor shall operate as a waiver of any other or further exercise of such right or power or of any further default. Each right, power and remedy of Bank as provided for herein or in any of the Loan Documents, or which shall now or hereafter exist at law or in equity or by statute or otherwise, shall be cumulative and concurrent and shall be in addition to every other such right, power or remedy. The exercise or beginning of the exercise by Bank of any one or more of such rights, powers or remedies shall not preclude the simultaneous or later exercise by Bank of any or all other such rights, powers or remedies. 10 11 C. AGREEMENT CONTINUING. This Agreement shall constitute a continuing agreement, applying to all future as well as existing transactions, whether or not of the character contemplated at the date of this Agreement, and if all transactions between Bank and Debtor shall be closed at any time, shall be equally applicable to any new transactions thereafter. Provisions of this Agreement, unless by their terms exclusive, shall be in addition to other agreements between the parties. Time is of the essence of this Agreement. D. DEFINITIONS. Unless the context indicates otherwise, definitions in the UCC apply to words and phrases in this Agreement; if UCC definitions conflict, Article 9 definitions apply. E. NOTICES. Notice shall be deemed reasonable if mailed postage prepaid at least five (5) days before the related action (or if the UCC elsewhere specifies a longer period, such longer period) to the address of Debtor given above, or to such other address as any party may designate by written notice to the other party. Each notice, request and demand shall be deemed given or made, if sent by mail, upon the earlier of the date of receipt or five (5) days after deposit in the U.S. Mail, first class postage prepaid, or if sent by any other means, upon delivery. F. MODIFICATIONS. No provision hereof shall be modified or limited except by a written agreement expressly referring hereto and to the provisions so modified or limited and signed by Debtor and Bank. The provisions of this Agreement shall not be modified or limited by course of conduct or usage of trade. G. APPLICABLE LAW AND PARTIAL INVALIDITY. This Agreement has been delivered in the State of Florida and shall be construed in accordance with the laws of that State. 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 provision 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 provisions or the remaining provisions of this Agreement. The invalidity or unenforceability of any provision of any Loan Document to any person or circumstance shall not affect the enforceability or validity of such provision as it may apply to other persons or circumstances. H. FINANCING STATEMENT. To the extent permitted by applicable law, a carbon, photographic or other reproduction of this Agreement or any financing statement covering the Collateral shall be sufficient as a financing statement. I. ARBITRATION. ANY CONTROVERSY OR CLAIM BETWEEN OR AMONG THE PARTIES HERETO INCLUDING BUT NOT LIMITED TO THOSE ARISING OUT OF OR RELATING TO THIS INSTRUMENT, AGREEMENT OR DOCUMENT OR ANY RELATED INSTRUMENTS, AGREEMENTS OR DOCUMENTS, INCLUDING ANY CLAIM BASED ON OR ARISING FROM AN ALLEGED TORT, SHALL BE DETERMINED BY BINDING ARBITRATION IN ACCORDANCE WITH THE FEDERAL ARBITRATION ACT (OR IF NOT APPLICABLE, THE APPLICABLE STATE LAW), THE RULES OF PRACTICE AND PROCEDURE FOR THE ARBITRATION OF COMMERCIAL DISPUTES OF J.A.M.S./ENDISPUTE OR ANY SUCCESSOR THEREOF ("J.A.M.S."), AND THE "SPECIAL RULES" SET FORTH BELOW. IN THE EVENT OF ANY INCONSISTENCY, THE SPECIAL RULES SHALL CONTROL. JUDGMENT UPON ANY ARBITRATION AWARD MAY BE ENTERED IN ANY COURT HAVING JURISDICTION. ANY PARTY TO THIS INSTRUMENT, AGREEMENT OR DOCUMENT MAY BRING AN ACTION, INCLUDING A SUMMARY OR EXPEDITED PROCEEDING, TO COMPEL ARBITRATION OF ANY CONTROVERSY OR CLAIM TO WHICH THIS AGREEMENT APPLIES IN ANY COURT HAVING JURISDICTION OVER SUCH ACTION. 11 12 i. SPECIAL RULES. THE ARBITRATION SHALL BE CONDUCTED IN THE COUNTY OF ANY BORROWER'S DOMICILE AT TIME OF THE EXECUTION OF THIS INSTRUMENT, AGREEMENT OR DOCUMENT OR IF THERE IS REAL OR PERSONAL PROPERTY COLLATERAL, IN THE COUNTY WHERE SUCH REAL OR PERSONAL PROPERTY IS LOCATED, AND ADMINISTERED BY J.A.M.S. WHO WILL APPOINT AN ARBITRATOR; IF J.A.M.S. IS UNABLE OR LEGALLY PRECLUDED FROM ADMINISTERING THE ARBITRATION, THEN THE AMERICAN ARBITRATION ASSOCIATION WILL SERVE. ALL ARBITRATION HEARINGS WILL BE COMMENCED WITHIN 90 DAYS OF THE DEMAND FOR ARBITRATION; FURTHER, THE ARBITRATOR SHALL ONLY, UPON A SHOWING OF CAUSE, BE PERMITTED TO EXTEND THE COMMENCEMENT OF SUCH HEARING FOR UP TO AN ADDITIONAL 60 DAYS. ii. RESERVATION OF RIGHTS. NOTHING IN THIS ARBITRATION PROVISION SHALL BE DEEMED TO (I) LIMIT THE APPLICABILITY OF ANY OTHERWISE APPLICABLE STATUTES OF LIMITATION OR REPOSE AND ANY WAIVERS CONTAINED IN THIS INSTRUMENT, AGREEMENT OR DOCUMENT; OR (II) BE A WAIVER BY BANK OF THE PROTECTION AFFORDED TO IT BY 12 U.S.C. SEC. 91 OR ANY SUBSTANTIALLY EQUIVALENT STATE LAW; OR (III) LIMIT THE RIGHT OF BANK HERETO (A) TO EXERCISE SELF HELP REMEDIES SUCH AS (BUT NOT LIMITED TO) SETOFF, OR (B) TO FORECLOSE AGAINST ANY REAL OR PERSONAL PROPERTY COLLATERAL, OR (C) TO OBTAIN FROM A COURT PROVISIONAL OR ANCILLARY REMEDIES SUCH AS (BUT NOT LIMITED TO) INJUNCTIVE RELIEF, WRIT OF POSSESSION OR THE APPOINTMENT OF A RECEIVER. BANK MAY EXERCISE SUCH SELF HELP RIGHTS, FORECLOSE UPON SUCH PROPERTY, OR OBTAIN SUCH PROVISIONAL OR ANCILLARY REMEDIES BEFORE, DURING OR AFTER THE PENDENCY OF ANY ARBITRATION PROCEEDING BROUGHT PURSUANT TO THIS INSTRUMENT, AGREEMENT OR DOCUMENT. NEITHER THIS EXERCISE OF SELF HELP REMEDIES NOR THE INSTITUTION OR MAINTENANCE OF AN ACTION FOR FORECLOSURE OR PROVISIONAL OR ANCILLARY REMEDIES SHALL CONSTITUTE A WAIVER OF THE RIGHT OF ANY PARTY, INCLUDING THE CLAIMANT IN ANY SUCH ACTION, TO ARBITRATE THE MERITS OF THE CONTROVERSY OR CLAIM OCCASIONING RESORT TO SUCH REMEDIES. J. CONTROLLING DOCUMENT. To the extent that this Security Agreement conflicts with or is in any way incompatible with any other Loan Document concerning the Obligation, any promissory note shall control over any other document, and if such note does not address an issue, then each other document shall control to the extent that it deals most specifically with an issue. K. EXECUTION UNDER SEAL. This Agreement is being executed under seal by Debtor(s). L. NOTICE OF FINAL AGREEMENT. THIS WRITTEN SECURITY AGREEMENT AND THE OTHER LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES. 12 13 IN WITNESS WHEREOF, the parties hereto have caused this Security Agreement to be duly executed under seal by their duly authorized representatives as of the date first above written. DEBTORS/PLEDGORS: SECURED PARTY: Insurance Management Solutions Group, Inc. NationsBank, N.A. a Florida corporation By: /s/ Kelly K. King (Seal) By: /s/ Linda Kibbe Mace (Seal) ------------------------------------- -------------------------------- Kelly K. King, CFO Linda Kibbe Mace, Vice President [Corporate Seal] SUBSIDIARY DEBTOR/PLEDGOR: Insurance Management Solutions, Inc. a Florida corporation By: /s/ Kelly K. King (Seal) ------------------------------------- Kelly K. King, CFO [Corporate Seal] Geotrac of America, Inc., a Florida corporation By: /s/ Kelly K. King (Seal) ------------------------------------- Kelly K. King, CFO [Corporate Seal] IMS Direct, Inc., a Florida corporation By: /s/ Kelly K. King (Seal) ------------------------------------- Kelly K. King, CFO [Corporate Seal] Colonial Claims Corporation, a Florida corporation By: /s/ Kelly K. King (Seal) ------------------------------------- Kelly K. King, CFO [Corporate Seal]
EX-10.5 6 PROMISSORY NOTE 1 EXHIBIT 10.5 NationsBank, N.A. PROMISSORY NOTE Date: June 11, 1999 Amount $12,000,000.00 Maturity Date: July 5, 2001 ========================================================================================================= Bank: Borrower: NationsBank, N.A. Insurance Management Solutions Group, Inc., a Florida corporation Banking Center: Insurance Management Solutions, Inc., a Florida corporation 18167 US Hwy 19 North, Suite 600 Geotrac of America, Inc., a Florida corporation Clearwater, Florida 33764-6575 IMS Direct, Inc., a Florida corporation Colonial Claims Corporation, a Florida corporation Pinellas County, Florida and all future subsidiaries of any of the above as may be joined in the future by separate joinder pursuant to the terms of the Loan Agreement of even date herewith. 360 Central Avenue St. Petersburg, Florida 33701 Pinellas County, Florida. ========================================================================================================= ========================================================================================================= =========================================================================================================
FOR VALUE RECEIVED, the undersigned Borrower unconditionally (and jointly and severally, if more than one) promises to pay to the order of Bank, its successors and assigns, without setoff, at its offices indicated at the beginning of this Note, or at such other place as may be designated by Bank, the principal amount of Twelve Million Dollars ($12,000,000.00), or so much thereof as may be advanced from time to time in immediately available funds, together with interest computed daily on the outstanding principal balance hereunder, at an annual interest rate, and in accordance with the payment schedule, indicated below. 1. RATE. The Rate shall be the "LIBOR Rate" for each Interest Period (as defined herein), plus the Applicable Margin, per annum ("Applicable Margin" is defined in the Loan Agreement executed on even date herewith). A. For the purposes of this Note and Loan, the "LIBOR Rate" for each Interest Period shall mean the offered rate for deposits in United States dollars in the London Interbank market for a one month period which appears on the Telerate Screen Page 3750 as of 11:00 a.m. (London time) on the date that is two London Banking days (as defined herein) preceding the first Banking Business Day (as defined herein of the Interest Period. If at least two such offered rates appear on the Telerate Screen Page 3750, the rate will be the arithmetic mean of such offered rates. The Lender may, in its discretion, use any other publicly available index or reference rate showing rates offered for United States dollar deposits in the London Interbank market as of the applicable date. In addition, the Lender may, in its discretion, use rate quotations for daily or annual period in lieu of quotations for substantially equivalent monthly periods. B. "Business Banking Day" shall mean each day other than a Saturday, a Sunday or any holiday on which commercial banks in Jacksonville, Florida are closed for business. C. "Interest Period" shall mean each period commencing on each Interest Rate Adjustment Date and ending on the next Interest Rate Adjustment Date. D. "Interest Rate Adjustment Date" shall mean the 5th day of August, 1999 and the 5th day of each month thereafter. E. "London Banking Day" shall mean each day other than a Saturday, a Sunday or any holiday on which commercial banks in London, England are closed for business. Notwithstanding any provision of this Note, Bank does not intend to charge and Borrower shall not be required to pay any amount of interest or other charges in excess of the maximum permitted by the applicable law of the State of Florida; if any higher rate ceiling is lawful, then that higher rate ceiling shall apply. Any payment in excess of such maximum shall be refunded to Borrower or credited against principal, at the option of Bank. 2. ACCRUAL METHOD. Unless otherwise indicated, interest at the Rate set forth above will be calculated by the 365/360 day method (a daily amount of interest is computed for a hypothetical year of 360 days; that amount is multiplied by the actual number of days for which any principal is outstanding hereunder). NationsBank Promissory Note Florida [Commercial] 1 2/96 2 NationsBank, N.A. 3. RATE CHANGE DATE. Any Rate based on a fluctuating index or base rate will change, unless otherwise provided, each time and as of the date that the index or base rate changes. In the event any index is discontinued, Bank shall substitute an index determined by Bank to be comparable, in its sole discretion. 4. PAYMENT SCHEDULE. Principal shall be paid in full in a single payment on July 5, 2001. Interest thereon shall be paid monthly, commencing on August 5, 1999, and continuing on the 5th day of each successive month thereafter, with a final payment of all unpaid interest at the stated maturity of this Note. All payments received hereunder shall be applied first to the payment of any expense or charges payable hereunder or under any other loan documents executed in connection with this Note, then to interest due and payable, with the balance applied to principal, or in such other order as Bank shall determine at its option. 5. REVOLVING FEATURE. Borrower may borrow, repay and reborrow hereunder at any time, up to a maximum aggregate amount outstanding at any one time equal to the principal amount of this Note, provided that Borrower is not in default under any provision of this Note, any other documents executed in connection with this Note, or any other note or other loan documents now or hereafter executed in connection with any other obligation of Borrower to Bank, and provided that the borrowings hereunder do not exceed any borrowing base or other limitation on borrowings by Borrower. Bank shall incur no liability for its refusal to advance funds based upon its determination that any conditions of such further advances have not been met. Bank records of the amounts borrowed from time to time shall be conclusive proof thereof. 6. AUTOMATIC PAYMENT. [X] Borrower has elected to authorize Bank to effect payment of sums due under this Note by means of debiting Borrower's account number ______________________________________________. This authorization shall not affect the obligation of Borrower to pay such sums when due, without notice, if there are insufficient funds in such account to make such payment in full on the due date thereof, or if Bank fails to debit the account. If the above box is not hand-checked, this paragraph 6 shall not apply. 7. WAIVERS, CONSENTS AND COVENANTS. Borrower, any indorser or guarantor hereof, or any other party hereto (individually an "Obligor" and collectively "Obligors") and each of them jointly and severally: (a) waive presentment, demand, protest, notice of demand, notice of intent to accelerate, notice of acceleration of maturity, notice of protest, notice of nonpayment, notice of dishonor, and any other notice required to be given under the law to any Obligor in connection with the delivery, acceptance, performance, default or enforcement of this Note, any indorsement or guaranty of this Note, or any other documents executed in connection with this Note or any other note or other loan documents now or hereafter executed in connection with any obligation of Borrower to Bank (the "Loan Documents"); (b) consent to all delays, extensions, renewals or other modifications of this Note or the Loan Documents, or waivers of any term hereof or of the Loan Documents, or release or discharge by Bank of any of Obligors, or release, substitution or exchange of any security for the payment hereof, or the failure to act on the part of Bank, or any indulgence shown by Bank (without notice to or further assent from any of Obligors), and agree that no such action, failure to act or failure to exercise any right or remedy by Bank shall in any way affect or impair the obligations of any Obligors or be construed as a waiver by Bank of, or otherwise affect, any of Bank's rights under this Note, under any indorsement or guaranty of this Note or under any of the Loan Documents; and (c) agree to pay, on demand, all costs and expenses of collection or defense of this Note or of any indorsement or guaranty hereof and/or the enforcement or defense of Bank's rights with respect to, or the administration, supervision, preservation, or protection of, or realization upon, any property securing payment hereof, including, without limitation, reasonable attorney's and paralegal's fees, including fees related to any suit, mediation or arbitration proceeding, out of court payment agreement, trial, appeal, bankruptcy proceedings or other proceeding, in such amount as may be determined reasonable by any arbitrator or court, whichever is applicable. 8. INDEMNIFICATION. Obligors agree to promptly pay, indemnify and hold Bank harmless from all State and Federal taxes of any kind and other liabilities with respect to or resulting from the execution and/or delivery of this Note or any advances made pursuant to this Note. If this Note has a revolving feature and is secured by a mortgage, Obligors expressly consent to the deduction of any applicable taxes from each taxable advance extended by Bank. 9. PREPAYMENTS. Subject to the terms of the Loan Agreement, prepayments may be made in whole or in part at any time on this loan. All prepayments of principal shall be applied in the inverse order of maturity, or in such other order as Bank shall determine in its sole discretion. 10. DELINQUENCY CHARGE. To the extent permitted by law, a delinquency charge may be imposed in an amount not to exceed four percent (4%) of any payment that is more than fifteen days late. 11. EVENTS OF DEFAULT. The following are events of default hereunder: (a) the failure to pay or perform any obligation, liability or indebtedness of any Obligor to Bank, or to any affiliate or subsidiary of NationsBank Corporation, whether under this Note or any Loan Documents, as and when due (whether upon demand, at maturity or by acceleration); (b) the failure to pay or perform any other obligation, liability or indebtedness of any Obligor to any other party; (c) the death of any Obligor (if an individual); (d) the resignation or withdrawal of any partner or a material owner/guarantor of Borrower, as determined by Bank in its sole discretion; (e) the commencement of a proceeding against any Obligor for dissolution or liquidation, the voluntary or involuntary termination or dissolution of any Obligor or the merger or consolidation of any Obligor with or into another entity; (f) the insolvency of, the business failure of, the appointment of a custodian, trustee, liquidator or receiver for or for any of the property of, the assignment for the benefit of creditors by, or the filing of a petition under bankruptcy, insolvency or debtor's relief law or the filing of a petition for any adjustment of indebtedness, composition or extension by or against any Obligor; (g) any representation or warranty made to Bank by any Obligor in any Loan Documents or otherwise NationsBank Promissory Note Florida [Commercial] 2 2/96 3 NationsBank, N.A. is or was, when it was made, untrue or materially misleading; (h) the failure of any Obligor to timely deliver such financial statements, including tax returns, other statements of condition or other information, as Bank shall request from time to time; (i) the entry of a judgment against any Obligor which is of a material nature not satisfied or transferred to bond within thirty (30) days; (j) the seizure or forfeiture of, or the issuance of any writ of possession, garnishment or attachment, or any turnover order for any property of any Obligor; (k) a material adverse change has occurred in the financial condition of any Obligor; or (l) the failure of Borrower's business to comply with any law or regulation controlling its operation. Consistent with the Loan Agreement (but not in addition to any cure periods provided therein), Borrower shall have a period of ten (10) days to cure any default based on Borrower's failure to pay any monetary obligation due to Bank and thirty (30) days from the date of written notice from Bank to Borrower to cure any other default by Borrower before Bank may pursue its remedies. 12. REMEDIES UPON DEFAULT. Whenever there is a default under this Note that has not been timely cured (a) the entire balance outstanding hereunder and all other obligations of any Obligor to Bank (however acquired or evidenced) shall, at the option of Bank, become immediately due and payable and any obligation of Bank to permit further borrowing under this Note shall immediately cease and terminate, and/or (b) to the extent permitted by law, the Rate of interest on the unpaid principal shall be increased at Bank's discretion up to the maximum rate allowed by law, or if none, 18% per annum (the "Default Rate"). The provisions herein for a Default Rate shall not be deemed to extend the time for any payment hereunder or to constitute a "grace period" giving Obligors a right to cure any default. At Bank's option, any accrued and unpaid interest, fees or charges may, for purposes of computing and accruing interest on a daily basis after the due date of the Note or any installment thereof, be deemed to be a part of the principal balance, and interest shall accrue on a daily compounded basis after such date at the Default Rate provided in this Note until the entire outstanding balance of principal and interest is paid in full. Upon a default under this Note, Bank is hereby authorized at any time, at its option and without notice or demand, to set off and charge against any deposit accounts of any Obligor (as well as any money, instruments, securities, documents, chattel paper, credits, claims, demands, income and any other property, rights and interests of any Obligor), which at any time shall come into the possession or custody or under the control of Bank or any of its agents, affiliates or correspondents, any and all obligations due hereunder. Additionally, Bank shall have all rights and remedies available under each of the Loan Documents, as well as all rights and remedies available at law or in equity. Any judgment rendered on this Note shall bear interest at the highest rate of interest permitted pursuant to Chapter 687, Florida Statutes. 13. NON-WAIVER. The failure at any time of Bank to exercise any of its options or any other rights hereunder shall not constitute a waiver thereof, nor shall it be a bar to the exercise of any of its options or rights at a later date. All rights and remedies of Bank shall be cumulative and may be pursued singly, successively or together, at the option of Bank. The acceptance by Bank of any partial payment shall not constitute a waiver of any default or of any of Bank's rights under this Note. No waiver of any of its rights hereunder, and no modification or amendment of this Note, shall be deemed to be made by Bank unless the same shall be in writing, duly signed on behalf of Bank; each such waiver shall apply only with respect to the specific instance involved, and shall in no way impair the rights of Bank or the obligations of Obligors to Bank in any other respect at any other time. 14. APPLICABLE LAW, VENUE AND JURISDICTION. This Note and the rights and obligations of Borrower and Bank shall be governed by and interpreted in accordance with the law of the State of Florida. In any litigation in connection with or to enforce this Note or any indorsement or guaranty of this Note or any Loan Documents, Obligors, and each of them, irrevocably consent to and confer personal jurisdiction on the courts of the State of Florida or the United States located within the State of Florida and expressly waive any objections as to venue in any such courts. Nothing contained herein shall, however, prevent Bank from bringing any action or exercising any rights within any other state or jurisdiction or from obtaining personal jurisdiction by any other means available under applicable law. The interest rate charged on this Note is authorized by Chapter 655, Florida Statutes and Section 687.12, Florida Statutes. 15. PARTIAL INVALIDITY. The unenforceability or invalidity of any provision of this Note shall not affect the enforceability or validity of any other provision herein and the invalidity or unenforceability of any provision of this Note or of the Loan Documents to any person or circumstance shall not affect the enforceability or validity of such provision as it may apply to other persons or circumstances. 16. BINDING EFFECT. This Note shall be binding upon and inure to the benefit of Borrower, Obligors and Bank and their respective successors, assigns, heirs and personal representatives, provided, however, that no obligations of Borrower or Obligors hereunder can be assigned without prior written consent of Bank. 17. CONTROLLING DOCUMENT. To the extent that this Note conflicts with or is in any way incompatible with any other document related specifically to the loan evidenced by this Note, this Note shall control over any other such document, and if this Note does not address an issue, then each other such document shall control to the extent that it deals most specifically with an issue. 18. YEAR 2000 REPRESENTATIONS AND WARRANTIES. (A) Borrower has (i) begun analyzing the operations of Borrower and its subsidiaries and affiliates that could be adversely affected by failure to become Year 2000 compliant (that is, that computer applications, imbedded microchips and other systems will be able to perform date-sensitive functions prior to and after December 31, 1999) and; (ii) developed a plan for becoming Year 2000 compliant in a timely manner, the implementation of which is on schedule in all material respects. Borrower reasonably believes that it will become Year 2000 compliant for its operations and those of its subsidiaries and affiliates on a timely basis except to the extent that a failure to do so could not reasonably be expected to have a material adverse effect upon the financial condition of Borrower. (B) Borrower reasonably believes any suppliers and vendors that are material to the operations of Borrower to its subsidiaries and affiliates will be Year 2000 compliant for their own computer applications except to the extent that a failure to do so could not reasonably be expected to have a material adverse effect upon the financial condition of Borrower. (C) Borrower will promptly notify Bank in the event Borrower determines that any computer application which is material to the operations of Borrower, its subsidiaries or any of its material vendors or suppliers will not be fully Year 2000 compliant on a timely basis, NationsBank Promissory Note Florida [Commercial] 3 2/96 4 NationsBank, N.A. except to the extent that such failure could not reasonably be expected to have a material adverse effect upon the financial condition of Borrower. 19. ARBITRATION. ANY CONTROVERSY OR CLAIM BETWEEN OR AMONG THE PARTIES HERETO INCLUDING BUT NOT LIMITED TO THOSE ARISING OUT OF OR RELATING TO THIS INSTRUMENT, AGREEMENT OR DOCUMENT OR ANY RELATED INSTRUMENTS, AGREEMENTS OR DOCUMENTS, INCLUDING ANY CLAIM BASED ON OR ARISING FROM AN ALLEGED TORT, SHALL BE DETERMINED BY BINDING ARBITRATION IN ACCORDANCE WITH THE FEDERAL ARBITRATION ACT (OR IF NOT APPLICABLE, THE APPLICABLE STATE LAW), THE RULES OF PRACTICE AND PROCEDURE FOR THE ARBITRATION OF COMMERCIAL DISPUTES OF J.A.M.S./ENDISPUTE OR ANY SUCCESSOR THEREOF ("J.A.M.S."), AND THE "SPECIAL RULES" SET FORTH BELOW. IN THE EVENT OF ANY INCONSISTENCY, THE SPECIAL RULES SHALL CONTROL. JUDGMENT UPON ANY ARBITRATION AWARD MAY BE ENTERED IN ANY COURT HAVING JURISDICTION. ANY PARTY TO THIS INSTRUMENT, AGREEMENT OR DOCUMENT MAY BRING AN ACTION, INCLUDING A SUMMARY OR EXPEDITED PROCEEDING, TO COMPEL ARBITRATION OF ANY CONTROVERSY OR CLAIM TO WHICH THIS AGREEMENT APPLIES IN ANY COURT HAVING JURISDICTION OVER SUCH ACTION. A. SPECIAL RULES. THE ARBITRATION SHALL BE CONDUCTED IN THE COUNTY OF ANY BORROWER'S DOMICILE AT THE TIME OF THE EXECUTION OF THIS INSTRUMENT, AGREEMENT OR DOCUMENT, OR IF THERE IS REAL OR PERSONAL PROPERTY COLLATERAL, IN THE COUNTY WHERE SUCH REAL OR PERSONAL PROPERTY IS LOCATED, AND ADMINISTERED BY J.A.M.S. WHO WILL APPOINT AN ARBITRATOR; IF J.A.M.S. IS UNABLE OR LEGALLY PRECLUDED FROM ADMINISTERING THE ARBITRATION, THEN THE AMERICAN ARBITRATION ASSOCIATION WILL SERVE. ALL ARBITRATION HEARINGS WILL BE COMMENCED WITHIN 90 DAYS OF THE DEMAND FOR ARBITRATION; FURTHER, THE ARBITRATOR SHALL ONLY, UPON A SHOWING OF CAUSE, BE PERMITTED TO EXTEND THE COMMENCEMENT OF SUCH HEARING FOR UP TO AN ADDITIONAL 60 DAYS. B. RESERVATION OF RIGHTS. NOTHING IN THIS ARBITRATION PROVISION SHALL BE DEEMED TO (I) LIMIT THE APPLICABILITY OF ANY OTHERWISE APPLICABLE STATUTES OF LIMITATION OR REPOSE AND ANY WAIVERS CONTAINED IN THIS INSTRUMENT, AGREEMENT OR DOCUMENT; OR (II) BE A WAIVER BY BANK OF THE PROTECTION AFFORDED TO IT BY 12 U.S.C. SEC. 91 OR ANY SUBSTANTIALLY EQUIVALENT STATE LAW; OR (III) LIMIT THE RIGHT OF BANK HERETO (A) TO EXERCISE SELF HELP REMEDIES SUCH AS (BUT NOT LIMITED TO) SETOFF, OR (B) TO FORECLOSE AGAINST ANY REAL OR PERSONAL PROPERTY COLLATERAL, OR (C) TO OBTAIN FROM A COURT PROVISIONAL OR ANCILLARY REMEDIES SUCH AS (BUT NOT LIMITED TO) INJUNCTIVE RELIEF, WRIT OF POSSESSION OR THE APPOINTMENT OF A RECEIVER. BANK MAY EXERCISE SUCH SELF HELP RIGHTS, FORECLOSE UPON SUCH PROPERTY, OR OBTAIN SUCH PROVISIONAL OR ANCILLARY REMEDIES BEFORE, DURING OR AFTER THE PENDENCY OF ANY ARBITRATION PROCEEDING BROUGHT PURSUANT TO THIS INSTRUMENT, AGREEMENT OR DOCUMENT. NEITHER THIS EXERCISE OF SELF HELP REMEDIES NOR THE INSTITUTION OR MAINTENANCE OF AN ACTION FOR FORECLOSURE OR PROVISIONAL OR ANCILLARY REMEDIES SHALL CONSTITUTE A WAIVER OF THE RIGHT OF ANY PARTY, INCLUDING THE CLAIMANT IN ANY SUCH ACTION, TO ARBITRATE THE MERITS OF THE CONTROVERSY OR CLAIM OCCASIONING RESORT TO SUCH REMEDIES. BORROWER REPRESENTS TO BANK THAT THE PROCEEDS OF THIS LOAN ARE TO BE USED PRIMARILY FOR BUSINESS, COMMERCIAL OR AGRICULTURAL PURPOSES. BORROWER ACKNOWLEDGES HAVING READ AND UNDERSTOOD, AND AGREES TO BE BOUND BY, ALL TERMS AND CONDITIONS OF THIS NOTE AND HEREBY EXECUTES THIS NOTE UNDER SEAL AS OF THE DATE HERE ABOVE WRITTEN. NOTICE OF FINAL AGREEMENT. THIS WRITTEN PROMISSORY NOTE REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES. This Note is not subject to documentary stamp taxes. EXECUTION DATE: June 11, 1999. Insurance Management Solutions Group, Inc. Insurance Management Solutions, Inc., a Florida corporation a Florida corporation By: /s/ Kelly K. King (Seal) By: /s/ Kelly K. King (SEAL) ------------------------------- ------------------------------ Kelly K. King, CFO Kelly K. King, CFO [Corporate Seal] [Corporate Seal]
[Signature continued on next page] NationsBank Promissory Note Florida [Commercial] 4 2/96 5 NationsBank, N.A. Geotrac of America, Inc., a Florida IMS Direct, Inc., a Florida corporation corporation By: /s/ Kelly K. King (Seal) By: /s/ Kelly K. King (SEAL) ------------------------------- ------------------------------ Kelly K. King, CFO Kelly K. King, CFO [Corporate Seal] [Corporate Seal] Colonial Claims Corporation, a Florida corporation By: /s/ Kelly K. King (Seal) ------------------------------- Kelly K. King, CFO [Corporate Seal]
UNITED STATES TERRITORIAL OR INTERNATIONAL WATERS LATITUDE N 27 degrees 40.977 LONGITUDE W 083 degrees 00.032 The foregoing instrument was acknowledged before me this 11th day of June, 1999, by Kelly K. King, as CFO of Insurance Management Solutions Group, Inc., a Florida corporation, on behalf of the corporation. He is personally known to me or has produced FL Drivers License (type of identification) as identification. /s/ Capt. Robert J. Ostrom ---------------------------------------------- Signature of Person Taking Acknowledgment /s/ Robert J. Ostrom ---------------------------------------------- Name of Acknowledger Typed, Printed or Stamped (NOTARY SEAL) Notary Public, State of ______________________ Notarial Serial Number: ______________________ UNITED STATES TERRITORIAL OR INTERNATIONAL WATERS LATITUDE N 27 degrees 40.977 LONGITUDE W 083 degrees 00.032 The foregoing instrument was acknowledged before me this 11th day of June, 1999, by Kelly K. King, as CFO of Insurance Management Solutions, Inc., a Florida corporation, on behalf of the corporation. He is personally known to me or has produced FL Drivers Lic (type of identification) as identification. /s/ Robert J. Ostrom ---------------------------------------------- Signature of Person Taking Acknowledgment /s/ Robert J. Ostrom ---------------------------------------------- Name of Acknowledger Typed, Printed or Stamped (NOTARY SEAL) Notary Public, State of ______________________ Notarial Serial Number: ______________________ NationsBank Promissory Note Florida [Commercial] 5 2/96 6 NationsBank, N.A. UNITED STATES TERRITORIAL OR INTERNATIONAL WATERS LATITUDE N 27 degrees 40.977 LONGITUDE W 083 degrees 00.032 The foregoing instrument was acknowledged before me this 11th day of June, 1999, by Kelly K. King, as CFO of Geotrac of America, Inc., a Florida corporation, on behalf of the corporation. He is personally known to me or has produced FL Drivers Lic (type of identification) as identification. /s/ Robert J. Ostrom ---------------------------------------------- Signature of Person Taking Acknowledgment /s/ Robert J. Ostrom ---------------------------------------------- Name of Acknowledger Typed, Printed or Stamped (NOTARY SEAL) Notary Public, State of ______________________ Notarial Serial Number: ______________________ UNITED STATES TERRITORIAL OR INTERNATIONAL WATERS LATITUDE N 27 degrees 40.977 LONGITUDE W 083 degrees 00.032 The foregoing instrument was acknowledged before me this 11th day of June, 1999, by Kelly K. King, as CFO of IMS Direct, Inc., a Florida corporation, on behalf of the corporation. He is personally known to me or has produced FL Drivers Lic (type of identification) as identification. /s/ Robert J. Ostrom ---------------------------------------------- Signature of Person Taking Acknowledgment /s/ Robert J. Ostrom ---------------------------------------------- Name of Acknowledger Typed, Printed or Stamped (NOTARY SEAL) Notary Public, State of ______________________ Notarial Serial Number: ______________________ UNITED STATES TERRITORIAL OR INTERNATIONAL WATERS LATITUDE N 27 degrees 40.977 LONGITUDE W 083 degrees 00.032 The foregoing instrument was acknowledged before me this 11th day of June, 1999, by Kelly K. King, as CFO of Colonial Claims Corporation, Inc., a Florida corporation, on behalf of the corporation. He is personally known to me or has produced FL Drivers Lic (type of identification) as identification. /s/ Robert J. Ostrom ---------------------------------------------- Signature of Person Taking Acknowledgment /s/ Robert J. Ostrom ---------------------------------------------- Name of Acknowledger Typed, Printed or Stamped (NOTARY SEAL) Notary Public, State of ______________________ Notarial Serial Number: ______________________ NationsBank Promissory Note Florida [Commercial] 6 2/96 7 OUT OF STATE AFFIDAVIT UNITED STATES TERRITORIAL WATERS OR INTERNATIONAL WATERS: LATITUDE N 27 degrees 40.977 LONGITUDE W 083 degrees 00.032 AFFIDAVIT OF OUT-OF-STATE EXECUTION AND DELIVERY I, Linda Kibbe Mace, Vice President, being first duly sworn upon my oath, depose and say: 1. That I am the vice President of NationsBank, N.A. (the "Lender"). 2. That on the 11th day of June, 1999, I witnessed the execution of that certain Revolving Line of Credit Promissory Note ("Promissory Note") dated May 28, 1999, in the maximum principal amount of Twelve Million Dollars ($12,000,000.00) payable by Insurance Management Solutions Group, Inc., a Florida corporation, Insurance Management Solutions, Inc. a Florida corporation, geotrac of America, Inc., a Florida corporation, IMS Direct, Inc., a Florida corporation, and Colonial Claims Corporation, Inc. a Florida corporation (hereinafter collectively referred to as "Borrower"), as maker to the Lender. 3. That the execution of the Promissory Note took place on a vessel located at Latitude 27 degrees 40.977 and Longitude 0.83 degrees 00.032, which is outside the territorial limits of the State of Florida. 4. That I accepted delivery of the Promissory Note on behalf of the Lender on a vessel located at Latitude 27 degrees 40.977 and Longitude 0.83 degrees 00.032, which is outside the territorial limits of the State of Florida. 5. That the location of the vessel at the time of execution and delivery of the Promissory Note at Latitude 27 degrees 40.977 and Longitude 0.83 degrees 00.032, was provided by the Captain of the vessel, the name of which is Double "O" 645326. /s/ Linda Kibbe Mace ------------------------------ Linda Kibbe Mace Vice President United States Territorial Waters or International Waters: Latitude N 27 degrees 40.977 Longitude W 0.83 degrees 00.032 The foregoing instrument was acknowledged on the 11th day of June, 1999, before me, Captain Robert J. Ostrom on a vessel of which I am the Captain, located at Latitude N 27 degrees 40.977 and Longitude W 0.83 degrees 00.032, which is located outside the territorial limits of the State of Florida, by Linda Kibbe Mace, as the Vice President of NationsBank, N.A., on behalf of the corporation, who is personally known to me or who has produced Lic #888936 as identification. /s/ Robert J. Ostrom ----------------------------- Signature of Captain Robert J. Ostrom ---------------------------- Print Name of Captain Commission Number __________________ My Commission Expires: _____________ 8 SERIAL NUMBER ISSUE NUMBER 888936 -3- UNITED STATES COAST GUARD LICENSE TO U.S. MERCHANT MARINE OFFICER This is to certify that Robert John Ostrom having been duly examined and found competent by the undersigned is licensed to serve as operator of uninspected passenger vessels as defined in 46 U.S.C. 2101 (42) upon near coastal waters, not more than 100-miles offshore for the term of five years from this date. Given under my hand this 9th day of March, 1999. Expiration: March 08, 2004 Miami, FL /s/ O.L. Russell - ---------------------------- ------------------------------ Port O.L. Russell By direction of the Officer in Charge of Marine Inspection EX-27.1 7 FINANCIAL DATA SCHEDULE
5 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, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FORM 10-Q. 1 U.S. DOLLARS 6-MOS DEC-31-1999 JAN-01-1999 JUN-30-1999 1 10,210,513 0 3,732,111 0 0 19,135,514 13,775,211 (6,075,999) 46,099,538 5,528,640 7,088,997 0 0 126,787 32,593,264 46,099,538 0 36,583,327 0 30,977,468 0 0 480,506 5,347,591 2,180,600 0 0 0 0 3,166,991 .26 .26
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