Item 1.01 Entry into a Material Definitive Agreement.
Asset Purchase Agreement with Williston Financial Group
On May 19, 2023, Doma Title of California, Inc. (the “Seller”) and Doma Corporate LLC, both subsidiaries of Doma Holdings, Inc. (the “Company” or "Doma"), entered into and closed an asset purchase agreement (the “Asset Purchase Agreement”) with Williston Financial Group LLC (“WFG”). Pursuant to the terms and subject to the conditions set forth in the Asset Purchase Agreement, the Seller agreed to sell to WFG certain assets used in or related to the Company’s title insurance agency business operated through retail title offices located in the State of California (the “Asset Sale”) for an aggregate purchase price of up to $24.5 million, subject to certain adjustments set forth in the Asset Purchase Agreement. The gross purchase price for the Asset Sale consists of $10.5 million paid by WFG to the Seller on May 19, 2023 (the “Closing Date”) and a deferred payment of up to $14.0 million payable by WFG to the Seller within 30 days after the 12-month anniversary of the Closing Date. The amount of the deferred payment is subject to an earnout based on the retention of specified employees hired by WFG or an affiliate of WFG after the Closing Date. The sale includes 22 retail title locations and operations centers in the Northern and Central California regions and 123 total employees. On the Closing Date, the Seller and a WFG affiliate, WFG National Title Insurance Company, entered into a customary transition services agreement.
GAAP Revenue and Gross Profit for the branches being sold were $37 million and $16 million, respectively, for the twelve-months ended December 31, 2022. As a result of the Asset Sale, Doma expects expense savings in corporate support, lease and administrative expenses related to its remaining 56 local retail title branches.
The Asset Purchase Agreement contains customary representations, warranties and covenants, as well as standard indemnification provisions.
Amendment to HSCM Credit Agreement
On May 19, 2023, States Title Holding, Inc., a subsidiary of the Company, as borrower (the “Borrower”), and certain subsidiaries of the Company, as guarantors, entered into the Third Amendment to Loan and Security Agreement (the “Third Amendment”), which amends that certain Loan and Security Agreement, dated December 31, 2020 (the “Credit Agreement”), by and among the Borrower, the guarantors party thereto, Hudson Structured Capital Management Ltd., as agent for the lenders (“HSCM”), and the lenders party thereto, as amended by the Counterpart Agreement and First Amendment to Loan and Security Agreement, dated January 29, 2021 (the “First Amendment”), as further amended by the Second Amendment to Loan and Security Agreement, dated July 27, 2021 (the “Second Amendment” and, together with the Credit Agreement, the First Amendment and the Third Amendment, the “Amended Credit Agreement”).
The Third Amendment amends certain mandatory prepayment provisions related to the disposition of assets by the Borrower or any of its subsidiaries such that the Borrower is required, within five business days following the receipt of net cash proceeds from dispositions in excess of $750,000 in any fiscal year (other than certain permitted dispositions), to repay the outstanding principal amount of term loan borrowings in an amount equal to 100% of such excess net cash proceeds received by the Borrower or any of its subsidiaries from such dispositions, unless HSCM, as agent, otherwise agrees.
The foregoing description of the Third Amendment does not purport to be complete and is qualified in its entirety by reference to the full text of the Third Amendment, a copy of which is attached hereto as Exhibit 10.1 and incorporated herein by reference.