Exhibit 10.21

 

 

 

 

CONIFER HOLDINGS, INC.

___________________________________

SECOND AMENDMENT

Dated as of June 21, 2019

to the

AMENDED AND Restated NOTE PURCHASE AGREEMENT

Dated as of September 29, 2017

___________________________________

RE:$30,000,000 8% Subordinated Notes due 2032

 

 

 

 

 

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SECOND Amendment to the Note Purchase Agreement

This Second Amendment dated as of June 21, 2019 (the or this “First Amendment”)
to the Note Purchase Agreement dated as of September 29, 2017, is between
Conifer Holdings, Inc., a Michigan corporation (the “Company”), and each of the
institutions which is a signatory to this First Amendment (collectively, the
“Noteholders”).

Recitals:

A.The Company and each of the Purchasers listed on Schedule A to the Note
Purchase Agreement (defined below) have heretofore entered into the Note
Purchase Agreement dated as of September 29, 2017 (the “Note Purchase
Agreement”).  The Company and each of the Purchasers listed on Schedule A to the
Note Purchase Agreement (defined below) have heretofore also entered into the
First Amendment to the Note Purchase Agreement dated as of September 29, 2017 on
June 21, 2018, (the “First Amendment to the Note Purchase Agreement”).  The
Company has heretofore issued $30,000,000 aggregate principal amount of its 8%
Subordinated Notes due September 29, 2032 (the “Notes”) pursuant to the Note
Purchase Agreement and the First Amendment to the Note Purchase Agreement.  The
Noteholders constitute the Required Holders as defined in the Note Purchase
Agreement.

B.The Company and the Noteholders now desire to amend the Note Purchase
Agreement again, in the respects, but only in the respects, hereinafter set
forth.

C.Capitalized terms used herein shall have the respective meanings ascribed
thereto in the Note Purchase Agreement unless herein defined or the context
shall otherwise require.

NOW, THEREFORE, upon the full and complete satisfaction of the conditions
precedent to the effectiveness of this First Amendment set forth in Section 3.1
hereof, and in consideration of good and valuable consideration the receipt and
sufficiency of which are hereby acknowledged, the Company and the Noteholders do
hereby agree as follows:

Section 1.

Amendments.

Section 1.1.The following definitions set forth in Schedule B of the Note
Purchase Agreement are amended and restated in their entireties to read as
follows:

“Indebtedness” means, with respect to any Person, (a) all indebtedness for
borrowed money (excluding trade liabilities incurred in the ordinary course of
business and payable in accordance with customary practices) which is evidenced
by a note, bond, debenture or similar instrument, (b) all obligations under
Capital Leases, (c) all obligations in respect of letters of credit, acceptances
or similar obligations issued or created for the account of the Company or any
of its Subsidiaries as of such date, other than insurance contracts issued by
the Company or any of its Subsidiaries in the ordinary course of business, (d)
net obligations in respect of interest rate or currency obligation swaps, hedges
or similar arrangements (the amount of any such obligation to be equal at any
time to the termination value of such agreement or arrangement giving rise to
such

 

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obligation that would be payable by such Person at such time), (e) amounts owed
as deferred purchase price for the purchase of any property or services (other
than trade payables incurred in the ordinary course of business), (f) all
indebtedness of others secured by any Lien on property owned or acquired by such
Person, whether or not the indebtedness secured thereby has been assumed, (g)
all liabilities of Company or any Subsidiary under any securitization, any
so-called “synthetic lease” or “tax ownership operating lease” or any other off
balance sheet transaction which is the functional equivalent of or takes the
place of borrowing but which does not constitute a liability on a balance sheet
of such Person, based on the outstanding amount of such liability if it had been
structured as a financing on the balance sheet of such Person, (h) all
obligations of such Person to purchase, redeem, retire, void or otherwise make
any payment in respect of any mandatorily redeemable capital stock, and (i)
obligations to guarantee any of the foregoing obligations on behalf of any
Person other than the Company and its Subsidiaries; provided that standard trust
accounts, deposit requirements or obligations of regulatory agencies and any
collateral requirements or obligations of other insurance business partners in
the normal course of business shall not constitute Indebtedness.

 

“Insurance Subsidiary” means any Subsidiary of the Company, the ability of which
to pay dividends is regulated by an Insurance Regulatory Authority or that is
otherwise required to be regulated thereby in accordance with the applicable
insurance rules and regulations of its state of domicile.

 

“Permitted Liens” means, with respect to any Person, (A) to the extent incurred
in the normal course of business (i) rights of third parties with respect to
standard trust accounts, (ii) deposit requirements or similar obligations of
regulatory agencies, and (iii) any collateral requirements or obligations of
other insurance business partners including the Federal Home Loan Bank of
Indiana relating to loans issued to the Insurance Subsidiaries, (B) Liens
securing Indebtedness permitted in Section 10.2(b), Section 10.2(c) or Section
10.2(e), (C) Liens for taxes, fees, assessments or other governmental charges
which are not past due or remain payable without penalty or which are disputed
in good faith and in appropriate proceedings, and for which the Company or a
Subsidiary has established  adequate reserves therefor in accordance with GAAP
on the books of the Company or such Subsidiary, (D) mechanics’, materialmen’s,
banker’s, carriers’, warehousemen’s and similar liens and encumbrances arising
in the ordinary course of business and securing obligations of such Person that
are not overdue for a period of more than sixty (60) days or are disputed in
good faith by appropriate proceedings, provided that in the case of any such
dispute (i) any proceedings commenced for the enforcement of such liens and
encumbrances shall have been duly suspended and (ii) such provision for the
payment of such liens and encumbrances has been made in accordance with GAAP on
the books of such Person, (E) liens arising in connection with worker’s
compensation, unemployment insurance, old age pensions and social security
benefits and similar statutory obligations which are not overdue or are disputed
in good faith by appropriate proceedings, provided that in the case of any such
dispute (i) any proceedings commenced for the enforcement of such liens shall
have been duly suspended and (ii) such provision for the payment of such liens
has been made in accordance with GAAP on the books of such Person, (F)(i) liens
incurred in the ordinary course of business to secure the performance of
statutory obligations arising in connection with progress payments or advance
payments due under contracts with the United States government or any agency
thereof entered into in the ordinary course of business and (ii) liens incurred
or deposits made in the ordinary course of business to secure the performance of
statutory obligations, bids, leases, fee and

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expense arrangements with trustees and fiscal agents and other similar
obligations (exclusive of obligations incurred in connection with the borrowing
of money, any lease-purchase arrangements or the payment of the deferred
purchase price of property), provided that full provision for the payment of all
such obligations set forth in clauses (i) and (ii) has been made in accordance
with GAAP on the books of such Person, (G) minor survey exceptions or minor
encumbrances, easements or reservations, or rights of others for rights-of-way,
utilities and other similar purposes, or zoning or other restrictions as to the
use of real properties, which to not materially interfere with the business of
such Person, (H) liens in respect of judgments that do not constitute an Event
of Default under clause (i) of Section 12 and (I) other Liens incurred in the
ordinary course or which are not material in amount or nature and which do not
secure Indebtedness.

 

“Tangible Net Worth” means as of any date Net Worth less the Intangible Assets
of the Company and its consolidated Subsidiaries, excluding the cumulative
impact to Tangible Net Worth from changes in net unrealized gains or losses from
investments since December 31, 2017, and plus the amount of liabilities recorded
on the balance sheet attributable to deferred gains from the Adverse Development
Cover, all determined as of such date.  For purposes of this Agreement,
“Intangible Assets” means the amount (to the extent reflected in determining
such Net Worth) of goodwill, patents, trademarks, service marks, trade names,
customer lists, renewal rights, copyrights, organization, and research and/or
development expenses.  For purposes of this definition, net unrealized gains or
losses shall have the meaning as applied in GAAP without giving effect to the
Financial Accounting Standards Board’s Accounting Standards Update No. 2016-01,
Financial Instruments (Topic 825): Recognition and Measurement of Financial
Assets and Financial Liabilities.

Section 1.2.The following shall be added as new definitions in alphabetical
order to Schedule B of the Note Purchase Agreement:

“Adverse Development Cover” means the Swiss Re Adverse Development Cover as
described in the document “ADC Binding Quote Conifer 2017 08 31.”

“Hedging Contract” means any foreign exchange contract, currency swap agreement,
futures contract, commodities hedge agreement, interest rate protection
agreement, interest rate future agreement, interest rate swap agreement,
interest rate cap agreement, interest rate collar agreement, option agreement or
any other similar hedging agreement or arrangement entered into by a Person in
the ordinary course of business.

“Senior Loan Agreement” means that certain Credit Agreement dated as of June 21,
2018, between the Company and The Huntington National Bank, as the same may be
amended or modified from time to time.

Section 1.3.Section 10.2 of the Note Purchase Agreement is amended and restated
in its entirety to read as follows:

10.2Indebtedness.

 

The Company will not, and will not permit its Subsidiaries to, become or remain
obligated for any Indebtedness, except:

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(a) Indebtedness to each holder of a Note;

 

(b)Indebtedness of the Company under Capital Leases for office machinery in
existence as of the Closing Date not to exceed in the aggregate $100,000;

 

(c)Indebtedness of the Company arising under the Senior Loan Agreement or any
replacement or refinancing thereof in a principal amount not to exceed
$10,000,000 in the aggregate;

 

(d)Indebtedness existing as of the Closing Date and listed on Schedule 10.2;

(e)Indebtedness (including purchase money indebtedness) incurred in connection
with the acquisition, construction or improvement of fixed or capital assets
(whether pursuant to a loan or a Capital Lease) in an aggregate amount not
exceeding $1,000,000 during any single fiscal year of the Company and $3,000,000
in the aggregate during the term of this Agreement at any time outstanding, and
any renewals or refinancing of such Indebtedness, on substantially the same
terms or terms that are not more burdensome on the Company as in effect on the
date of incurrence of such Indebtedness and otherwise in compliance with this
Agreement, provided that no Default or Event of Default has occurred and is
continuing, both before and after giving effect to the incurrence, renewal or
refinancing thereof; provided, further, that the principal amount of such
renewed or refinanced Indebtedness shall not exceed the principal amount of the
Indebtedness so renewed or refinanced and shall in no event exceed the caps set
forth above:

(f)Indebtedness in respect of Hedging Contracts authorized as required under
Section 8.9 of the Senior Loan Agreement and Hedging Contracts entered into in
the ordinary course of business related loans from the Federal Home Loan Bank of
Indiana for interest rate management and not for speculative purposes.

(g)Guaranty Obligations to the extent permitted under Section 10.7;

(h)Indebtedness incurred in the ordinary course of business with respect to
surety and appeal bonds, performance and return-of-money bonds and other similar
obligations or to or for the benefit of any Person providing workers’
compensation, health, disability or other employee benefits or property,
casualty or liability insurance, all in the ordinary course of business in
accordance with customary industry practices, in amounts and for the purposes
customary in the Company’s industry;

(i)additional unsecured Indebtedness of the Company and its Subsidiaries not
otherwise described above, not in excess of $1,500,000 in aggregate principal
amount at any one time outstanding, provided that no Default or Event of Default
shall have occurred and be continuing at the time of incurring such Indebtedness
or shall result from the incurrence of such Indebtedness; and

(j)Loans from the Federal Home Loan Bank of Indiana issued or created for the
account of the Insurance Subsidiaries.

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Section 1.4.Section 10.7 of the Note Purchase Agreement is amended and restated
in its entirety to read as follows:

 

10.7Restriction on Guarantees.

 

The Company will not, and will not permit its Subsidiaries to, enter into any
Guaranty of any Indebtedness of any other Person, except (i) by endorsement for
deposit in the ordinary course of business, (ii) guarantees of Indebtedness
otherwise permitted pursuant to Section 10.2, (iii) any guarantees required by
regulatory authorities and (iv) guarantees of Indebtedness of other Persons
(including joint ventures) to the extent such indebtedness is permitted
hereunder and under the Senior Loan Agreement and such guarantees constitute
investments permitted under Section 9.10 of the Senior Loan Agreement.

Section 1.5.Section 11.1 of the Note Purchase Agreement is amended and restated
in its entirety to read as follows:

11.1Tangible Net Worth.

Maintain as of the end of each fiscal quarter of the Company a Tangible Net
Worth of not less than $45,000,000 as of June 30, 2018 and each fiscal quarter
thereafter.

Section 1.6.The section heading of Section 11.6 of the Note Purchase Agreement
is amended and restated in its entirety to read as follows: “Consolidated Debt
to Capital.”

Section 1.7.Section 11.6 of the Note Purchase Agreement is amended and restated
in its entirety to read as follows:

Commencing with the fiscal quarter ending June 30, 2018, not permit the ratio of
the total Consolidated Indebtedness (excluding from the calculation of
Consolidated Indebtedness any loans from the Federal Home Loan Bank of Indiana
the proceeds of which were used solely to make investments as permitted under
Section 9.10(a) of the Senior Loan Agreement and Indebtedness under Hedging
Contracts related to such Indebtedness) to the Total Capital to exceed 0.45 to
1.00.  For purposes of the foregoing calculation, solely with respect to any
revolving credit facility of the Company permitted to be incurred hereunder,
only amounts drawn or otherwise outstanding thereunder shall be considered
Indebtedness.

Section 2.

Representations and Warranties of the Company.

Section 2.1.To induce the Noteholders to execute and deliver this First
Amendment (which representations shall survive the execution and delivery of
this First Amendment), the Company represents and warrants to the Noteholders
that:

 

(a)this First Amendment has been duly authorized, executed and delivered by the
Company and this First Amendment constitutes the legal, valid and binding
obligation, contract and agreement of the Company enforceable against the
Company in accordance with its terms, except as enforcement may be limited by
bankruptcy, insolvency,

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reorganization, moratorium or similar laws or equitable principles relating to
or limiting creditors’ rights generally;

 

(b)the execution, delivery and performance by the Company of this First
Amendment (i) have been duly authorized by all requisite corporate action and,
if required, shareholder action and (ii) do not require the consent or approval
of any governmental or regulatory body or agency; and

 

(c)as of the date hereof and after giving effect to this First Amendment, no
Default or Event of Default has occurred which is continuing.

Section 3.

Conditions to Effectiveness of This First Amendment.

Section 3.1.This First Amendment shall not become effective until, and shall
become effective when, each and every one of the following conditions shall have
been satisfied:

 

(a)executed counterparts of this First Amendment, duly executed by the Company
and the holders of at least 50% of the outstanding principal of the Notes, shall
have been delivered to the holders of Notes;

 

(b)the holders of Notes shall have received evidence satisfactory to them that
the Company has entered into the Senior Loan Agreement; and

 

(c)the recitals set forth above and the representations and warranties of the
Company set forth in Section 2 hereof are true and correct on and with respect
to the date hereof; and

 

(d)the Noteholders shall have been reimbursed for all reasonable and documented
expenses incurred relating to this First Amendment.

Upon receipt of all of the foregoing, this First Amendment shall become
effective.

Section 4.

Miscellaneous.

Section 4.1.This First Amendment shall be construed in connection with and as
part of the Note Purchase Agreement, and except as modified and expressly
amended by this First Amendment, all terms, conditions and covenants contained
in the Note Purchase Agreement and the Notes are hereby ratified and shall be
and remain in full force and effect.

Section 4.2.Any and all notices, requests, certificates and other instruments
executed and delivered after the execution and delivery of this First Amendment
may refer to the Note Purchase Agreement without making specific reference to
this First Amendment but nevertheless all such references shall include this
First Amendment unless the context otherwise requires.

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Section 4.3.The descriptive headings of the various Sections or parts of this
First Amendment are for convenience only and shall not affect the meaning or
construction of any of the provisions hereof.

Section 4.4.This First Amendment shall be governed by and construed in
accordance with New York law, excluding choice-of-law principles of the law of
such State that would permit the application of the laws of a jurisdiction other
than such State.

Section 4.5.The execution hereof by you shall constitute a contract between us
for the uses and purposes hereinabove set forth, and this First Amendment may be
executed in any number of counterparts, each executed counterpart constituting
an original, but all together only one agreement.

 

[Signature Pages to Follow]

 

 

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IN WITNESS WHEREOF, the parties hereto have caused their duly authorized
officers to execute and deliver this Second Amendment as of the date first set
forth above.

 

CONIFER HOLDINGS, INC.

 

 

By

 

  Brian Roney

Its:  President

 

 

 

 

 

[Signature Page to Second Amendment]

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Accepted and agreed to on the date first written above:

Elanus Capital Investments Master SP Series 3

 

 

 

By

Matthew Moniot

Its:Sole Director

 

[Signature Page to Second Amendment]