final1stamndmnttoconifer






                                                                                                                                                                 CONIFER HOLDINGS, INC.        ___________________________________               FIRST AMENDMENT             Dated as of June 21, 2018                      to the           NOTE PURCHASE AGREEMENT           Dated as of September 29, 2017      ___________________________________    RE:   $30,000,000 8% Subordinated Notes due 2032                                                                                 





 






          FIRST AMENDMENT TO THE NOTE PURCHASE AGREEMENT          This First Amendment dated as of June 21, 2018 (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”).                                     R ECITALS:         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 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.  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 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 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  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                                          2    





 






                                                                                 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:         10.2   Indebtedness.          The Company will not, and will not permit its Subsidiaries to, become or remain obligated  for any Indebtedness, except:                (a)   Indebtedness to each holder of a Note;                                          3    





 






                                                                                                (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.                                          4    





 






                                                                                       Section 1.4.  Section 10.7 of the Note Purchase Agreement is amended and restated in  its entirety to read as follows:          10.7  Restriction 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:         11.1  Tangible 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,                                          5    





 






                                                                                       insolvency, 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.                                           6    





 






                                                                                      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]                                             7    





 






 





 






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 First Amendment]