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                                                         Execution Version                               Conifer Holdings, Inc.                                   $10,500,000                 7.5%/12.5% Subordinated Notes due September 30, 2038                                 ______________           AMENDED AND RESTATED NOTE PURCHASE AGREEMENT                               ______________                           Dated as of September 25, 2018    25598028  





 






                         TABLE OF CONTENTS   Section                                                             Page   1.AUTHORIZATION OF THE NOTES ................................................................................. 1  2.SALE AND PURCHASE OF THE NOTES ........................................................................ 2  3.CLOSING ............................................................................................................................... 2  4.CONDITIONS TO CLOSING .............................................................................................. 2       4.1.  Representations and Warranties ....................................................................... 2       4.2.  Performance; No Default ................................................................................. 3       4.3.  Compliance Certificates ................................................................................... 3       4.4.  Purchase Permitted By Applicable Law, etc. .................................................. 3       4.5.  Payment of Fees ............................................................................................... 3       4.6.  Opinion of Counsel .......................................................................................... 3       4.7.  Proceedings and Documents ............................................................................ 3  5.REPRESENTATIONS AND WARRANTIES OF THE COMPANY ................................ 4       5.1.  Organization; Power and Authority ................................................................. 4       5.2.  Authorization, etc. ............................................................................................ 4       5.3.  Disclosure ......................................................................................................... 4       5.4.  No Conflict ....................................................................................................... 5       5.5.  Organization and Ownership of Shares of Subsidiaries; Affiliates ................ 5       5.6.  Financial Statements; Material Liabilities ....................................................... 6       5.7.  Governmental Authorizations, etc. .................................................................. 6       5.8.  Litigation; Observance of Agreements, Statutes and Orders .......................... 6       5.9.  Taxes................................................................................................................. 7       5.10. Title to Property; Leases .................................................................................. 7       5.11. Intellectual Property ......................................................................................... 7       5.12. Private Offering by the Company .................................................................... 8       5.13. ERISA............................................................................................................... 8       5.14. Use of Proceeds; Margin Regulations ............................................................. 8       5.15. Existing Indebtedness; Future Liens ................................................................ 8       5.16. Investment Company Act ................................................................................. 9       5.17. Solvency ........................................................................................................... 9       5.18. Foreign Assets Control Regulations, Etc. ........................................................ 9  6.REPRESENTATIONS OF THE PURCHASER ................................................................ 10   25598028  





 






      6.1.  Purchase for Investment ................................................................................. 10       6.2.  Tax Matters .................................................................................................... 10  7.INFORMATION AS TO COMPANY................................................................................ 10       7.1.  Financial and Business Information............................................................... 10       7.2.  Officer’s Certificate ........................................................................................ 12       7.3.  Inspection ....................................................................................................... 13  8.PREPAYMENT OF THE NOTES ..................................................................................... 14       8.1.  Optional Prepayments with Premium ............................................................ 14       8.2.  Surrender, etc. ................................................................................................. 15  9.AFFIRMATIVE COVENANTS ......................................................................................... 15       9.1.  Compliance with Law .................................................................................... 15       9.2.  Insurance ......................................................................................................... 15       9.3.  Payment of Taxes and Claims........................................................................ 15       9.4.  Corporate Existence, etc. ............................................................................... 16       9.5.  [Reserved] ...................................................................................................... 16       9.6.  ERISA............................................................................................................. 16  10.NEGATIVE COVENANTS .............................................................................................. 16       10.1. Merger, Consolidation, etc ............................................................................. 16       10.2. Indebtedness ................................................................................................... 17       10.3. Acquisitions .................................................................................................... 19       10.4. Restricted Payments ....................................................................................... 19       10.5. Sale-Leaseback Transactions ......................................................................... 19       10.6. Change in Existing Investment Policies ........................................................ 19       10.7. Restriction on Guarantees .............................................................................. 19       10.8. Economic Sanctions, etc. ............................................................................... 20  11.FINANCIAL COVENANTS ............................................................................................. 20       11.1. Tangible Net Worth........................................................................................ 20       11.2. Fixed Charge Coverage Ratio ........................................................................ 20       11.3. Dividend Paying Capacity .............................................................................. 20       11.4. Net Uncollateralized Reinsurance Recoverables ........................................... 20       11.5. Risk-Based Capital ......................................................................................... 20       11.6. Consolidated Debt to Capital ......................................................................... 21  12.EVENTS OF DEFAULT ................................................................................................... 21  13.REMEDIES ON DEFAULT. ............................................................................................ 23                                     ii  25598028  





 






      13.1. Acceleration .................................................................................................... 23       13.2. Other Remedies .............................................................................................. 23       13.3. Rescission ....................................................................................................... 24       13.4. No Waivers or Election of Remedies, Expenses, etc. ................................... 24  14.REGISTRATION; EXCHANGE; SUBSTITUTION OF NOTES .................................. 24       14.1. Registration of Notes ...................................................................................... 24       14.2. Transfer and Exchange of Notes .................................................................... 25       14.3. Replacement of Notes .................................................................................... 25  15.SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ENTIRE AGREEMENT               25  16.PAYMENTS ON THE NOTES ........................................................................................ 26       16.1. Place of Payment ............................................................................................ 26       16.2. Interest ............................................................................................................ 26       16.3. Deferral of Interest ......................................................................................... 26  17.SUBORDINATION OF THE NOTES ............................................................................. 27       17.1. Note Subordinate to Senior Debt ................................................................... 27       17.2. No  Payment  When  Senior  Debt  in  Default;  Payment  Over  of              Proceeds Upon Dissolution, Etc. ................................................................... 28       17.3. Payment Permitted If No Default................................................................... 29       17.4. Subrogation to Rights of Holders of Senior Debt ......................................... 29       17.5. Provisions Solely to Define Relative Rights ................................................. 30       17.6. No Waiver of Subordination Provisions ........................................................ 30       17.7. Notice to Holders ........................................................................................... 30       17.8. Reliance on Judicial Order or Certificate of Liquidating Agent ................... 31  18.EXPENSES, ETC .............................................................................................................. 31       18.1. Transaction Expenses ..................................................................................... 31       18.2. Certain Taxes .................................................................................................. 32       18.3. Other Taxes .................................................................................................... 32       18.4. Tax Treatment ................................................................................................ 32       18.5. Survival .......................................................................................................... 33  19.AMENDMENT AND WAIVER ...................................................................................... 33       19.1. Requirements .................................................................................................. 33       19.2. Binding Effect, etc. ......................................................................................... 33  20.NOTICES ........................................................................................................................... 33                                      iii  25598028  





 






21.CONFIDENTIAL INFORMATION ................................................................................. 34  22.MISCELLANEOUS .......................................................................................................... 34       22.1. Successors and Assigns .................................................................................. 34       22.2. Accounting Terms .......................................................................................... 35       22.3. Payments Due on Non-Business Days ........................................................... 35       22.4. Severability ..................................................................................................... 35       22.5. Construction ................................................................................................... 35       22.6. Counterparts ................................................................................................... 36       22.7. Governing Law ............................................................................................... 36       22.8. Jurisdiction and Process; Waiver of Jury Trial .............................................. 36       22.9. No Recourse Against Others .......................................................................... 37      SCHEDULE A     --  INFORMATION RELATING TO PURCHASERS      SCHEDULE B     --  DEFINED TERMS      SCHEDULE 5.3   --  Other Documents      SCHEDULE 5.5   --  Subsidiaries of the Company and                         Ownership of Subsidiary Stock      SCHEDULE 5.6   --  Financial Statements         SCHEDULE 5.15  --  Permitted Liens      SCHEDULE 10.2  --  Existing Indebtedness      EXHIBIT 1      --  Form  of  7.5%/12.5%  Subordinated  Note  due  September  30,     2038                                       iv  25598028  





 






                           Conifer Holdings, Inc.                        550 West Merrill Street, Suite 200                            Birmingham, MI 48009                 7.5%/12.5% Subordinated Notes due September 30, 2038                                                        As of September 25, 2018   TO EACH OF THE PURCHASERS LISTED IN        THE ATTACHED SCHEDULE A:   Ladies and Gentlemen:               Conifer  Holdings,  Inc.,  a  Michigan  corporation  (the “Company”),  agrees  with each of the Purchasers to amend and restate the Note Purchase Agreement dated as of  September 29, 2017, as amended by the First Amendment dated as of June 21, 2018 (as so  amended and as otherwise amended, restated, supplemented or modified from time to time,  the “Existing Note Purchase Agreement”), as follows:   1.    AUTHORIZATION OF THE NOTES.         (a)   On  September  29,  2017,  the  Company  issued  and  sold  to  Elanus  Capital  Investments Master SP Series 3 (“Elanus”) $30,000,000 aggregate principal amount of its  8% Subordinated Notes due September 29, 2032 (the “Existing Notes”).           (b)   On September 24, 2018, the Company consummated an offering of 6.75%  Senior Unsecured Notes due 2023 in the aggregate principal amount of $22,000,000 (the  “Senior Notes”).           (c)   In connection with the foregoing offering by the Company, Elanus and the  Company  entered  into  the  Subordinated  Notes  Amendment  Agreement  dated  as  of  September 24, 2018 (the “Amendment Agreement”), pursuant to which (i) a portion of the  net proceeds of such offering were used to prepay $15,000,000 of the Existing Notes, plus  accrued interest thereon, and (ii) Elanus agreed to apply $5,000,000 of the Existing Notes  for  the  purchase  of  $5,000,000  of  the  Senior  Notes,  which  application  constituted  an  additional  prepayment  of  the  Existing  Notes.   After  giving  effect  to  the  foregoing  prepayments  of  the  Existing  Notes,  $10,000,000  of  the  Existing  Notes  remained  outstanding.         (d)   As  of  the  date  hereof,  the  Company  will  authorize  the  issue  and  sale  of  $10,500,000  aggregate  principal  amount  of  its  7.5%/12.5%  Subordinated  Notes  due  September  30,  2038  (the “Notes”),  of  which  $10,000,000  of  the  Notes  will  be  deemed  issued in exchange for the outstanding Existing Notes and an additional $500,000 of the    25598028  





 






Notes will be deemed issued and sold to the Purchaser.  Each Note shall be substantially in  the form set out in Exhibit 1, with such changes therefrom, if any, as may be approved by  each  Purchaser  and  the  Company.   Certain  capitalized  terms  used in this Agreement are  defined  in  Schedule  B;  references  to  a  “Schedule”  or  an  “Exhibit”  are,  unless  otherwise  specified, to a Schedule or an Exhibit attached to this Agreement.     2.    SALE AND PURCHASE OF THE NOTES.         Subject to the terms and conditions of this Agreement, the Company will issue and  sell  to  each  Purchaser  and  each  Purchaser  will  purchase  from  the  Company,  as  of  the  Closing  provided  for  in  Section  3,  each  Note  in  the  principal  amount  specified  opposite  each Purchaser’s name in Schedule A at the purchase price of 100% of the principal amount  thereof.     3.    CLOSING.         The sale and purchase of each Note to be purchased by each Purchaser shall occur at  the  offices  of  the  Company,  550  W.  Merrill  Street,  Suite  200,  Birmingham,  Michigan  48009, at 2:00 p.m., Eastern Standard Time, as of a closing (the “Closing”) on September  25, 2018 (the “Closing Date”), or on such other Business Day thereafter as may be agreed  upon by the Company and each Purchaser.  As of the Closing the Company will deliver to  each Purchaser a Note to be purchased by each such Purchaser dated the date of the Closing  and registered in such Purchaser’s name (or in the name of its nominee), against delivery to  the Company of cash in the aggregate amount of $500,000 by wire transfer of immediately  available  funds  for  the  account  of  the  Company  to  account  number  01382306748  at  Huntington National Bank, Columbus, Ohio, (Wire Instructions: ABA 072403473, Account  01382306748, For the benefit of: Conifer Holdings, Inc., 550 W. Merrill Street, Suite 200,  PO BOX 3003, Birmingham, MI 48009).  Upon each Purchaser’s receipt of the Notes, such  Purchaser will return to the Company the Existing Notes in its possession for cancellation  by the Company.  If at the Closing the Company shall fail to tender a Note to a Purchaser as  provided above in this Section 3, or any of the conditions specified in Section 4 shall not  have been fulfilled to each Purchaser’s satisfaction, each Purchaser shall, at its election, be  relieved of all further obligations under this Agreement, without thereby waiving any rights  it may have by reason of such failure by the Company to tender such Note or any of the  conditions specified in Section 4 not having been fulfilled to its satisfaction.   4.    CONDITIONS TO CLOSING.         Each  Purchaser’s  obligation  to  purchase  and  pay  for  a  Note  to  be  sold  to  such  Purchaser as of the Closing is subject to the fulfillment to its satisfaction, prior to or as of  the Closing, of the following conditions:   4.1.  Representations and Warranties.         The  representations  and  warranties  of  the  Company  in  this  Agreement  shall  be  correct when made and as of the time of the Closing.                                      2  





 






4.2.  Performance; No Default.         The  Company  shall  have  performed  and  complied  with  all  agreements  and  conditions  contained  in  this  Agreement  required to be performed  or complied  with by it  prior to or as of the Closing and after giving effect to the issue and sale of each Note (and  the application of the proceeds thereof) no Default or Event of Default shall have occurred  and be continuing.     4.3.  Compliance Certificates.               (a)   Officer’s  Certificate.   The  Company  shall  have  delivered  to  such  Purchaser  an  Officer’s  Certificate,  dated  as  of  the  Closing,  certifying  that  the  conditions  specified in Sections 4.1 and 4.2 have been fulfilled.               (b)   Secretary’s Certificate.  The Company shall have delivered to such  Purchaser a certificate certifying as to the resolutions attached thereto and other corporate  proceedings  relating  to  the  authorization,  execution  and  delivery  of  each  Note  and  the  Agreements and the Company’s organizational documents as then in effect.   4.4.  Purchase Permitted By Applicable Law, etc.         As  of  the  date  of  the  Closing  such  Purchaser’s  purchase  of  a  Note  shall  (i) be  permitted  by  the  laws  and  regulations  of  each  jurisdiction  to  which  such  Purchaser  is  subject,  (ii) not  violate  any  applicable  law  or  regulation  (including,  without  limitation,  Regulation  T,  U  or  X  of  the  Board  of  Governors  of  the  Federal  Reserve  System)  and  (iii) not  subject  such  Purchaser  to  any  tax,  penalty  or  liability  under  or  pursuant  to  any  applicable law or regulation, which law or regulation was not in effect as of the date hereof.   4.5.  Payment of Fees.               (a)   The  Company  shall  have  paid  the  out-of-pocket  and  documented  fees, charges and disbursements of such Purchaser and its counsel, Clifford Chance US LLP  in an aggregate amount not to exceed $42,000.               (b)   The Company paid to the Purchasers on September 24, 2018, a loan  origination fee with respect to the issuance of the Notes in the amount of $105,000.   4.6.  Opinion of Counsel.         Such Purchaser shall have received an opinion in form and substance satisfactory  to  such  Purchaser  from  counsel  for  the  Company,  covering  the  matters  incident  to  the  transactions  contemplated  hereby  as  such  Purchaser  or  its  counsel  may  reasonably  request.   4.7.  Proceedings and Documents.         All  corporate  and  other  proceedings  in  connection  with  the  transactions                                      3  





 






contemplated  by  this  Agreement  and  all  documents  and  instruments  incident  to  such  transactions shall be satisfactory to such Purchaser and its counsel, and such Purchaser  and  its  counsel  shall  have  received  all  such  counterpart  originals  or  certified  or  other  copies of such documents as such Purchaser or its counsel may reasonably request.   5.    REPRESENTATIONS AND WARRANTIES OF THE COMPANY.         The Company represents and warrants to each Purchaser that:   5.1.  Organization; Power and Authority.         The Company is a corporation duly organized, validly existing and in good standing  under  the  laws  of  its  jurisdiction  of  incorporation,  and  is  duly  qualified  as  a  foreign  corporation  and  is  in  good  standing  in  each  jurisdiction  in  which  such  qualification  is  required by law, other than those jurisdictions as to which the failure to be so qualified or in  good standing would not, individually or in the aggregate, reasonably be expected to have a  Material Adverse Effect.  The Company has the corporate power and authority to own or  hold  under  lease  the  properties  it  purports  to  own  or  hold  under  lease,  to  transact  the  business  it  transacts and proposes to transact, to execute and deliver this Agreement and  each Note and to perform the provisions hereof and thereof.   5.2.  Authorization, etc.         This Agreement and each Note have been duly authorized by all necessary corporate  action on the part of the Company, and this Agreement constitutes, and upon execution and  delivery  thereof  each  Note  will  constitute  a  legal,  valid  and  binding  obligation  of  the  Company  enforceable  against  the  Company in accordance with its  terms, except as such  enforceability  may  be  limited  by  (i)  applicable  bankruptcy,  insolvency,  reorganization,  moratorium  or  other  similar  laws  affecting  the  enforcement of  creditors’  rights generally  and (ii) general principles of equity (regardless of whether such enforceability is considered  in a proceeding in equity or at law).   5.3.  Disclosure.         This  Agreement,  the  financial  statements  listed  in  Schedule  5.6  and  the  documents, certificates or other writings delivered to such Purchaser by or on behalf of  the Company prior to the Closing Date in connection with the transactions contemplated  hereby and identified in Schedule 5.3 (this Agreement and such documents, certificates or  other writings and such financial statements delivered to such Purchaser being referred to,  collectively,  as  the “Disclosure  Documents”),  taken  as  a  whole,  do  not  contain  any  untrue statement of a material fact or omit to state any material fact necessary to make the  statements  therein  not  misleading  in  light  of  the  circumstances  under  which  they  were  made.  Except as disclosed in the Disclosure Documents, since December 31, 2017 there  has  been  no  change  in  the  financial  condition,  operations,  business,  properties  or  prospects of the Company or any Subsidiary except changes described in the Registration  Statement or that could not, individually or in the aggregate, reasonably be expected to  have  a  Material  Adverse  Effect.   There  is  no  fact  known  to  the  Company  that  could                                      4  





 






reasonably  be  expected  to  have  a  Material  Adverse  Effect  that  has  not  been  set  forth  herein, in the Disclosure Documents or the Registration Statement.   5.4.  No Conflict.         The execution, delivery and performance by the Company of this Agreement and  each Note will not (i) contravene, result in any breach of, or constitute a default under, or  result  in  the  creation  of  any  Lien  in  respect  of  any  property  of  the  Company  or  any  Subsidiary  under,  any  indenture,  mortgage,  deed  of  trust,  loan,  purchase  or  credit  agreement,  lease,  corporate  charter  or  by-laws,  or  any  other  agreement  or  instrument  to  which the Company or any Subsidiary is bound or by which the Company or any Subsidiary  or any of their respective properties may be bound or affected, (ii) conflict with or result in a  breach  of  any  of  the  terms,  conditions  or  provisions  of  any  order,  judgment,  decree,  or  ruling of any court, arbitrator or Governmental Authority applicable to the Company or any  Subsidiary  or  (iii)  violate  any  provision  of  any  statute  or  other  rule  or  regulation  of  any  Governmental Authority applicable to the Company or any Subsidiary.   5.5.  Organization and Ownership of Shares of Subsidiaries; Affiliates.               (a)  Schedule 5.5 contains complete and correct lists (i) of the Company’s  Subsidiaries, showing, as to each Subsidiary, the correct name thereof, the jurisdiction of its  organization, and the percentage of shares of each class of its capital stock or similar equity  interests  outstanding  owned  by  the  Company  and  each  other  Subsidiary,  (ii)  of  the  Company’s  Affiliates,  other  than  Subsidiaries,  and  (iii)  of  the  Company’s  directors  and  senior officers.               (b)  All of the outstanding shares of capital stock or similar equity interests  of each Subsidiary shown in Schedule 5.5 as being owned by the Company and its Subsid- iaries  have  been  validly  issued,  are  fully  paid  and  nonassessable  and  are  owned  by  the  Company or another Subsidiary free and clear of any Lien (except as otherwise disclosed in  Schedule 5.5).               (c)  Each Subsidiary identified in Schedule 5.5 is a corporation or other legal  entity duly organized, validly existing and in good standing under the laws of its jurisdiction  of organization, and is duly qualified as a foreign corporation or other legal entity and is in  good standing in each jurisdiction in which such qualification is required by law, other than  those jurisdictions as to which the failure to be so qualified or in good standing would not,  individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.   Each such Subsidiary has the corporate or other power and authority to own or hold under  lease the properties it purports to own or hold under lease and to transact the business it  transacts and proposes to transact.               (d)  No Subsidiary is a party to, or otherwise subject to any legal restriction  or  any agreement (other  than this Agreement, the agreements listed on Schedule 5.5 and  customary  limitations  imposed  by  corporate  law  statutes)  restricting  the  ability  of  such  Subsidiary  to  pay  dividends  out  of  profits  (subject  to  standard  insurance  regulations)  or  make any other similar distributions of profits to the Company or any of its Subsidiaries that                                      5  





 






owns outstanding shares of capital stock or similar equity interests of such Subsidiary.   5.6.  Financial Statements; Material Liabilities.         The Company has delivered to the holder of each Note copies of the financial state- ments  of  the  Company  and  its Subsidiaries listed on Schedule 5.6.  All of said financial  statements  (including  in  each  case  the  related  schedules  and  notes)  fairly  present  in  all  material respects the consolidated financial position of the Company and its Subsidiaries as  of  the  respective  dates  specified  in  such  Schedule  and  the  consolidated  results  of  their  operations and cash flows for the respective periods so specified and have been prepared in  accordance with GAAP consistently applied throughout the periods involved except as set  forth in the notes thereto (subject, in the case of any interim financial statements, to normal  year-end  adjustments).   The  Company  and  its  Subsidiaries  do  not  have  any  Material  liabilities that are not disclosed in the Disclosure Documents or the Registration Statement.   5.7.  Governmental Authorizations, etc.         Each  of the Company  and  its Subsidiaries holds all necessary permits, approvals,  authorizations,  orders,  licenses,  consents,  registrations,  qualifications,  certificates  and  permits including, without limitation, insurance licenses from the insurance departments of  the  various  states  and  jurisdictions  where  the  Insurance  Subsidiaries  write  insurance  business  or  otherwise  conduct  insurance  or  reinsurance  business,  (collectively,  the  “Insurance  Licenses”)  as  the  case  may  be,  or  as  may  be  required  by  any  applicable  insurance  statutes  of  such  states  or  other  jurisdictions  of  and  from  Governmental  Authorities  necessary  to  conduct  their  respective  businesses  as  now  being  conducted,  (collectively, including the Insurance Licenses, the “Governmental Licenses”) and neither  the Company nor any of its Subsidiaries has received any notice of proceedings relating to  the revocation or modification of any such Governmental License, except where the failure  to  hold  such  Governmental  Licenses  or  the  receipt  of  an  unfavorable  decision,  ruling  or  finding  in  respect  of  any  such  proceeding,  would  not,  singly  or  in  the  aggregate, have a  Material Adverse Effect; all of the Governmental Licenses are valid and in full force and  effect, except where the invalidity or the failure of such Governmental Licenses to be in full  force and effect would not, singly or in the aggregate, have a Material Adverse Effect; and  the  Company  and  its  Subsidiaries  are  in  compliance  with  all  applicable  laws,  rules,  regulations, judgments, orders, decrees and consents, except where the failure to be in such  compliance would not, singly or in the aggregate, have a Material Adverse Effect.   5.8.  Litigation; Observance of Agreements, Statutes and Orders.               (a) There are no actions, suits or proceedings pending or, to the knowledge  of  the  Company,  threatened  against  or  affecting  the  Company  or  any  Subsidiary  or  any  property of the Company or any Subsidiary in any court or before any arbitrator of any kind  or before or by any Governmental Authority that, individually or in the aggregate, would  reasonably be expected to have a Material Adverse Effect.               (b)  Neither the Company nor any Subsidiary is in default under any term of  any agreement or instrument to which it is a party or by which it is bound, or any order,                                      6  





 






judgment, decree or ruling of any court, arbitrator or Governmental Authority or is in viola- tion  of any applicable  law,  ordinance,  rule or regulation of any Governmental Authority,  which default or violation, individually or in the aggregate, would reasonably be expected to  have a Material Adverse Effect.   5.9.  Taxes.         The  Company  and  its  Subsidiaries  have  filed  all  income  and  other  material  tax  returns that are required to have been filed in any jurisdiction, and have paid all taxes shown  to be due and payable on such returns and all other taxes and assessments levied upon them  or their properties, assets, income or franchises, to the extent such taxes and assessments  have become due and payable and before they have become delinquent, except for any taxes  and assessments (i) the amount of which is not individually or in the aggregate Material or  (ii) the amount, applicability or validity of which is currently being contested in good faith  by appropriate proceedings and with respect to which the Company or a Subsidiary, as the  case may be, has established adequate reserves in accordance with GAAP on the financial  statements  of  the  Company  and  its  Subsidiaries  listed  on  Schedule  5.6.   The  Company  knows  of  no  basis  for  any  other  tax  or  assessment  that  could,  individually  or  in  the  aggregate, reasonably be expected to have a Material Adverse Effect.  The charges, accruals  and reserves on the books of the Company and its Subsidiaries in respect of Federal, state or  other  taxes  for  all  fiscal  periods  are  adequate.   The  Federal  income  tax  liabilities  of  the  Company and its Subsidiaries have been paid for all fiscal years up to and including the  fiscal year ended December 31, 2017.   5.10.  Title to Property; Leases.         The Company and its Subsidiaries have good and sufficient title to their respective  properties that individually or in the aggregate are Material, in each case free and clear of  any  Lien  other than Permitted Liens.  All leases that individually or in the aggregate are  Material are valid and subsisting and are in full force and effect in all material respects.    5.11.  Intellectual Property.               (a) the Company  and  its Subsidiaries own or possess all licenses, patents,        copyrights,  service  marks,  trademarks  and  trade  names,  or  rights  thereto,  that        individually or in the aggregate are Material, without known conflict with the rights        of others;               (b)  to the knowledge of the Company, no product of the Company or any of        its  Subsidiaries  infringes  in  any  material  respect  any  license,  patent,  copyright,        service mark, trademark, trade name or other right owned by any other Person; and               (c)  to the knowledge of the Company, there is no Material violation by any        Person of any right of the Company or any of its Subsidiaries with respect to any        license, patent, copyright, service mark, trademark, trade name or other right owned        or used by the Company or any of its Subsidiaries.                                       7  





 






5.12.  Private Offering by the Company.         Neither the Company nor anyone acting on its behalf has offered the Notes or any  similar securities for sale to, or solicited any offer to buy any of the same from, or otherwise  approached  or  negotiated  in  respect  thereof  with,  any  Person  other  than  the  Purchasers.   Neither the Company nor anyone acting on its behalf has taken, or will take, any action that  would subject the issuance or sale of the Notes to the registration requirements of Section 5  of the Securities Act or to the registration requirements of any securities or blue sky laws of  any applicable jurisdiction.   5.13.  ERISA.         Neither  Company  nor  any  ERISA  Affiliate  maintains  or  contributes  or  has  any  direct or indirect, actual or contingent liability, or has, at any time within the past six years,  maintained, contributed to or had any direct or indirect, actual or contingent liability, with  respect  to  any  Plan.   There  was  no  unfunded  past  service  liability  of  any  pension  plan  maintained by the Company or an ERISA Affiliate as of the Closing Date, and there is no  failure to satisfy the minimum funding standards of Section 412 of the Code or Section 302  of ERISA, or any existing material liability with respect to any Plan owed to the PBGC or  any successor thereto.   5.14.  Use of Proceeds; Margin Regulations.         The  Company  will  apply  the  proceeds  of  the  sale  of  the  Notes  hereunder  to  refinance the outstanding balance of the Existing Notes, including accrued interest thereon,  and for working capital purposes.  The Company is not engaged principally, or as one of its  important activities, directly or indirectly, in the business of extending credit for the purpose  of purchasing or carrying margin stock, and none of the proceeds of the Notes will be used,  directly or indirectly, for the purpose of buying or carrying any “margin stock” within the  meaning of, or otherwise for any purpose which would violate the provisions of, Regulation  T,  U or X of the Board  of  Governors  of the Federal Reserve  System.   Terms for which  meanings are provided in Regulation U of the Board of Governors of the Federal Reserve  System or any regulations substituted therefor, as from time to time in effect, are used in  this paragraph with such meanings.   5.15.  Existing Indebtedness; Future Liens.               (a)  Schedule 10.2 sets forth a complete and correct list of all outstanding  Indebtedness  of  the  Company  and  its  Subsidiaries  as  of  the  Closing  Date.   Neither  the  Company nor any Subsidiary is in default and no waiver of default is currently in effect, in  the  payment  of  any  principal  or  interest  on  any  Indebtedness  of  the  Company  or  such  Subsidiary  and  no  event  or  condition  exists  with  respect  to  any  Indebtedness  of  the  Company or any Subsidiary that would permit (or that with notice or the lapse of time, or  both, would permit) one or more Persons to cause such Indebtedness to become due and  payable before its stated maturity or before its regularly scheduled dates of payment.               (b)  Except as disclosed in Schedule 5.15 and for Permitted Liens, neither                                      8  





 






the Company nor any Subsidiary has agreed or consented to cause or permit in the future  (upon the happening of a contingency or otherwise) any of its property, whether now owned  or hereafter acquired, to be subject to a Lien.               (c)   Neither  the  Company  nor  any  Subsidiary  is  a  party  to,  or  otherwise  subject  to  any  provision  contained  in,  any  instrument  evidencing  Indebtedness  of  the  Company  or  such  Subsidiary,  any  agreement  relating  thereto  or  any  other  agreement  (including its charter or any other organizational document) which limits the amount of, or  otherwise imposes restrictions on the incurring of, Indebtedness of the Company.   5.16.  Investment Company Act.         Neither  the  Company  nor  any  Subsidiary  is  an  “investment  company”  within  the  meaning of the Investment Company Act of 1940.  5.17.  Solvency.         As of the Closing Date and immediately after the consummation of the transactions  to occur pursuant to this Agreement, the Company and its Subsidiaries will be, taken as a  whole, Solvent.   5.18.  Foreign Assets Control Regulations, Etc.         (a) Neither the Company nor any Controlled Entity (i) is a Blocked Person, (ii) has  been notified that its name appears or may in the future appear on a State Sanctions List  or  (iii)  is  a  target  of  sanctions  that  have  been  imposed  by  the  United  Nations  or  the  European Union.        (b)  Neither the Company nor any Controlled Entity (i) has violated, been found  in  violation  of,  or  been  charged  or  convicted  under,  any  applicable  U.S.  Economic  Sanctions  Laws,  Anti-Money  Laundering  Laws  or  Anti-Corruption  Laws  or  (ii)  to  the  Company’s  knowledge,  is  under  investigation  by  any  Governmental  Authority  for  possible violation of any U.S. Economic Sanctions Laws, Anti-Money Laundering Laws  or Anti-Corruption Laws.        (c)  No part of the proceeds from the sale of the Notes hereunder:             (i)     constitutes  or  will  constitute  funds  obtained  on  behalf  of  any        Blocked  Person  or  will  otherwise  be  used  by  the  Company  or  any  Controlled        Entity,  directly  or  indirectly,  (A)  in  connection  with  any  investment  in,  or  any        transactions or dealings with, any Blocked Person, (B) for any purpose that would        cause any Purchaser to be in violation of any U.S. Economic Sanctions Laws or        (C) otherwise in violation of any U.S. Economic Sanctions Laws;             (ii)    will  be  used,  directly  or  indirectly,  in  violation  of,  or  cause  any        Purchaser to be in violation of, any applicable Anti-Money Laundering Laws; or                                      9  





 






          (iii)   will be used, directly or indirectly, for the purpose of making any        improper payments, including bribes, to any Governmental Official or commercial        counterparty in order to obtain, retain or direct business or obtain any improper        advantage, in each case which would be in violation of, or cause any Purchaser to        be in violation of, any applicable Anti-Corruption Laws.        (d)  The  Company has established procedures and controls which it reasonably  believes  are  adequate  (and  otherwise  comply  with  applicable  law)  to  ensure  that  the  Company and each Controlled Entity is and will continue to be in compliance with all  applicable  U.S.  Economic  Sanctions  Laws,  Anti-Money  Laundering  Laws  and  Anti- Corruption Laws.     6.    REPRESENTATIONS OF THE PURCHASER.   6.1.  Purchase for Investment.         Each Purchaser represents that it is purchasing each Note for its own account or for  one or more separate accounts maintained by it or for the account of one or more pension or  trust funds and not with a view to the distribution thereof, provided that the disposition of  its  or  their  property  shall  at  all  times  be  within  its  or  their  control.   Each  Purchaser  understands  that  each Note has not  been  registered under the Securities Act and may  be  resold only if registered pursuant to the provisions of the Securities Act or if an exemption  from registration is available, except under circumstances where neither such registration  nor such an exemption is required by law, and that the Company is not required to register  any Note.   6.2.  Tax Matters.         Each Purchaser represents that it and each of its beneficial owners is either: (1) a  United States person (within the meaning of Section 7701(a)(30) of the Code), or (2) not a  “bank” described in Section 881(c)(3)(A) of the Code, a “10 percent shareholder” of the  Company within the meaning of Section 881(c)(3)(B) of the Code, or a “controlled foreign  corporation” described in Section 881(c)(3)(C) of the Code.  Each Purchaser shall deliver to  the Company on or prior to the date it acquires a Note and from time to time thereafter  upon the reasonable request of the Company (or the expiration, obsolescence or material  inaccuracy of any form previously delivered) an executed original of, as applicable, (a)  Internal Revenue Service Form W-8BEN, W-8BEN-E, or other appropriate W-8, or (b)  Internal Revenue Service Form W-9.   7.    INFORMATION AS TO COMPANY.   7.1.  Financial and Business Information.         The Company shall deliver to the holder of each Note:               (a)   Quarterly  Statements  –  as  soon  as  available,  but  in  any  event  not                                      10  





 






later than  60 days after the end of each fiscal quarter (excluding the fourth fiscal  quarter of each fiscal year) commencing with the fiscal quarter ended September 30,  2018), (i) copies of the Company’s quarterly report filed on Form 10-Q promulgated  under  the  Securities  Exchange  Act  of  1934  prepared  in  compliance  with  the  requirements  therefor  and  filed  or  required  to  be  filed  with  the  Securities  and  Exchange  Commission  and  (ii)  a  copy  of  each  Insurance  Subsidiary’s  financial  statements for such fiscal quarter, including a balance sheet as of the end of such  fiscal quarter and the related statements of income and retained earnings for such  fiscal quarter, each prepared in accordance with SAP and certified by an officer of  the applicable Insurance Subsidiary;         (b)   Annual Statements –  as soon as available, but in any event not later  than 100 days after and as of the end of each fiscal year of the Company (i) a copy  of  the  Company’s  annual  report  on  Form  10-K  promulgated  under  the  Securities  Exchange  Act  of  1934  for  such  fiscal  year  prepared  in  accordance  with  the  requirements  therefor  and  filed  or  required  to  be  filed  with  the  Securities  and  Exchange  Commission  and  (ii)  a  copy  of  each  Insurance  Subsidiary’s  financial  statements for such fiscal year, including a balance sheet as of the end of such fiscal  year and the related statements of income and retained earnings for such fiscal year,  each prepared in accordance with SAP (commonly referred to as the “Yellow Book”  statements) and certified by an officer of the applicable Insurance Subsidiary;          (c)   SEC and Other Reports -- promptly upon their becoming available,  one copy of (i) each financial statement, report, notice or proxy statement sent by the  Company or any Subsidiary (x) to any holders of Senior Debt or any Indebtedness  incurred pursuant to Section 10.2(e) hereunder or (y) to its public securities holders  generally,  (ii) each regular  or periodic report, each registration statement  (without  exhibits except as expressly requested by such holder), and each prospectus and all  amendments thereto filed by the Company or any Subsidiary with the Securities and  Exchange Commission and of all press releases and other statements made available  generally by the Company or any Subsidiary to the public concerning developments  that are Material and (iii) all significant reports and financial statements related to  Company and/or any of its Subsidiaries filed with any Regulatory Agency;          (d)   Notice of Default or Event of Default -- promptly, and in any event  within five (5) Business Days after a Responsible Officer becoming aware of the  existence of any Default or Event of Default or that any Person has given any notice  or taken any action with respect to a claimed default hereunder or that any Person  has given any notice or taken any action with respect to a claimed default of the type  referred  to  in  Section  12(g),  a  written  notice  specifying  the  nature  and  period  of  existence thereof and what action the Company is taking or proposes to take with  respect thereto;         (e)   Proceedings – promptly, and in any event within five (5) Business  Days of receipt thereof, copies of any notice of the commencement of (i) any action,  suit or proceeding against or affecting the Company or any Subsidiary in any court  or  before  any  arbitrator  of  any  kind or  before  or by any  Governmental  Authority                                11  





 






      relating  to  any  license  or  licenses  of  any  Insurance  Subsidiaries  (representing        singularly  or  in  the  aggregate  10%  or  more  of  gross  written  premiums  of  the        Company  and  its  Subsidiaries)  that  may  be  revoked,  not  renewed  or  otherwise        impaired,  or  (ii)  any  other  action,  suit  or  proceeding  that  would  reasonably  be        expected to have a Material Adverse Effect.               (f)   Notices  from  Governmental  Authority  --  promptly,  and  in  any  event        within  five  (5)  Business   Days  of  receipt  thereof,  copies  of  (i)  any  notice  to  the        Company or any Subsidiary from an Insurance Regulatory Authority to the effect        that any license or licenses of any Insurance Subsidiaries (representing singularly or        in the aggregate 10% or more of gross written premiums of the Company and its        Subsidiaries) will be revoked, not renewed or otherwise impaired, or (ii) any other        notice  from  any  Federal  or  state  Governmental  Authority  relating  to  any  order,        ruling, statute or other law or regulation that would reasonably be expected to have a        Material Adverse Effect; and               (g)  Requested Information -- with reasonable promptness, such other data        and  information  relating  to  the  business,  operations,  affairs,  financial  condition,        assets  or  properties  of  the  Company  or  any  of  its  Subsidiaries  or  relating  to  the        ability of the Company to perform its obligations hereunder and under each Note as        from time to time may be reasonably requested by any such holder of a Note.   7.2.  Officer’s Certificate.         Each set of financial statements delivered to the holder of a Note pursuant to Section  7.1(a) or Section 7.1(b) hereof shall be accompanied by a certificate of a Senior Financial  Officer setting forth:               (a)   Covenant  Compliance  --  the  information  (including  detailed        calculations) required in order to establish whether the Company was in compliance        with the covenants set forth in Section 11 hereof, inclusive, during the quarterly or        annual  period  covered  by  the  statements  then  being  furnished  (including  with        respect to each such Section, where applicable, the calculations of the maximum or        minimum amount, ratio or  percentage,  as the case may be,  permissible under the        terms of such Sections, and the calculation of the amount, ratio or percentage then in        existence); and               (b)   Event  of  Default  --  a  statement  that  such  officer  has  reviewed  the        relevant terms hereof and has made, or caused to be made, under his or her supervi-       sion,  a  review  of  the  transactions  and  conditions  of  the  Company  and  its  Sub-       sidiaries from the beginning of the quarterly or annual period covered by the state-       ments then being furnished to the date of the certificate and that such review shall        not have disclosed the existence during such period of any condition or event that        constitutes  a  Default  or  an  Event  of  Default  or,  if  any  such  condition  or  event        existed  or  exists,  specifying  the  nature  and  period  of  existence  thereof  and  what        action the Company shall have taken or proposes to take with respect thereto.                                       12  





 






7.3.  Inspection.         The Company shall permit the representatives of the holder of a Note:               (a)   No  Default --  if  no  Default or  Event of Default then exists, at the        expense of such holder and upon reasonable prior notice to the Company, to visit        the  principal  executive  office  of  the  Company,  to  examine  all  of  its  books  of        account, records, reports and other papers, and to discuss the affairs, finances and        accounts  of  the  Company  and  its  Subsidiaries  with  the  Company’s  officers,  and        (with  the  consent  of  the  Company,  which  consent  will  not  be  unreasonably        withheld)  to  visit  the  other  offices  and  properties  of  the  Company  and  each        Subsidiary, all at such reasonable times and as often as may be reasonably requested        in writing; and               (b)   Default -- if a Default or Event of Default then exists, at the expense        of the Company to visit and inspect any of the offices or properties of the Company        or any Subsidiary, to examine all their respective books of account, records, reports        and other papers, and to discuss their respective affairs, finances and accounts with        their respective officers and independent public accountants (and by this provision        the  Company  authorizes  said  accountants  to  discuss  the  affairs,  finances  and        accounts of the Company and its Subsidiaries), all at such times and as often as may        be requested.                                       13  





 






8.    PREPAYMENT OF THE NOTES.   8.1.  Optional Prepayments with Premium.               (a)   The Company shall not have the right to prepay the Notes prior to  September 30, 2021.  On the last day of any calendar quarter ending on or after September  30,  2021,  the  Company  may,  at  its  option, upon notice  as provided  in  clause (b)  below,  prepay  all  or  a  portion  of  the  Notes,  including  principal  and  accrued  but  unpaid  interest  accrued  to  but  excluding  the  date  of  payment, subject to the Company’s  payment  of the  applicable call premium set forth in the table below:                     Quarter ending        Call Premium                   September 30, 2021    $1,100,000                  December 31, 2021     $1,150,000                  March 31, 2022        $1,200,000                  June 30, 2022         $1,250,000                  September 30, 2022    $1,300,000                  December 31, 2022     $1,412,500                  March 31, 2023        $1,525,000                  June 30, 2023         $1,637,500                  September 30, 2023    $1,750,000                  December 31, 2023     $3,050,000                                        An amount equal to the                  From each calendar                                        product of (x) the prior                  quarter ending after                                        quarter’s call premium and                  December 31, 2023                                        (y) 1.125^(0.25) [1.03]    provided  that  if  the  Company  elects  to  prepay  an  amount  that  is  less  than  the  entire  outstanding  balance  of  the  Notes  pursuant  to  this  Section  8.1(a),  the  applicable  call  premium shall be proportionally reduced based on the amount of the Notes so prepaid.   Any repayment, prepayment or redemption of the Notes made on or after September 30,  2021,  in  each  case  whether  or  not  as  a  result  of  any  Event  of  Default,  any  voluntary,  involuntary or automatic acceleration of the Notes and/or the exercise of remedies by any  holder of a Note, shall be at 100% of the principal amount outstanding, plus accrued but  unpaid interest to but excluding the date of repayment, prepayment or redemption, subject  to the Company’s payment of the applicable call premium set forth in the table above.               (b)   The Company will give the holder of a Note written notice of each  optional prepayment under this Section 8.1 not less than 30 days prior to the date fixed for  such prepayment under Section 8.1(a).  Each such notice shall specify such date and the  aggregate principal amount of the Notes outstanding and to be prepaid on such date, and the  interest (and premium) to  be paid on the prepayment  date  with respect  to  such principal  (and premium) amount being prepaid.  Prepayment notice provided by the Company does  not  accelerate  the  Company’s  obligation  to  pay  any  portion  of  the  Notes  and  any  such                                      14  





 






prepayment  notice  may  be  conditioned  upon  the  completion  of  any  financing  for  such  prepayment.  From and after the date fixed for such prepayment, unless the Company shall  fail  to  pay  such  principal  amount  when  so  due  and  payable,  interest  on  such  principal  amount shall cease to accrue.   8.2.  Surrender, etc.         Upon payment or prepayment of each Note in full, such Note shall be surrendered to  the Company and cancelled and shall not be reissued, and no Note shall be issued in lieu of  any prepaid principal amount.   9.    AFFIRMATIVE COVENANTS.         The Company covenants that so long as the Notes are outstanding:   9.1.  Compliance with Law.         The Company will and will cause each of its Subsidiaries to comply with all laws,  ordinances or governmental rules or regulations to which each of them is subject, and will  obtain  and  maintain  in  effect  all  licenses,  certificates,  permits,  franchises  and  other  governmental authorizations necessary to the ownership of their respective properties or to  the conduct of their respective businesses, in each case to the extent necessary to ensure that  non-compliance with such laws, ordinances or governmental rules or regulations or failures  to  obtain  or  maintain  in  effect  such  licenses,  certificates,  permits,  franchises  and  other  governmental  authorizations  would  not,  individually  or  in  the  aggregate,  reasonably  be  expected to have a Material Adverse Effect.   9.2.  Insurance.         The  Company  will  and  will  cause  each  of  its  Subsidiaries  to  maintain,  with  financially sound and reputable insurers, insurance with respect to their respective proper- ties and businesses against such casualties and contingencies, of such types, on such terms  and  in  such  amounts  (including  deductibles,  co-insurance  and  self-insurance,  if  adequate  reserves  are  maintained  with  respect  thereto)  as  is  customary  in  the  case  of  entities  of  established reputations engaged in the same or a similar business and similarly situated.   9.3.  Payment of Taxes and Claims.         The  Company  will  and  will  cause  each  of  its  Subsidiaries  to  file  all  income  and  other material Tax returns required to be filed in any jurisdiction and to pay and discharge  all Taxes shown to be due and payable on such returns and all other Taxes imposed on them  or  any  of  their  properties,  assets,  income  or  franchises,  to  the  extent  such  Taxes  have  become due and payable and before they have become delinquent and all claims for which  sums  have  become  due  and  payable  that  have  or  might  become  a  Lien  on  properties  or  assets  of  the  Company  or  any  Subsidiary,  provided  that  neither  the  Company  nor  any  Subsidiary  need  pay  any  such  Tax  if  (i) the  amount,  applicability  or  validity  thereof  is  contested  by  the  Company  or  such  Subsidiary  on  a  timely  basis  in  good  faith  and  in                                      15  





 






appropriate  proceedings,  and  the  Company  or  a  Subsidiary  has  established  adequate  reserves  therefor  in  accordance  with  GAAP  on  the  books  of  the  Company  or  such  Subsidiary or (ii) the nonpayment of all such Taxes in the aggregate would not reasonably  be expected to have a Material Adverse Effect.    9.4.  Corporate Existence, etc.         The  Company  will  at  all  times  preserve  and  keep  in  full  force  and  effect  its  corporate existence.  Except as otherwise permitted in this Agreement, the Company will at  all times preserve and keep in full force and effect the corporate existence of each of its  Subsidiaries (unless merged into the Company or a Subsidiary) and all rights and franchises  of the Company and its Subsidiaries unless, in the good faith judgment of the Company, the  termination  of  or  failure  to  preserve  and  keep  in  full  force  and  effect  such  corporate  existence, right or franchise would not, individually or in the aggregate, have a Material Ad- verse Effect.    9.5.  [Reserved].   9.6.  ERISA.         None of the Company nor any of its ERISA Affiliates shall maintain, contribute to  or have any actual or contingent, direct or indirect obligation to maintain or contribute to,  any employee benefit plan that is subject to Title I or Title IV of ERISA or section 4975 of  the Code.   10.   NEGATIVE COVENANTS.         The Company covenants that so long as the Notes are outstanding:   10.1.  Merger, Consolidation, Disposition of Assets, etc.         The Company shall not consolidate with or merge with any other Person, liquidate,  wind-up or dissolve itself, or convey, dispose, transfer or lease all or substantially all of its  assets in a single transaction or series of transactions to any Person, outside the ordinary  course of its business, unless:               (a)   the successor formed by such consolidation or the survivor of such        merger or the Person that acquires by conveyance, disposition, transfer or lease all        or substantially all of the assets of the Company as an entirety, as the case may be,        shall be a solvent corporation organized and existing under the laws of the United        States or any State thereof (including the District of Columbia), and, if the Company        is not such corporation, (i) such corporation shall have executed and delivered to        each holder of any Note its assumption of the due and punctual performance and        observance of each covenant and condition of this Agreement and each Note and        (ii) shall  have  caused  to  be  delivered  to  the  Required  Holders  an  opinion  of        nationally recognized independent counsel, or other independent counsel reasonably        satisfactory to the Required Holders, to the effect that all agreements or instruments                                      16  





 






      effecting  such  assumption  are  enforceable  in  accordance  with  their  terms  and        comply with the terms hereof;               (b)   immediately  after  giving  effect  to  such  transaction,  no  Default  or        Event of Default shall have occurred and be continuing or would result therefrom;                (c)   immediately  after  giving  pro  forma  effect  to  such  transaction,  the        successor, survivor  or transferee  Person  shall be in compliance with the financial        covenants set forth in Section 11 hereof;               (d)   the successor, survivor or transferee Person and its Subsidiaries shall        be  engaged  primarily  in  the  business  engaged  in  by  the  Company  and  its        Subsidiaries as of the Closing Date; and               (e)   contemporaneously  with  the  closing  of  such  transaction,  the        Company  shall  have  delivered  to  the  holder  of  each  Note  an  officers’  certificate        stating  that  such  transaction  and  the  requirements  of  this  Section  10.1  have  been        satisfied.   No such transaction or conveyance, disposition, transfer or lease of all or substantially all of  the assets of the Company shall have the effect of releasing the Company or any successor  corporation  that  shall  theretofore  have  become  such  in  the  manner  prescribed  in  this  Section 10.1 from its liability under this Agreement or the Notes.   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;               (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 of the Company arising under the Senior Notes;               (e)   Indebtedness existing as of the Closing Date and listed on Schedule        10.2;                (f)   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                                      17  





 






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;         (g)   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;         (h)   Guaranty Obligations to the extent permitted under Section 10.7;         (i)   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;         (j)   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         (k)   Loans  from  the  Federal  Home  Loan  Bank  of  Indiana  issued  or  created for the account of the Insurance Subsidiaries.                                 18  





 






 10.3.  Acquisitions.           The  Company  shall  not,  and  shall  cause  its  Subsidiaries  to  not,  purchase  or  otherwise  acquire,  or  become  obligated  for  the  purchase  of all  or substantially all  of the  assets or business interests of any Person, firm or corporation or any shares of stock of any  corporation,  trusteeship  or  association  or  in  any  other  manner  effectuate  or  attempt  to  effectuate  an  expansion  of  present  business  by  acquisition  with  a  purchase  price  or  consideration in excess of $10,000,000; provided, further, that, immediately before and after  giving effect to such transaction, (a) no Default or Event of Default shall have occurred and  be  continuing  or  would  result  therefrom  and  (b)  the  Company  shall  be  in  pro  forma  compliance with the financial covenants set forth in Section 11 hereof.   10.4.  Restricted Payments.           The Company shall not declare or pay any dividends or make any other distribution  upon its equity interests if at the time declared or paid or if after giving effect thereto (a) a  Default or Event of Default (or event which with the giving of notice or the passage of time  or  both  would  constitute  an  Event  of  Default)  shall  have  occurred  and  be  continuing  or  would result therefrom or (b) the Company shall not be in pro forma compliance with the  financial covenants set forth in Section 11 hereof.   10.5.  Sale-Leaseback Transactions.           The  Company  will  not,  and  will  not  permit  its  Subsidiaries  to,  engage  in  a  sale  leaseback,  synthetic  lease  or  similar  transaction  involving  any  of  its  assets,  in  excess  of  $1,500,000 in the aggregate at any time through the Maturity Date.   10.6.  Change in Existing Investment Policies.           The Company will not, and will not permit its Subsidiaries to, permit or suffer any  material  adverse  change  in  its  investment  policies  with  respect  to  cash  and  marketable  securities that would have a Material Adverse Effect on the Company or its Subsidiaries.   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.                                      19  





 






10.8.  Economic Sanctions, etc.         The  Company  will  not,  and  will  not  permit  any  Controlled  Entity  to  (a) become  (including by virtue of being owned or controlled by a Blocked Person), own or control a  Blocked Person or (b) directly or indirectly have any investment in or engage in any dealing  or transaction (including any investment, dealing or transaction involving the proceeds of  the Notes) with any Person if such investment, dealing or transaction (i) would cause any  holder or any affiliate of such holder to be in violation of, or subject to sanctions under, any  law or regulation applicable to such holder, or (ii) is prohibited by or subject to sanctions  under any U.S. Economic Sanctions Laws.   11.  FINANCIAL COVENANTS.         The Company covenants that so long as the Notes are outstanding it will, and will to  the extent applicable cause its Subsidiaries to:   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 September 30, 2018 and each fiscal quarter thereafter.   11.2.  Fixed Charge Coverage Ratio.           Commencing with the fiscal quarter ending September 30, 2018, maintain as of the  end of each fiscal quarter of the Company a Fixed Charge Coverage Ratio of not less than  1.25 to 1.0.   11.3.  Dividend Paying Capacity.           Not permit the Dividend Paying Capacity of any Insurance Subsidiary for any fiscal  year  to  be  less  than  $1,000,000.   This  Section  does  not  apply  to  Red  Cedar  Insurance  Company.   11.4.  Reinsurance Retentions.          Not  permit  reinsurance  contracts  to  have  a  greater  retention  (or  deductible)  than  those in place as of July 1, 2017.   11.5.  Risk-Based Capital.           Not permit “total adjusted capital” (within the meaning of the Risk-Based Capital  for Insurers Model Act as promulgated by the NAIC as of the date of this Agreement (the  “Model Act”)) of any of its Insurance Subsidiaries as of the last day of each fiscal year to  be less than 300% of the applicable “authorized control level of risk-based capital” (within  the meaning of the Model Act) for such Insurance Subsidiary.  This Section does not apply  to Red Cedar Insurance Company.                                      20  





 






11.6.  Consolidated Debt to Capital.           Commencing with the fiscal quarter ending September 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.   12.   EVENTS OF DEFAULT.         An “Event of Default” shall exist if any of the following conditions or events shall  occur and be continuing:               (a)   the Company defaults in the payment of any principal (or premium,        as  applicable)  on  any Note when the same becomes  due  and  payable, whether  at        maturity or at a date fixed for prepayment or by declaration or otherwise; or               (b)   the Company defaults in the payment of any interest on any Note for        more than five Business Days after the same becomes due and payable; or               (c)   the Company defaults in the performance of or compliance with any        term  contained  in  Section 7.1(d),  (e)  or  (f),  Section  9.4,  Section  9.5,  Section  10,        Section 11 or Section 17.7; or               (d)   the Company defaults in the performance of or compliance with any        term contained herein (other than those referred to in paragraphs (a), (b) and (c) of        this Section 12) and such default is not remedied within 30 days after the earlier of        (i) a  Responsible  Officer  obtaining  actual  knowledge  of  such  default  and  (ii) the        Company receiving written notice of such default from the holder of a Note (any        such written notice to be identified as a “notice of default” and to refer specifically        to this paragraph (d) of Section 12); or               (e)  any representation or warranty made in writing by or on behalf of the        Company or by any officer of the Company in this Agreement or in any writing fur-       nished in connection with the transactions contemplated hereby proves to have been        false or incorrect in any material respect on the date as of which made; or               (f)   (i)  the  Company  or  any  Subsidiary  is  in  default  (as  principal  or  as        guarantor or other surety) in the payment of any principal of or premium or make-       whole amount or interest on any Indebtedness that is outstanding in an aggregate        principal amount of at least $1,500,000 beyond any period of grace provided with        respect  thereto,  or  (ii)  the  Company  or  any  Subsidiary  is  in  default  in  the  per-                                     21  





 






formance of or compliance with any term of any evidence of any Indebtedness in an  aggregate outstanding principal amount of at least $1,500,000 or of any mortgage,  indenture or other agreement relating thereto or any other condition exists, and as a  consequence  of  such  default  or  condition  such  Indebtedness  has  become,  or  has  been declared (or one or more Persons are entitled to declare such Indebtedness to  be), due and payable before its stated maturity or before its regularly scheduled dates  of payment, or (iii) as a consequence of the occurrence or continuation of any event  or  condition  (other  than  the  passage  of  time  or  the  right  of  the  holder  of  Indebtedness to convert such Indebtedness into equity interests) the Company or any  Subsidiary  has  become  obligated  to  purchase  or  repay  Indebtedness  before  its  regular maturity or before its regularly scheduled dates of payment in an aggregate  outstanding principal amount of at least $1,500,000 (or its equivalent in the relevant  currency of payment); or         (g)  the Company or any Subsidiary (i) is generally not paying, or admits in  writing its inability to pay, its debts as they become due, (ii) files, or consents by  answer or otherwise to the filing of a petition against it for relief or reorganization or  rehabilitation,  conservation,  supervision,  arrangement,  adjustment,  winding-up,  liquidation, dissolution, composition or other relief with respect to it or its debts or  any  other  petition  in  bankruptcy,  for  liquidation  or  to  take  advantage  of  any  bankruptcy, insolvency, reorganization, rehabilitation, moratorium or other similar  law  of  any  jurisdiction,  (iii) makes  an  assignment  for  the  benefit  of  its  creditors,  (iv) consents  to  the  appointment  of  a  custodian,  receiver,  trustee  or  other  officer  with similar powers with respect to it or with respect to any substantial part of its  property, (v) is adjudicated as insolvent or to be liquidated, or (vi) takes corporate  action for the purpose of any of the foregoing; or         (h)  a court of competent jurisdiction or Governmental Authority enters an  order  appointing,  without  consent  by  the  Company  or  any  of  its  Subsidiaries,  a  custodian,  receiver,  rehabilitator,  supervisor,  trustee  or  other  officer  with  similar  powers with respect to it or with respect to any substantial part of its property, or  constituting an order for relief or approving a petition for relief or reorganization,  rehabilitation,  conservation,  supervision,  arrangement,  adjustment,  winding-up,  liquidation, dissolution, composition or other relief with respect to it or its debts or  any  other  petition  in  bankruptcy  or  for  liquidation  or  to  take  advantage  of  any  bankruptcy  or  insolvency  law  of  any  jurisdiction,  or  ordering  the  dissolution,  winding-up, rehabilitation, liquidation or any similar relief of or with respect to the  Company or any of its Subsidiaries, or any such petition shall be filed against the  Company or any of its Subsidiaries and such petition shall not be dismissed within  60 days; or         (i)  a final order, orders, judgment or judgments for the payment of money  aggregating  in  excess  of  $1,000,000  are  rendered  against  one  or  more  of  the  Company and its  Subsidiaries  and which  judgments are  not, within  30 days  after  entry thereof, bonded, discharged or stayed pending appeal, or are not discharged  within 30 days after the expiration of such stay;                                  22  





 






            (j) if any of the Insurance Subsidiaries shall be prohibited by any Regulatory        Agency from issuing new insurance policies in any jurisdiction and such prohibition        shall have a Material Adverse Effect on such Insurance Subsidiary’s business; or               (k)  if the operation of the Company or any of its Subsidiaries shall become        subject to the control of any Regulatory Agency, other than in the normal course of        business.   13.   REMEDIES ON DEFAULT.   13.1.  Acceleration.               (a)   If  an  Event  of  Default  with  respect  to  the  Company  described  in  paragraph (g) or (h) of Section 12 (other than an Event of Default described in clause (i) of  paragraph  (g)  or  described  in  clause  (vi) of paragraph  (g)  by virtue of  the fact  that such  clause encompasses clause (i) of paragraph (g)) has occurred, the Notes then outstanding  shall automatically become immediately due and payable.               (b)   If  any  other  Event  of  Default  has  occurred  and  is  continuing,  the  Required Holders, by notice, may declare the Notes to be immediately due and payable.        Upon  the  Notes  becoming  due  and  payable  under  this  Section 13.1,  whether  automatically  or  by  declaration,  the  Notes  will  forthwith  mature  and  the  entire  unpaid  principal  amount  of  the  Notes,  including  any  applicable  premium,  plus  all  accrued  and  unpaid interest thereon (including interest accrued thereon at the Default Rate), shall all be  immediately due and payable, in each and every case without presentment, demand, protest  or further notice, all of which are hereby waived; provided, that for the avoidance of doubt,  the amounts contemplated by Section 8.1(a) shall be payable in each case whether or not  any payment, prepayment or redemption of the Notes is as a result of any Event of Default,  any  voluntary,  involuntary  or  automatic  acceleration  of  the  Notes  and/or  the  exercise  of  remedies by any holder thereof; provided, further, such contemplated amount payable shall  be presumed to be liquidated damages sustained by each holder of a Note as the result of the  early  payment  and  termination  and  the  Company  agrees  that  it  is  reasonable  under  the  circumstances.   13.2.  Other Remedies.         If any Default or Event of Default has occurred and is continuing, and irrespective  of whether the Notes has become or have been declared immediately due and payable under  Section  13.1,  each  holder  of  a  Note  at  the  time  outstanding  may  proceed  to  protect  and  enforce  the  rights  of  the  holder  by  an  action  at  law,  suit  in  equity  or  other  appropriate  proceeding, whether for the specific performance of any agreement contained herein or in  any Note, or for an injunction against a violation of any of the terms hereof or thereof, or in  aid of the exercise of any power granted hereby or thereby or by law or otherwise.                                       23  





 






13.3.  Rescission.         At any time after any Note has been declared due and payable pursuant to Section  13.1,  the  holder  of  such  Note  then  outstanding,  by  written  notice  to  the  Company,  may  rescind  and  annul  any  such  declaration  and  its  consequences  (and  such  rescission  and  annulment shall be deemed to occur if such action is approved by the Required Holders) if  (a) the Company has paid all overdue interest on such Note and all principal (and premium,  as applicable) on such Note that are due and payable and are unpaid other than by reason of  such declaration, and all interest on such overdue principal (and premium, as applicable)  and (to the extent permitted by applicable law) any overdue interest in respect of such Note,  at  the  Default  Rate,  (b) all  Events  of  Default  and  Defaults,  other  than  non-payment  of  amounts  that  have become  due  solely  by reason  of such declaration, have been  cured  or  have been waived pursuant to Section 19, and (c) no judgment or decree has been entered  for  the  payment  of  any  monies  due  pursuant  hereto  or  to  such Note.   No  rescission and  annulment under this Section 13.3 will extend to or affect any subsequent Event of Default  or Default or impair any right consequent thereon.   13.4.  No Waivers or Election of Remedies, Expenses, etc.         No course of dealing and no delay on the part of the holder of any Note in exercising  any right, power or remedy shall operate as a waiver thereof or otherwise prejudice such  holder’s  rights,  powers  or  remedies.   No  right,  power  or  remedy  conferred  by  this  Agreement or by any Note upon the holder thereof shall be exclusive of any other right,  power or remedy referred to herein or therein or now or hereafter available at law, in equity,  by statute or otherwise.  The Company will pay to the holder of any Note on demand such  further amount as shall be sufficient to cover all costs and expenses of the holder incurred in  any  enforcement  or  collection  under  this  Section  13,  including,  without  limitation,  reasonable attorneys’ fees, expenses and disbursements.   14.   REGISTRATION; EXCHANGE; SUBSTITUTION OF NOTES.   14.1.  Registration of Notes.               The Company shall keep at its principal executive office a register for the  registration and registration of transfers of Notes.  The name and address of each holder of  one or more Notes, each transfer thereof and the name and address of each transferee of one  or more Notes shall be registered in such register.  If any holder of one or more Notes is a  nominee, then (a) the name and address of the beneficial owner of such Note or Notes shall  also  be  registered  in  such  register  as  an  owner  and  holder  thereof  and  (b)  at  any  such  beneficial  owner’s  option,  either  such  beneficial  owner  or  its  nominee  may  execute  any  amendment, waiver or consent pursuant to this Agreement.  Prior to due presentment for  registration  of  transfer,  the  Person  in  whose  name  any  Note  shall  be  registered  shall  be  deemed  and  treated  as  the  owner  and  holder  thereof  for  all  purposes  hereof,  and  the  Company shall not be affected by any notice or knowledge to the contrary.  The Company  shall give to any holder of a Note promptly upon request therefor, a complete and correct  copy of the names and addresses of all registered holders of Notes.                                      24  





 






14.2.  Transfer and Exchange of Notes.               Upon  surrender  of  any  Note  to  the  Company  at  the  address  and  to  the  attention  of  the  designated  officer  (all  as  specified  in  Section 14.1),  for  registration  of  transfer or exchange (and in the case of a surrender for registration of transfer accompanied  by a written instrument of transfer duly executed by the registered holder of such Note or  such holder’s attorney duly authorized in writing and accompanied by the relevant name,  address and other information for notices of each transferee of such Note or part thereof),  within  10  Business  Days  thereafter,  the  Company  shall  execute  and  deliver,  at  the  Company’s expense (except as provided below), one or more new Notes (as requested by  the  holder  thereof)  in  exchange  therefor,  in  an  aggregate  principal  amount  equal  to  the  unpaid principal amount of the surrendered Note.  Each such new Note shall be payable to  such Person as such holder may request and shall be substantially in the form of Exhibit 1.   Each such new Note shall be dated and bear interest from the date to which interest shall  have  been  paid  on  the  surrendered  Note  or  dated  the  date  of  the  surrendered Note  if no  interest  shall  have  been  paid  thereon.   The  Company  may  require  payment  of  a  sum  sufficient to cover any stamp tax or governmental charge imposed in respect of any such  transfer of Notes.  Any transferee, by its acceptance of a Note registered in its name (or the  name of its nominee), shall be deemed to have made the representation set forth in Section  6.1.   14.3.  Replacement of Notes.               Upon  receipt  by  the  Company  at  the  address  and  to  the  attention  of  the  designated officer (all as specified in Section 14.1) of evidence reasonably satisfactory to  it  of  the  ownership  of  and  the  loss,  theft,  destruction  or  mutilation  of  any  Note,  the  Company at its own expense shall execute and deliver, in lieu thereof, a new Note, dated  and  bearing  interest  from  the  date  to  which  interest shall  have been paid on  such  lost,  stolen,  destroyed  or  mutilated  Note  or  dated  the  date  of such lost, stolen,  destroyed or  mutilated Note if no interest shall have been paid thereon.   15.   SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ENTIRE  AGREEMENT.         All representations and warranties contained herein shall survive the execution and  delivery of this Agreement and each Note, the purchase and the payment of any Note.  All  statements contained in any certificate or other instrument delivered by or on behalf of the  Company pursuant to this Agreement shall be deemed representations and warranties of the  Company under this Agreement.  Subject to the  preceding  sentence, this Agreement and  each Note embodies the entire agreement and understanding between each Purchaser and  the Company and supersede all prior agreements and understandings relating to the subject  matter hereof.                                       25  





 






16.   PAYMENTS ON THE NOTES.   16.1.  Place of Payment.         Subject to Section 16.2 and the Schedules hereto, payments of principal and interest  becoming due and payable on each Note shall be made by the Company to each Purchaser  or  holder  of  a  Note  as  set  forth  on  Schedule  A  hereto  or  otherwise  designated  by  such  Purchaser or holder in writing.   16.2.  Interest.           Each Note shall bear interest on its principal amount at a rate of 7.5% per annum  through and including September 30, 2023, and thereafter shall bear interest on its principal  amount at a rate of 12.5% per annum until the Maturity Date.  Interest on each Note will be  payable quarterly in arrears on the last Business Day of each March, June, September and  December  of  each  year,  commencing  on  the last  Business Day  of December 2018  (each  such date, an “Interest Payment Date”), to the holder of each Note at the close of business  on such day (whether or not a Business Day), as the case may be.  Interest shall at all times  be computed on the basis of a 360-day year consisting of twelve 30-day months.     16.3.  Deferral of Interest.           So  long  as  no  Default  or  Event  of  Default  has  occurred  and  is  continuing,  the  Company shall have the right, at any time and from time to time to defer the payment of  interest  of  each  Note  for  a  period  of  up  to  four  consecutive  quarterly  interest  payment  periods (any such quarterly interest period, an “Interest Deferral Period”), during which  Interest Deferral Period(s), the Company shall have the right to make no payments or partial  payments of interest on any Interest Payment Date.  No Interest Deferral Period shall end on  a  date  other  than  an  Interest  Payment  Date  and  no  Interest  Deferral  Period  shall  extend  beyond the stated maturity of the principal of the Notes or if such extension would cause the  Interest Deferral Period to exceed four fiscal quarters in the aggregate through the Maturity  Date.  No interest shall be due and payable during an Interest Deferral Period (and during  such period the interest otherwise payable shall cease), except at the end thereof.  At the end  of any such Interest Deferral Period, the Company shall pay all interest then accrued and  unpaid on each Note, including during the applicable Interest Deferral Periods.  Prior to the  termination of any quarterly interest payment period within an Interest Deferral Period, the  Company may extend such Interest Deferral Period and further defer the payment of interest  through the next quarterly interest payment period; provided that (i) all such previous and  further  extensions  comprising  such  Interest  Deferral  Period  do  not  exceed  four  quarterly  interest payment periods in the aggregate through the Maturity Date, (ii) no Interest Deferral  Period  shall  end  on  a  date other than  an Interest  Payment Date, (iii) no Interest Deferral  Period  shall  extend  beyond  the  stated  maturity  of  the  principal  of  the  Notes  or  if  such  extension  would  cause  the  Interest  Deferral  Period  to  exceed  four  fiscal  quarters  in  the  aggregate through the Maturity Date and (iv) no Default or Event of Default has occurred                                      26  





 






and is continuing.  Upon the termination of any such Interest Deferral Period and upon the  payment of all accrued and unpaid interest then due on any Interest Payment Date, including  during  the  applicable  Interest  Deferral  Periods,  the  Company  may  elect  to  begin  a  new  Interest Deferral Period; provided, that (i) such Interest Deferral Period does not exceed four  quarterly  interest  payment  periods  in  the  aggregate  through  the  Maturity  Date,  (ii)  no  Interest Deferral Period shall end on a date other  than an Interest Payment Date, (iii) no  Interest Deferral Period shall extend beyond the stated maturity of the principal of the Notes  or if such extension would cause the Interest Deferral Period to exceed four fiscal quarters  in  the  aggregate  through  the  Maturity  Date,  and  (iv) no Default or  Event of  Default has  occurred and is continuing.  The Company shall notify the holder of each Note to begin any  such Interest Deferral Period no later than 10 days prior to the commencement or extension  thereof.   17.   SUBORDINATION OF THE NOTES.   17.1.  Notes Subordinate to Senior Debt.           The Company covenants and agrees, and each holder of a Note, by its acceptance  thereof, likewise covenants and agrees, that, to the extent and in the manner hereinafter set  forth, the payment of the principal of and any premium and interest on each and all of the  Notes are hereby expressly made subordinate and subject in right of payment to the prior  payment in full of all Senior Debt.  “Senior Debt” means (i) the Indebtedness under the  Senior  Loan  Agreement  and  any  amendment,  restatement  or  refinancing  thereof,  (ii)  the  Senior Notes and (iii) the principal of and any premium and interest on (including interest  accruing on or after the filing of any petition in bankruptcy or for reorganization relating to  the  Company,  whether  or  not  such  claim  for  post-petition  interest  is  allowed  in  such  proceeding)  all  Indebtedness  of  the  Company,  incurred  on  or  after  the  date  of  this  Agreement and permitted to be incurred hereunder, unless it is provided in the instrument  creating  or  evidencing  the  same  or  pursuant  to  which  the  same  is  outstanding  that  the  obligations under such instrument are not superior in right of payment to the Notes issued  under  this  Agreement;  provided,  however,  that  the  aggregate  amount  of  all  Senior  Debt  under  clauses  (i),  (ii)  and  (iii)  above  shall  in  no  event  exceed  $42,000,000;  provided,  further,  that  Senior  Debt  shall  not  include:   (a) any  obligation  of  the  Company  to  any  Subsidiary or any obligation of a Subsidiary to the Company or another Subsidiary; (b) any  liability for Federal, state, foreign, local or other taxes owed or owing by the Company or  any of its Subsidiaries; (c) any accounts payable or other liability to trade creditors arising in  the  ordinary  course  of  business  (including  guarantees  thereof  or  instruments  evidencing  such  liabilities);  (d)  Indebtedness  to,  or  guaranteed  on  behalf  of,  any  director,  officer  or  employee  of  the  Company  or  any  of  its  Subsidiaries  (including  amounts  owed  for  compensation);  (e)  any  capital  stock  or  redeemable  stock  of  the  Company  or  its  Subsidiaries; (f) any Indebtedness that is expressly subordinate or junior in right of payment  to  the  Notes;  or  (g)  any  Indebtedness  incurred  in  violation  of  this  Agreement.   Only  Indebtedness  of  the  Company  that  is  Senior  Debt  shall  rank  senior  to  the  Notes.   Each  holder  of  a  Note  agrees,  if  requested  by  the  Senior  Lender  to  execute  a  Subordination  Agreement  for  the  benefit  of  the  Senior  Lender  consistent  with  the  provisions  of  this  Section 17.1.                                      27  





 






17.2.  No Payment When Senior Debt in Default; Payment Over of Proceeds Upon  Dissolution, Etc.                 (a)   In  the  event  and  during  the  continuation  of  any  default  by  the  Company in the payment of any principal of or any premium or interest on any Senior Debt  (following  any  grace  period,  if  applicable)  when  the  same  becomes  due  and  payable,  whether at maturity or at a date fixed for redemption or by declaration of acceleration or  otherwise, then, upon written notice of such default to the Company and each holder of a  Note by the holders of such Senior Debt therefor, unless and until such default shall have  been cured or waived or shall have ceased to exist, no direct or indirect payment (in case,  property, securities, by set-off or otherwise) shall be made or agreed to be made on account  of the principal of or any premium or interest on a Note, or in respect of any redemption,  repayment, retirement, purchase or other acquisition of a Note.               (b)   In the event of a bankruptcy, insolvency or other similar proceeding  described in the definition of Event of Default (each such event, if any, herein sometimes  referred  to  as  a “Proceeding”),  all  Senior  Debt  (including  any  interest  thereon  accruing  after  the  commencement  of  any  such  proceedings)  shall  first  be  paid  in  full  before  any  payment or distribution, whether in cash, securities or other property, shall be made to any  holder  of  a  Note  on  account  thereof.   Any  payment  or  distribution,  whether  in  cash,  securities  or  other  property  (other  than  securities  of  the  Company  or  any  other  entity  provided  for  by  a  plan  of  reorganization  or  readjustment  the  payment  of  which  is  subordinate, at least to the extent provided in these subordination provisions with respect to  the  Indebtedness  evidenced  by  the  Notes,  to  the  payment  of  all  Senior  Debt  at  the  time  outstanding  and  to  any  securities  issued  in  respect  thereof  under  any  such  plan  of  reorganization  or  readjustment),  which  would  otherwise  (but  for  these  subordination  provisions)  be  payable  or  deliverable  in  respect  of  the  Notes  shall  be  paid  or  delivered  directly to the holders of Senior Debt in accordance with the priorities then existing among  such  holders  until  all  Senior  Debt  (including  any  interest  thereon  accruing  after  the  commencement  of  any  Proceeding)  shall  have  been  paid  in  full.   In  the  event  of  any  Proceeding, after payment in full of all sums owing with respect to Senior Debt, each holder  of a Note, together with the holders of any obligations of the Company ranking on a parity  with the Notes, shall be entitled to be paid from the remaining assets of the Company the  amounts at the time due and owing on account of unpaid principal of and any premium and  interest on the Notes and such other obligations before any payment or other distribution,  whether in cash, property or otherwise, shall be made on account of any capital stock or any  obligations of the Company ranking junior to the Notes and such other obligations.               (c)   If, notwithstanding the foregoing, any payment or distribution of any  character or any security, whether in cash, securities or other property (other than securities  of the Company or any other entity provided for by a plan of reorganization or readjustment  the payment of which is subordinate, at least to the extent provided in these subordination  provisions with respect to the Indebtedness evidenced by the Notes, to the payment of all  Senior Debt at the time outstanding and to any securities issued in respect thereof under any  such plan of reorganization or readjustment) shall be received by the holder in contravention  of  any  of  the  terms  hereof and before all Senior Debt shall have been paid in full, such                                      28  





 






payment or distribution or security shall be received in trust for the benefit of, and shall be  paid  over  or  delivered  and  transferred  to,  the  holders  of  the  Senior  Debt  at  the  time  outstanding  in  accordance  with  the  priorities  then  existing  among  such  holders  for  application to the payment of all Senior Debt remaining unpaid, to the extent necessary to  pay all such Senior Debt (including any interest thereon accruing after the commencement  of any Proceeding) in full.  In the event of the failure of the holder of a Note to endorse or  assign  any  such  payment,  distribution  or  security,  each  holder  of  Senior  Debt  is  hereby  irrevocably authorized to endorse or assign the same.               (d)   Each  holder  of  a  Note,  at  the  expense  of  the Company,  shall take  such reasonable action (including the delivery of this Agreement to an agent for any holders  of Senior Debt or consent to the filing of a financing statement with respect hereto) as may,  in the opinion of counsel designated by the holders of a majority in principal amount of the  Senior Debt at the time outstanding, be necessary or appropriate to assure the effectiveness  of the subordination effected by these provisions, including the execution of a standalone  Subordination Agreement.   17.3.  Payment Permitted If No Default.           Nothing  contained  herein  or  elsewhere  in  this  Agreement  or  in  the  Notes  shall  prevent the Company, at any time, except during the pendency of the conditions described  above  or  of  any  Proceeding,  from  making  payments  at  any  time  of  principal of  and  any  premium and interest on the Notes.   17.4.  Subrogation to Rights of Holders of Senior Debt.           Subject to the payment in full of all amounts due or to become due on all Senior  Debt,  whether  in  cash,  securities  or  other  property,  each  holder  of  a  Note  shall  be  subrogated to the extent of the payments or distributions made to the holders of such Senior  Debt  pursuant  to  the  provisions  hereof  (equally  and  ratably  with  the  holders  of  all  Indebtedness of the Company that by its express terms is subordinated to Senior Debt of the  Company to substantially the same extent as each Note is subordinated to the Senior Debt  and is entitled to like rights of subrogation by reason of any payments or distributions made  to holders of such Senior Debt) to the rights of the holders of such Senior Debt to receive  payments and distributions of cash, property and securities applicable to the Senior Debt  until the principal of and any premium and interest on the Notes shall be paid in full.  For  purposes of such subrogation, no payments or distributions to the holders of the Senior Debt  of any cash, property or securities to which each holder of a Note would be entitled except  for these subordination provisions, and no payments made pursuant to these subordination  provisions  to  the  holders  of  Senior  Debt  by  the  holder  of  a  Note,  shall,  as  among  the  Company,  its  creditors  other  than  holders  of  Senior  Debt,  and  the  holder  of  a  Note,  be  deemed  to  be  a  payment  or  distribution by the Company to  or on account  of the Senior  Debt.                                      29  





 






17.5.  Provisions Solely to Define Relative Rights.           These  subordination  provisions  are  and  are  intended  solely  for  the  purpose  of  defining  the relative rights  of each holder  of a  Note  on  the  one  hand  and  the  holders  of  Senior Debt on the other hand.  Nothing contained herein or elsewhere in this Agreement or  in the Notes is intended to or shall (a) impair, as between the Company and each holder of a  Note, the obligations of the Company, which are absolute and unconditional, to pay to each  holder of a Note the principal of and any premium and interest on the Notes as and when the  same shall become due and payable in accordance with their terms, (b) affect the relative  rights against the Company and each holder of a Note and creditors of the Company other  than their rights in relation to the holders of Senior Debt or (c) prevent the holder of a Note  from exercising all remedies otherwise permitted by applicable law upon default under this  Agreement, including filing and voting claims in any Proceeding, subject to the rights, if  any, of the holders of Senior Debt to receive cash, property and securities otherwise payable  or deliverable to the holder.   17.6.  No Waiver of Subordination Provisions.           No right of any present or future holder of any Senior Debt to enforce subordination  as  herein provided shall at any time in any way be prejudiced or impaired by any act or  failure to act on the part of the Company or by any act or failure to act, in good faith, by any  such  holder,  or  by  any  noncompliance  by  the  Company  with  the  terms,  provisions  and  covenants of this Agreement, regardless of any knowledge thereof that the holder may have  or be otherwise charged with.  Without in any way limiting the generality of the foregoing  sentence, the holders of Senior Debt may, at any time and form time to time, without the  consent of or notice to the holder of a Note, without incurring responsibility to such holder  of  a  Note  and  without  impairing  or  releasing  the  subordination  providing  herein  or  the  obligations hereunder of the holder of a Note to the holders of Senior Debt, do any one or  more of the following (unless in violation of this Agreement):  (i) change the manner, place  or terms of payment or extend the time of payment of, or renew or alter, Senior Debt, or  otherwise amend or supplement in any manner Senior Debt or any instrument evidencing  the  same  or  any  agreement  under  which  Senior  Debt  is  outstanding,  (ii)  sell,  exchange,  release  or  otherwise  deal  with  any  property  pledged,  mortgaged  or  otherwise  securing  Senior Debt, (iii) release any Person liable in any manner for the payment of Senior Debt  and (iv) exercise or refrain from exercising any rights against the Company and any other  Person.    17.7.  Notice to Holders.           The Company shall give prompt written notice to the holder of a Note of any fact  known to the Company that would prohibit the making of any payment in respect of the  Notes.                                      30  





 






17.8.  Reliance on Judicial Order or Certificate of Liquidating Agent.           Upon any payment or distribution of assets of the Company, each holder of a Note  shall  be  entitled  to  conclusively  rely  upon  any  order  or  decree  entered  by  any  court  of  competent jurisdiction in which such Proceeding is pending, or a certificate of the trustee in  bankruptcy,  receiver,  liquidating  trustee,  custodian,  assignee  for  the  benefit  of  creditors,  agent or other Person making such payment or distribution, delivered to the holders of the  Notes, for the purpose of ascertaining the Persons entitled to participate in such payment or  distribution,  the  holders  of  the  Senior  Debt  and  other  Indebtedness  of  the  Company, the  amount thereof or payable thereon, the amount or amounts paid or distributed thereon and  all other facts pertinent thereto.   18.   EXPENSES, ETC.   18.1.  Transaction Expenses.         Except as otherwise provided herein, each party hereto shall pay its own fees, costs  and  expenses  incurred  in  connection  herewith  and  the  transactions  contemplated  hereby,  including  the  fees,  costs  and  expenses  of  its  financial  advisors,  accountants  and  legal  counsel.         The  Company  will  pay  all  reasonable  and  documented  costs  and  expenses  (including reasonable attorneys’  fees of a single  counsel)  incurred by the Purchasers and  each other holder of a Note in connection with such transactions and in connection with any  amendments,  waivers  or  consents  under  or  in  respect  of  this  Agreement  or  the  Notes,  including, without limitation: (a) the costs and expenses incurred in enforcing or defending  (or determining whether or how to enforce or defend) any rights under this Agreement or  the Notes or in responding to any subpoena or other legal process or informal investigative  demand  issued  in connection  with this Agreement or the Notes,  or by reason of being a  holder of any Note, (b) the costs and expenses, including financial advisors’ fees, incurred  in connection with the insolvency or bankruptcy of the Company or any Subsidiary or in  connection with any work-out or restructuring of the transactions contemplated hereby and  by the Notes and (c) the costs and expenses incurred in connection with the initial filing of  this  Agreement  and  all  related  documents  and  financial  information  with  a  Regulatory  Agency provided, that such costs and expenses under this clause (c) shall not exceed $3,000  for  each  series  of  Notes  and provided  further  that  the  reasonable  costs  and  expenses  incurred  in  the  diligence,  negotiation  and  execution  of  this  Agreement  shall  not  exceed  $50,000.  If required by the NAIC, the Company shall obtain and maintain at its own cost  and  expense a Legal Entity  Identifier  (LEI).  The Company will pay, and will save each  Purchaser and each other holder of a Note harmless from, (i) all claims in respect of any  fees, costs or expenses, if any, of brokers and finders (other than those, if any, retained by a  Purchaser  or  other  holder  in  connection  with  its  purchase  of  the  Notes)  and  (ii)  any  judgment,  liability,  claim,  order,  decree,  fine,  penalty,  cost,  fee,  expense  (including  reasonable attorneys’ fees and expenses) or obligation resulting from the consummation of  the  transactions  contemplated  hereby; provided that  such  indemnity  shall  not,  as  to  any                                      31  





 






Purchaser  or  holder  of  Note,  be  available  to  the  extent  that  such  judgments,  liabilities,  claims,  orders,  decrees,  fines,  penalties,  costs,  fees,  expenses  or  obligations  (x)  are  determined  by  a  court  of  competent  jurisdiction  by  final  and  nonappealable  judgment  to  have  resulted  from  (i)  the  gross  negligence  or  willful  misconduct  of  such  Purchaser  or  holder  of  a  Note  or  (ii)  a  material  breach  by  such  Purchaser  or  holder  of  a  Note  of  its  express  obligations  under  this  Agreement  or  (y)  result  from  claims  of  any  Purchaser  or  holder of a Note solely against one or more other Purchasers or holders of a Note.   18.2.  Certain Taxes.         Any and all payments by the Company or on account of the Note shall be made  without deduction or withholding for any Taxes, except as required by applicable law. If  any  applicable  law  requires  (in  the  good  faith  determination  of  the  Company)  the  deduction or withholding of any Taxes from any such payment, then the Company shall  (i)  make  such  deduction  or  withholding,  (ii)  timely  pay  the  full  amount  deducted  or  withheld  to  the  appropriate  Governmental  Authority,  and  (iii)  if  such  Taxes  are  Indemnified  Taxes,  pay  an  additional  amount  so  that  the  total  sum  each  Purchaser  receives  net of such  deduction  or  withholding  (including any deduction or withholding  required with respect to additional amounts) equals the sum that Purchaser would have  received  had  no  such  deduction  or  withholding  been  made.   Each  Purchaser  will  use  commercially  reasonable  efforts  to  cooperate  with  the  Company  to  reduce  any  Taxes  required to be deducted or withheld from payments by the Company or on account of the  Note.  The  Company  and  the  Subsidiaries  shall  jointly  and  severally  indemnify  each  Purchaser,  within  10  days  of  written  demand  therefor,  for  the  full  amount  of  any  Indemnified  Taxes  paid  by  such  Purchaser  on  account  of  the  Note  or  payments  thereunder, whether or not such Taxes were correctly or legally imposed or asserted by  the relevant Governmental Authority.   18.3.  Other Taxes.         The  Company  agrees  to  pay  all  stamp,  documentary  or  similar  Taxes  or  fees  which may be payable in respect of the execution and delivery or the enforcement of this  Agreement or the execution and delivery (but not the transfer) or the enforcement of any  of the Notes in the United States or any other jurisdiction where the Company has assets  or of any amendment of, or waiver or consent under or with respect to, this Agreement or  of  any  of  the  Notes,  and  to  pay  any  value  added  Tax  due  and  payable  in  respect  of  reimbursement of costs and expenses by the Company pursuant to this Section 18, and  will save each holder of a Note to the extent permitted by applicable law harmless against  any loss or liability resulting from nonpayment or delay in payment of any such Tax or  fee required to be paid by the Company hereunder.   18.4.  Tax Treatment.         The parties agree to treat the Note for all U.S. federal income and Code Chapter 3  and 4 purposes as indebtedness.                                       32  





 






18.5.  Survival.         The obligations of the parties under this Section 18 will survive the payment or  transfer  of  any  Note,  the  enforcement,  amendment  or  waiver  of  any  provision  of  this  Agreement or the Notes, and the termination of this Agreement.   19.   AMENDMENT AND WAIVER.   19.1.  Requirements.         This Agreement and the Notes may be amended, and the observance of any term  hereof or of the Notes may be waived (either retroactively or prospectively), with (and only  with) the written consent of the Company and the Required Holders.   19.2.  Binding Effect, etc.         Any amendment or waiver consented to as provided in this Section 19 applies the  holders of Notes and is binding upon the holders and upon the Company without regard to  whether each such Note has been marked to indicate such amendment or waiver.  No such  amendment or waiver will extend to or affect any obligation, covenant, agreement, Default  or  Event  of  Default  not  expressly  amended  or  waived  or  impair  any  right  consequent  thereon.  No course of dealing between the Company and the holders of the Notes nor any  delay in exercising any rights hereunder or under the Notes shall operate as a waiver of any  rights  of  the  holders  of  such  Notes.   As  used  herein,  the  term “this  Agreement”  and  references thereto shall mean this Agreement as it may from time to time be amended or  supplemented.   20.   NOTICES.         All notices and communications provided for hereunder shall be in writing and sent  (a) by telecopy if the sender on the same day sends a confirming copy of such notice by a  recognized  overnight  delivery  service  (charges  prepaid),  or  (b) by  registered  or  certified  mail  with  return  receipt  requested  (postage  prepaid),  or  (c) by  a  recognized  overnight  delivery service (with charges prepaid).  Any such notice must be sent:               (i)   if to a Purchaser or its nominee, to such Purchaser or it at the address        specified for such communications in Schedule A, or at such other address as such        Purchaser or it shall have specified to the Company in writing,               (ii)  if  to  the  Company,  to  the  Company  at  its  address  set  forth  at  the        beginning hereof to the attention of Brian Roney, President, or at such other address        as the Company shall have specified to the holder of each Note in writing.   Notices under this Section 20 will be deemed given only when actually received.                                       33  





 






21.   CONFIDENTIAL INFORMATION.         For  the  purposes  of  this  Section  21, “Confidential  Information”  means  in- formation delivered to a Purchaser by or on behalf of the Company or any Subsidiary in  connection with the transactions contemplated by or otherwise pursuant to this Agreement  that is proprietary in nature and that was clearly marked or labeled or otherwise adequately  identified when received by a Purchaser as being confidential information of the Company  or  such  Subsidiary,  provided  that  such  term  does  not  include  information  that  (a) was  publicly  known  or  otherwise  known  to  a  Purchaser  prior  to  the  time  of  such  disclosure,  (b) subsequently becomes publicly known through no act or omission by a Purchaser or any  person acting on its behalf, (c) otherwise becomes known to a Purchaser other than through  disclosure  by  the  Company  or  any  Subsidiary  or  (d)  constitutes  financial  statements  delivered  to  a  Purchaser  under  Section  7.1  that  are  otherwise  publicly  available.   Each  Purchaser  and  each  holder  will  maintain  the  confidentiality  of  such  Confidential  Information in accordance with procedures adopted by a Purchaser in good faith to protect  confidential  information  of  third  parties  delivered  to  such  Purchaser,  provided  that  each  Purchaser  and  each  holder  may  deliver  or  disclose  Confidential  Information  to  (i) its  directors, officers, employees, agents, attorneys and affiliates (to the extent such disclosure  reasonably relates to the administration of the investment represented by its Note), (ii) its  financial  advisors  and  other  professional  advisors  who  agree  to  hold  confidential  the  Confidential  Information  substantially  in  accordance  with  the  terms  of  this  Section  21,  (iii) any other holder of any Note, (iv) any Institutional Investor to which it may sell or offer  to sell such Note or any part thereof or any participation therein (if such Person has agreed  in writing prior to its receipt of such Confidential Information to be bound by the provisions  of this Section 21), (v) any Person from which it may offer to purchase any security of the  Company  (if  such  Person  has  agreed  in  writing  prior  to  its  receipt  of  such  Confidential  Information  to  be  bound  by  the  provisions  of  this  Section 21),  (vi) any  federal  or  state  regulatory authority having jurisdiction over it, (vii) the NAIC or any similar organization,  or  any  nationally  recognized  rating  agency  that  requires  access  to  information  about  its  investment portfolio or (viii) any other Person to which such delivery or disclosure may be  necessary  or  appropriate  (w) to  effect  compliance  with  any  law, rule,  regulation  or order  applicable to it, (x) in response to any subpoena or other legal process, (y) in connection  with any litigation to which it is a party or (z) if an Event of Default has occurred and is  continuing,  to  the  extent  it  may  reasonably  determine such delivery and disclosure  to  be  necessary or appropriate in the enforcement or for the protection of the rights and remedies  under its Note and this Agreement.     22.   MISCELLANEOUS.   22.1.  Successors and Assigns.         All covenants and other agreements contained in this Agreement by or on behalf of  any  of  the  parties  hereto  bind  and  inure to the benefit of  their respective successors and  assigns  (including,  without  limitation,  any  subsequent  holder  of  a  Note)  whether  so  expressed or not, except that (x) subject to Section 10.1, the Company may not assign or  otherwise transfer any of its rights or obligations hereunder or under the Notes without the                                      34  





 






prior  written  consent  of  each  holder  and  (y)  in  the  absence  of  the  existence  and  the  continuation of an Event of Default, no Purchaser may assign any of its right, title or interest  in and to any Note without the consent of the Company (not to be unreasonably withheld,  conditioned or delayed).  Any assignee of the Purchaser or any other holder shall execute a  joinder to this Agreement.   22.2.  Accounting Terms.         All  accounting  terms  used  herein  which  are  not  expressly  defined  in  this  Agreement  have  the  meanings  respectively  given  to  them  in  accordance  with  GAAP.   Except as otherwise specifically provided herein, (i) all computations made pursuant to  this Agreement shall be made in accordance with GAAP, and (ii) all financial statements  shall  be prepared in  accordance with  GAAP.  For purposes of determining compliance  with  this  Agreement  (including Section  9, Section 10, Section 11 and the definition of  “Indebtedness”), any election by the Company to measure any financial liability using fair  value  (as  permitted  by  Financial  Accounting  Standards  Board  Accounting  Standards  Codification  Topic  No.  825-10-25  – Fair  Value  Option,  International  Accounting  Standard  39  – Financial  Instruments:  Recognition  and  Measurement  or  any  similar  accounting standard) shall be disregarded and such determination shall be made as if such  election had not been made.   22.3.  Payments Due on Non-Business Days.         Anything  in  this  Agreement  or  the  Notes  to  the  contrary  notwithstanding,  any  payment of principal of or interest on the Notes that is due on a date other than a Business  Day shall be made on the next succeeding Business Day without including the additional  days elapsed in the computation of the interest payable on such next succeeding Business  Day.   22.4.  Severability.         Any  provision  of  this  Agreement  that  is  prohibited  or  unenforceable  in  any  jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or  unenforceability  without  invalidating  the  remaining  provisions  hereof,  and  any  such  prohibition or unenforceability in any jurisdiction shall (to the full extent permitted by law)  not invalidate or render unenforceable such provision in any other jurisdiction.   22.5.  Construction.         Each covenant contained herein shall be construed (absent express provision to the  contrary) as being independent of each other covenant contained herein, so that compliance  with any one covenant shall not (absent such an express contrary provision) be deemed to  excuse compliance with any other covenant.  Where any provision herein refers to action to  be  taken  by  any  Person,  or  which  such Person is prohibited from taking, such provision  shall be applicable whether such action is taken directly or indirectly by such Person.         Defined  terms  herein  shall  apply  equally  to  the  singular  and  plural  forms  of  the                                      35  





 






terms  defined.   Whenever  the  context  may  require,  any  pronoun  shall  include  the  corresponding masculine, feminine and neuter forms.  The words “include,” “includes” and  “including” shall be deemed to be followed by the phrase “without limitation.”  The word  “will” shall be construed to have the same meaning and effect as the word “shall.”  Unless  the  context  requires  otherwise  (a) any  definition  of  or  reference  to  any  agreement,  instrument  or  other  document  herein  shall  be  construed  as  referring  to  such  agreement,  instrument or other document as from time to time amended, supplemented or otherwise  modified (subject to any restrictions on such amendments, supplements or modifications set  forth  herein),  (b) subject  to  Section  22.1,  any  reference  herein  to  any  Person  shall  be  construed to include such Person’s successors and assigns, (c) the words “herein,” “hereof”  and “hereunder,” and words of similar import, shall be construed to refer to this Agreement  in its entirety and not to any particular provision hereof, (d) all references herein to Sections  and Schedules shall be construed to refer to Sections of, and Schedules to, this Agreement,  and (e) any reference to any law or regulation herein shall, unless otherwise specified, refer  to such law or regulation as amended, modified or supplemented from time to time.   22.6.  Counterparts.         This  Agreement  may  be  executed  in  any  number  of  counterparts,  each  of  which  shall  be  an  original  but  all  of  which  together  shall  constitute  one  instrument.   Each  counterpart  may  consist  of  a  number  of  copies  hereof,  each  signed  by  less  than  all,  but  together signed by all, of the parties hereto.   22.7.  Governing Law.         This  Agreement  shall  be  construed  and  enforced  in  accordance  with,  and  the  rights of the parties shall be governed by, the law of the State of New York excluding  choice-of-law  principles  of  the  law  of  such  State  that  would  permit  or  require  the  application of the laws of a jurisdiction other than such State.   22.8.  Jurisdiction and Process; Waiver of Jury Trial.         (a)   The Company irrevocably submits to the non-exclusive jurisdiction of any  New York State or federal court sitting in the Borough of Manhattan, The City of New  York, over any suit, action or proceeding arising out of or relating to this Agreement or  the Notes.  To the fullest extent permitted by applicable law, the Company irrevocably  waives and agrees not to assert, by way of motion, as a defense or otherwise, any claim  that it is not subject to the jurisdiction of any such court, any objection that it may now or  hereafter have to the laying of the venue of any such suit, action or proceeding brought in  any such court and any claim that any such suit, action or proceeding brought in any such  court has been brought in an inconvenient forum.        (b)  The Company agrees, to the fullest extent permitted by applicable law, that a  final  judgment  in  any  suit,  action  or  proceeding  of  the  nature  referred  to  in  Section  22.8(a) brought in any such court shall be conclusive and binding upon it subject to rights  of appeal, as the case may be, and may be enforced in the courts of the United States of  America or the State of New York (or any other courts to the jurisdiction of which it or                                      36  





 






any of its assets is or may be subject) by a suit upon such judgment.        (c)  The Company consents to process being served by or on behalf of any holder  of a Note in any suit, action or proceeding of the nature referred to in Section 22.8(a) by  mailing  a  copy  thereof  by  registered,  certified,  priority  or  express  mail  (or  any  substantially  similar  form  of  mail),  postage  prepaid,  return  receipt  or  delivery  confirmation requested, to it at its address specified in Section 20 or at such other address  of  which  such  holder  shall  then  have  been  notified  pursuant  to  said  Section.   The  Company  agrees  that  such  service  upon  receipt  (i) shall  be  deemed  in  every  respect  effective service of process upon it in any such suit, action or proceeding and (ii) shall, to  the  fullest  extent  permitted  by  applicable  law,  be  taken  and  held  to  be  valid  personal  service  upon  and  personal  delivery  to  it.   Notices  hereunder  shall  be  conclusively  presumed  received  as  evidenced  by  a  delivery  receipt  furnished  by  the  United  States  Postal Service or any reputable commercial delivery service.        (d)  Nothing in this Section 22.8 shall affect the right of any holder of a Note to  serve process in any manner permitted by law, or limit any right that the holder of such  Note may have to bring proceedings against the Company in the courts of any appropriate  jurisdiction or to enforce in any lawful manner a judgment obtained in one jurisdiction in  any other jurisdiction.        (e)  THE PARTIES HERETO HEREBY WAIVE TRIAL BY JURY IN ANY ACTION BROUGHT  ON  OR  WITH  RESPECT  TO  THIS AGREEMENT,  THE NOTES  OR  ANY  OTHER  DOCUMENT  EXECUTED IN CONNECTION HEREWITH OR THEREWITH.    22.9.  No Recourse Against Others.           This Agreement, the Notes and the obligations hereunder and thereunder are fully  recourse  to  the  Company.   No  director,  officer,  employee,  incorporator,  Affiliate  or  stockholder  of  the  Company shall have  any liability  for  any obligations of the Company  under the Notes or this Agreement or for a claim based on, in respect of, or by reason of,  such obligations or their creation.  Each holder of a Note, by accepting such Note, waives  and releases all such liability.  The waiver and release are part of the consideration for the  issuance of the Notes.                                *    *    *    *    *                                       37  





 






 





 






The foregoing is hereby  agreed to as of the  date hereof.                                       ELANUS  CAPITAL  INVESTMENTS                                      MASTER SP SERIES 3                                      By                                            Matthew Moniot                                      Its:  Sole Director                                       38  





 






                                                           SCHEDULE A                   INFORMATION RELATING TO PURCHASERS                                                          Principal Amount of   Name and Address of Purchasers                         Note to be Purchased   Elanus Capital Investments Master SP Series 3                       $10,500,000     (1)  All payments by wire transfer of immediately available funds to:   The Bank of New York Mellon  ABA #: 021000018  Account Number 9932228400  Account Name: ELANUS CAP INVS MSTR SP SER 3               with sufficient information              to identify the source and              application of such funds.     (2)  All notices of payments and written confirmations of such wire transfers:   Address:  c/o Elanus Capital Management LLC (the manager)  180 Varick Street  Suite 416  New York, NY 10014  Fax:  917-398-5790  Contacts: Matthew Moniot, David Michael and Ling Marquardt  Email: mmoniot@elanuscapital.com; dmichael@elanuscapital.com; and  lmarquardt@elanuscapital.com      (3)  All other communications:   Address:  c/o Elanus Capital Management LLC (the manager)  180 Varick Street  Suite 416  New York, NY 10014  Fax:  917-398-5790  Contacts:  Matthew Moniot, David Michael and Ling Marquardt  Email:  mmoniot@elanuscapital.com; dmichael@elanuscapital.com; and  lmarquardt@elanuscapital.com                                      1                                  Schedule A  25598028  





 






                                                           SCHEDULE A    With a copy to:   Andrew J. Young  CLIFFORD CHANCE US LLP   31 West 52nd Street  New York, NY 10019  Fax:  212-878-8375  Email:  andrew.young@cliffordchance.com                                      2                                  Schedule A  25598028  





 






                                                           SCHEDULE B                               DEFINED TERMS        As used herein, the following terms have the respective meanings set forth below or  set forth in the Section hereof following such term:               “Adverse  Development  Cover”  means  the  Swiss  Re  Adverse  Development Cover as described in the document “ADC Binding Quote Conifer 2017 08  31.               “Affiliate” means, at any time, and with respect to any Person, (a) any other  Person that at such time directly or indirectly through one or more intermediaries Controls,  or is Controlled by, or is under common Control with, such first Person, and (b) any Person  beneficially owning or holding, directly or indirectly, 10% or more of any class of voting or  equity interests of the Company or any Subsidiary or any Person of which the Company and  its  Subsidiaries  beneficially  own  or  hold,  in  the  aggregate,  directly or  indirectly,  10%  or  more of any class of voting or equity interests.  As used in this definition, “Control” means  the possession,  directly  or indirectly, of the power to direct  or cause the direction of the  management and policies of a Person, whether through the ownership of voting securities,  by contract or otherwise.  Unless the context otherwise clearly requires, any reference to an  “Affiliate” is a reference to an Affiliate of the Company.               “Agreement” means this Amended and Restated Note Purchase Agreement,  including all Schedules attached to this Agreement.               “Amendment Agreement” is defined in Section 1(c).               “Anti-Corruption Laws”  means any law or regulation in a U.S. or any  non-U.S. jurisdiction regarding bribery or any other corrupt activity, including the U.S.  Foreign Corrupt Practices Act and the U.K. Bribery Act 2010.               “Anti-Money Laundering Laws” means any law or regulation in a U.S.  or  any  non-U.S.  jurisdiction  regarding  money  laundering,  drug  trafficking,  terrorist- related activities or other money laundering predicate crimes, including the Currency and  Foreign Transactions Reporting Act of 1970 (otherwise known as the Bank Secrecy Act)  and the USA PATRIOT Act.               “Blocked Person” means (a) a Person whose name appears on the list of  Specially Designated Nationals and Blocked Persons published by OFAC, (b) a Person,  entity, organization, country or regime that is blocked or a target of sanctions that have  been  imposed  under  U.S.  Economic  Sanctions  Laws  or  (c)  a  Person  that  is  an  agent,  department or instrumentality of, or is otherwise beneficially owned by, controlled by or  acting  on  behalf  of,  directly  or  indirectly,  any  Person,  entity,  organization,  country  or  regime described in clause (a) or (b).                                      1                                  Schedule B  25598028  





 






            “Business Day” means any day other than a Saturday, a Sunday or a day on  which commercial banks in New York City or Detroit, Michigan are required or authorized  to be closed.               “Capital Lease” means, at any time, a lease with respect to which the lessee  is or is required concurrently to recognize the acquisition of an asset and the incurrence of a  liability in accordance with GAAP as in effect on the effective date of this Agreement.               “Closing” is defined in Section 3.               “Closing Date” is defined in Section 3.               “Code” means the Internal Revenue Code of 1986, as amended from time to  time, and the rules and regulations promulgated thereunder from time to time.               “Company” means Conifer Holdings, Inc., a Michigan corporation.               “Consolidated Indebtedness” means, as at any date of determination, the  aggregate amount of all Indebtedness of the Company and its Subsidiaries.               “Confidential Information” is defined in Section 21.               “Consolidated  Net  Income”  means  the  net  income  (or  loss)  of  the  Company and its consolidated Subsidiaries for such period, all as determined in accordance  with GAAP.               “Controlled  Entity”  means  (a) any of the Subsidiaries  of the Company  and  any  of  their  or  the  Company’s  respective  Controlled  Affiliates  and  (b)  if  the  Company has a parent company, such parent company and its Controlled Affiliates.               “Default” means an event or condition the occurrence or existence of which  would, with the lapse of time or the giving of notice or both, become an Event of Default.               “Default Rate” means that rate of interest that is 2% per annum above the  rate of interest stated in clause (a) of the first paragraph of each Note.               “Disclosure Documents” is defined in Section 5.3.               “Dividend Paying Capacity” means for any Insurance Subsidiary for any  fiscal quarter end, the greater of (i) net income of such Insurance Subsidiary for the most  recent year end or (ii) 10% of Statutory Surplus for such Insurance Subsidiary as of the last  day of the most recent quarter end, all as determined in accordance with GAAP or SAP.               “Elanus” is defined in Section 1(a).                                      2                                  Schedule B  25598028  





 






            “ERISA” means the Employee Retirement Income Security Act of 1974, as  amended from time to time, and the rules and regulations promulgated thereunder from time  to time in effect.                “ERISA  Affiliate”  means  any  trade  or  business  (whether  or  not  incor- porated) that is treated as a single employer together with the Company under section 414 of  the Code.               “Event of Default” is defined in Section 12.               “Excluded Taxes” means any of the following Taxes imposed on or with  respect to Purchaser or required to be withheld or deducted from a payment to Purchaser,  (a)  Taxes  imposed  on  or  measured  by  net  income  (however  denominated),  franchise  Taxes, and branch profits Taxes, in each case, (i) imposed as a result of such Purchaser  being  organized  under  the  laws  of,  or  having  its  principal  office  in,  the  jurisdiction  imposing such Tax (or any political subdivision thereof) or (ii) that are Taxes imposed as  a  result  of  a  present  or  former  connection  between  Purchaser  and  the  jurisdiction  imposing such Tax (other than connections arising from the Purchaser having executed,  delivered, become a party to, performed its obligations under, received payments under,  received or perfected a security interest under, engaged in any other transaction pursuant  to  or  enforced  this  Agreement,  or  sold  or  assigned  an  interest  in  the  Note  or  this  Agreement), (b) U.S. federal withholding Taxes imposed on amounts payable to or for  the  account  of  Purchaser  pursuant  to  a  law  in  effect  on  the  date  on  which  Purchaser  acquires a Note except to the extent that, pursuant to Section 18, amounts with respect to  such Taxes were payable to such Purchaser’s assignor immediately before such assignee  became  a  party  hereto,  (c)  Taxes  attributable  to  Purchaser’s  failure  to  provide  the  Company  appropriate  Tax  forms  pursuant  to  Section  6.2,  and  (d)  any  U.S.  federal  withholding Taxes imposed under FATCA.               “Exchange Act” means the Securities Exchange Act of 1934, as amended.               “Existing Note Purchase Agreement” is defined in the Preamble.               “Existing Notes” is defined in Section 1(a).               “FATCA” means Sections 1471 through 1474 of the Code, as of the date of  this  Agreement  (or  any  amended  or  successor  version),  current  or  future  regulations  or  official  interpretations  thereof  and  any  agreements  entered  into  pursuant  to  Section 1471(b)(1)  of  the  Code,  other  official  administrative  guidance  promulgated  thereunder,  any  intergovernmental  agreements  entered  into  by  the  United  States  in  connection with the implementation thereof, and any fiscal or regulatory legislation, rules or  official guidance adopted pursuant to such intergovernmental agreement.                                       3                                  Schedule B  25598028  





 






            “Fixed Charge Coverage Ratio” means, as of any date of determination, a  ratio, the numerator of which is Consolidated Net Income of the Company less net income  from Subsidiaries (to the extent included in Consolidated Net Income when applying the  equity basis of accounting, in accordance with GAAP) for the four preceding fiscal quarters  ending on such date, plus to the extent deducted in determining Consolidated Net Income,  interest  expense,  depreciation  and  amortization  expenses  (only  to  the  extent  directly  recorded  by  the  Company)  for  such  period,  plus  the  Dividend  Paying  Capacity  of  all  Insurance  Subsidiaries  plus  dividends  received  in  cash  by  the  Company  from  its  Subsidiaries during such period and the denominator of which is the sum of (A) the amount  of  all  dividends  paid  by  the  Company  to  its  shareholders  during  such  period,  (B)  all  scheduled principal and interest payments with respect to the Consolidated Indebtedness of  the Company and its Subsidiaries during such period and (C) all payments by the Company  with respect to Capital Leases during such period; provided that during an Interest Deferral  Period, the amount included in clause (B) shall exclude the amount of all deferred interest  permitted to be deferred hereunder.               “GAAP” means generally accepted accounting principles as in effect from  time to time in the United States of America.               “Governmental Authority” means               (a)   the government of                     (i)   the United States of America or any State or other political              subdivision thereof, or                     (ii)  any  jurisdiction  in  which  the  Company  or  any  Subsidiary              conducts all or any part of its business, or which asserts jurisdiction over any              properties of the Company or any Subsidiary, or               (b)   any  entity  exercising  executive,  legislative,  judicial,  regulatory  or        administrative  functions  of,  or  pertaining  to,  any such government, including  any        securities exchange and any self-regulatory organization (including the NAIC).               “Governmental Licenses” is defined in Section 5.7               “Guaranty” means, with respect to any Person, any obligation (except the  endorsement  in  the  ordinary  course  of  business  of  negotiable  instruments  for  deposit  or  collection) of such Person guaranteeing or in effect guaranteeing any indebtedness, dividend  or other obligation of any other Person in any manner, whether directly or indirectly, in- cluding (without limitation) obligations incurred through an agreement, contingent or other- wise, by such Person.               “Hedging Contract” means any foreign exchange contract, currency swap                                      4                                  Schedule B  25598028  





 






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.               “Holder”  or  “holder”  means,  with  respect  to  each  Note,  the  Person  in  whose name the Note is registered in the register maintained by the Company pursuant to  Section 14.1.               “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.              “Indemnified Taxes” means Taxes, other than Excluded Taxes, imposed  on  or  with  respect  to  any  payment  made  by  or  on  account  of  any  obligation  of  the  Company or its Subsidiaries under this Agreement and the Note.               “Insurance Licenses” is defined in Section 5.7.               “Insurance Regulatory Authority” means, with respect to any Insurance  Subsidiary,  the  insurance  department  or  similar  governmental  authority  charged  with                                      5                                  Schedule B  25598028  





 






regulating insurance companies or insurance holding companies, in its state of domicile and,  to the extent that it has regulatory authority over such Insurance Subsidiary, in each other  jurisdiction in which such Insurance Subsidiary conducts business or is licensed to conduct  business.               “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.               “Interest Deferral Period” is defined in Section 16.3.               “Interest Payment Date” is defined in Section 16.2.               “Lien”  means,  with  respect  to  any  Person,  any  mortgage,  lien,  pledge,  charge, security interest or other encumbrance, or any interest or title of any vendor, lessor,  lender or other secured party to or of such Person under any conditional sale or other title  retention agreement or Capital Lease, upon or with respect to any property or asset of such  Person (including in the case of stock, stockholder agreements, voting trust agreements and  all similar arrangements).               “Material”  means  material  in  relation  to  the  business, operations, affairs,  financial  condition,  assets,  properties,  or  prospects  of  the  Company  and  its  Subsidiaries  taken as a whole.               “Material Adverse Effect” means a material adverse effect on (a) the busi- ness, financial condition, or assets of the Company and its Subsidiaries taken as a whole, or  (b)  the  ability  of  the  Company  to  perform  its  obligations  under  this  Agreement  and  the  Notes, or (c) the validity or enforceability of this Agreement or the Notes.               “Maturity Date” is defined in the first paragraph of each Note.               “NAIC” means  the  National  Association  of  Insurance  Commissioners  or  any successor thereto.               “Net Worth” means as of any date of determination shareholders’ equity,  including all common stock, Preferred Stock and any minority interests of the Company and  its consolidated Subsidiaries as of such date as determined in accordance with GAAP as in  effect on the date of this Agreement.               “Note” is defined in Section 1.               “OFAC” means the Office of Foreign Assets Control of the United States  Department of the Treasury.                                      6                                  Schedule B  25598028  





 






            “OFAC Sanctions Program” means any economic or trade sanction that  OFAC  is  responsible  for  administering  and  enforcing.   A  list  of  OFAC  Sanctions  Programs    may      be     found     at    http://www.treasury.gov/resource- center/sanctions/Programs/Pages/Programs.aspx.               “Officer’s Certificate” means a certificate of a Senior Financial Officer or  of any other officer of the Company whose responsibilities extend to the subject matter of  such certificate.               “PBGC” means the Pension Benefit Guaranty Corporation referred to and  defined in ERISA or any successor thereto.               “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(f),  (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 obligations set forth in clauses (i) and (ii) has been                                      7                                  Schedule B  25598028  





 






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.               “Person”  means  an  individual,  partnership,  corporation,  limited  liability  company,  association,  trust,  unincorporated  organization,  or  a  government  or  agency  or  political subdivision thereof.               “Plan”  means  an  “employee  benefit  plan”  (as  defined  in  section  3(3)  of  ERISA) that is or, within the preceding five years, has been established or maintained, or to  which contributions are or, within the preceding five years, have been made or required to  be made, by the Company or any ERISA Affiliate or with respect to which the Company or  any ERISA Affiliate may have any liability.               “Preferred Stock” means any class of capital stock of a corporation that is  preferred over any other class of capital stock of such corporation as to the payment of divi- dends or the payment of any amount upon liquidation or dissolution of such corporation.               “Proceeding” is defined in Section 17.2(b).               “Property”  or “Properties”  means,  unless  otherwise  specifically  limited,  real or personal property of any kind, tangible or intangible, choate or inchoate.               “Purchaser” or “Purchasers” means  each  of  the  purchasers  that  has  executed and delivered this Agreement to the Company and such  Purchaser’s successors  and  assigns  (so  long  as  any  such  assignment  complies  with  Section  22.1),  provided,  however, that any Purchaser of a Note that ceases to be the registered holder or a beneficial  owner  (through  a  nominee)  of  such  Note  as  the  result  of  a  transfer  thereof  pursuant  to  Section 14.2 shall cease to be included within the meaning of “Purchaser” of such Note for  the purposes of this Agreement upon such transfer.              “Registration  Statement”  means  collectively,  (i)  the  Registration  Statement  on  Form  S-1  (Registration  No.  333-226778)  filed  by  the  Company  with  the  Securities  and  Exchange  Commission  under  the  Securities  Act  of  1933,  as  amended,  on  August 10, 2018, and each amendment thereto, and (ii) the Registration Statement on Form  S-1 filed by the Company with the Securities and Exchange Commission on September 19,  2018 pursuant to Rule 462(b).               “Regulatory Agency” means any state board, commission, department or  other  regulatory  body  which  regulates  insurance  companies  or  insurance  holding                                      8                                  Schedule B  25598028  





 






companies.              “Required Holders” means, at any time, the holders of at least 50% of the  principal amount of the Notes at the time outstanding (exclusive of Notes then owned by the  Company or any of its Affiliates).               “Responsible Officer” means  any Senior Financial Officer and any other  officer of the Company with responsibility for the administration of the relevant portion of  this Agreement.               “SAP”  means,  with  respect  to  any  Insurance  Subsidiary,  the  statutory  accounting  practices  and  procedures,  prescribed  or  permitted,  by  the  relevant  Insurance  Regulatory Authority of its state of domicile.               “Securities Act” means the Securities Act of 1933, as amended from time  to time.               “Senior Debt” is defined in Section 17.1.               “Senior  Financial  Officer”  means  the  chief  financial  officer,  principal  accounting officer, treasurer or controller of the Company.               “Senior  Lender”  means  The  Huntington  National  Bank  and  any  other  issuer of Senior Debt.               “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.               “Senior Notes” is defined in Section 1(b).               “Solvent” means, with respect to any Person as of any date of determination,  that, as of such date, (a) the value of the assets of such Person (both at fair value and present  fair  saleable  value)  is  greater  than  the  total  amount  of  liabilities  (including  contingent,  unliquidated  and  probable  liabilities)  of  such  Person,  (b)  such  Person  is  able  to  pay  all  liabilities  of  such  Person  as  such  liabilities  mature  and  (c)  such  Person  does  not  have  unreasonably small capital with which to conduct its business.  In computing the amount of  contingent or unliquidated liabilities at any time, such liabilities shall be computed at the  amount that, in light of all the facts and circumstances existing at such time, represents the  amount that can reasonably be expected to become an actual or matured liability.                “State  Sanctions  List”  means  a  list  that  is  adopted  by  any  state  Governmental Authority within the United States of America pertaining to Persons that  engage in investment or other commercial activities in Iran or any other country that is a                                      9                                  Schedule B  25598028  





 






target of economic sanctions imposed under U.S. Economic Sanctions Laws.               “Statutory  Surplus”  of  any  Person  means  the  statutory  surplus  of  such  Person computed in the manner required for its annual statement of condition and affairs  prepared in accordance with SAP.               “Subordinated  Debt”  means  all  Indebtedness  of  the  Company  for  borrowed  money  which  is  subordinated  to  the  Company’s  Indebtedness  to  the  Senior  Lender pursuant to a Subordination Agreement.               “Subordination  Agreements”  means  the  subordination  agreements  executed from time to time by the Required Holders in favor of the Senior Lender in each  case in form and substance acceptable to the Senior Lender and the Required Holders.               “Subsidiary” means, as to any Person, any corporation, association or other  business entity in which such Person or one or more of its Subsidiaries or such Person and  one or more of its Subsidiaries owns sufficient equity or voting interests to enable it or them  (as a group) ordinarily, in the absence of contingencies, to elect a majority of the directors  (or  Persons  performing  similar  functions)  of  such  entity,  and  any  partnership  or  joint  venture if more than a 50% interest in the profits or capital thereof is owned by such Person  or one or more of its Subsidiaries or such Person and one or more of its Subsidiaries (unless  such  partnership  can  and  does  ordinarily  take  major  business  actions  without  the  prior  approval of such Person or one or more of its Subsidiaries).  Unless the context otherwise  clearly  requires,  any  reference  to  a  “Subsidiary”  is  a  reference  to  a  Subsidiary  of  the  Company.               “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  developmental  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.               “Taxes” means all means all present or future taxes, levies, imposts, duties,  deductions,  withholdings  (including  backup  withholding),  assessments,  fees  or  other  charges imposed by any Governmental Authority, including any interest, additions to tax or  penalties applicable thereto.                                      10                                  Schedule B  25598028  





 






            “Total  Capital”  means  (i)  the  Consolidated  Indebtedness  plus  (ii)  Net  Worth.               “USA  PATRIOT  Act”  means  United  States  Public  Law  107-56,  Uniting  and  Strengthening  America  by  Providing  Appropriate  Tools  Required  to  Intercept  and  Obstruct  Terrorism  (USA  PATRIOT  ACT)  Act  of  2001  and  the  rules  and  regulations  promulgated thereunder from time to time in effect.               “U.S.  Economic  Sanctions  Laws”  means  those  laws,  executive  orders,  enabling legislation or regulations administered and enforced by the United States pursuant  to  which  economic  sanctions  have  been  imposed  on  any  Person,  entity,  organization,  country or regime, including the Trading with the Enemy Act, the International Emergency  Economic Powers Act, the Iran Sanctions Act, the Sudan Accountability and Divestment  Act and any other OFAC Sanctions Program.                                       11                                  Schedule B  25598028  





 






                                                              EXHIBIT 1         This instrument and the rights and obligations evidenced hereby are subordinate  in right of payment to the prior payment in full, in the manner and to the extent set forth  in that certain Amended and Restated Note Purchase Agreement (as amended, restated,  amended and restated, modified or supplemented from time to time, the “Note Purchase  Agreement”) dated as of September 25, 2018, among Conifer Holdings, Inc. (“Issuer”)  and the Purchasers party thereto, to the Senior Debt (as such term is defined in the Note  Purchase  Agreement)  and  each  holder  of  this  instrument,  by  its  acceptance  hereof,  irrevocably  agrees  to  be  bound  by  the  subordination  provisions  set  forth  in  the  Note  Purchase Agreement.                              [FORM OF NOTE]                          CONIFER HOLDINGS, INC.           7.5%/12.5% SUBORDINATED NOTE DUE SEPTEMBER 30, 2038   No. [_____]                                        As of September 25, 2018  $[_______]               FOR VALUE RECEIVED, the undersigned, CONIFER HOLDINGS, INC.  (herein called the “Company”), a corporation organized and existing under the laws of the  State  of Michigan, hereby promises to  pay  to  [____________], or registered assigns, the  principal  sum  of  [_____________________]  DOLLARS  on  September  30,  2038  (the  “Maturity Date”) with interest (computed on the basis of a 360-day year of twelve 30-day  months). Capitalized terms used herein and not otherwise defined shall have the meaning  ascribed to such term in the Note Purchase Agreement.                From and including the date of issuance of  this Note interest shall accrue  and be payable at a rate of 7.5% per annum through and including September 30, 2023, and  thereafter  interest  shall  accrue  and  be  payable  at  a  rate  of  12.5%  per  annum  until  the  Maturity Date.               Interest shall be payable quarterly, on the last Business Day of December,  March,  June  and  September  in  each  year,  commencing  with  the  last  Business  Day  of  December 2018, until the principal hereof shall have become due and payable; provided that  the  Issuer  may  defer  any  interest  payments  due  hereunder  to  the  extent  (i)  permitted  by  Section 16.3 of the Note Purchase Agreement, and (ii) permitted by law on any overdue  payment (including any overdue prepayment) of principal (and any premium due thereon),  any  overdue  payment  of  interest  payable  quarterly  as  aforesaid  (or,  at  the  option  of  the  registered holder hereof, on demand) and during the continuance of an Event of Default;  provided further that, with respect to any such unpaid amounts during the continuance of  Event of Default, interest shall be payable at a rate per annum from time to time equal to 2%  per annum greater than the rate otherwise payable hereunder.               Payments of principal of and premium and interest on with respect to this                                      1  25598028  





 






Note are to be made in lawful money of the United States of America at [   ] or at such other  place as the holder of this Note shall have designated by written notice to the Company as  provided in the Note Purchase Agreement referred to below.               This Note is issued pursuant to the Amended and Restated Note Purchase  Agreement,  dated  as  of  September  25,  2018  (as  from  time  to  time  amended,  the  “Note  Purchase  Agreement”), between  the  Company and the  Purchasers named therein and is  entitled to the benefits thereof.                 This Note is subject to optional prepayment at the times and on the terms  specified in the Note Purchase Agreement, but not otherwise.               If an Event of Default, as defined in the Note Purchase Agreement, occurs  and is continuing, the principal of this Note may be declared or otherwise become due and  payable  in  the  manner,  at  the  price  and  with  the  effect  provided  in  the  Note  Purchase  Agreement.               This Note amends and restates in full that certain 8% Subordinated Note due  September 29, 2032, dated as of September 29, 2017, in the original principal amount of  $30,000,000,  made  by  the  Company  in  favor  of  Elanus  Capital  Investments  Master  SP  Series 3 (the “Prior Note”), and evidences all amounts outstanding thereunder as of the date  hereof as well as amounts hereafter incurred as described above, which Prior Note shall,  from  and  after  the  date  hereof,  be  of  no  further  force  and  effect.   This  Note is given in  substitution for, and not in payment or satisfaction of, such Prior Note, and is not intended  to constitute a novation of the Prior Note.               This Agreement shall be construed and enforced in accordance with, and the  rights  of  the  parties  shall  be  governed  by,  the  law  of  the  State  of  New  York  excluding  choice-of-law  principles  of  the  law  of  such  State  that  would  permit  or  require  the  application of the laws of a jurisdiction other than such State.                                             CONIFER HOLDINGS, INC.                                             By_________________________                                               [Title]    25598028  





 






                                                                SCHEDULE 5.3                                OTHER DOCUMENTS      1. Swiss Re’s “ADC Binding Quote Conifer 2017 08 31”                                    SCHEDULE 5.3  29150461  





 






                                                                SCHEDULE 5.5                              i.   LIST OF SUBSIDIARIES         Name         Jurisdiction of Percentage of Shares  Percentage of Shares                     Organization    owned by Conifer      owned by Subsidiary                                       Holdings, Inc.  American Colonial Florida        100%                 N/A  Insurance Services   Conifer Insurance Michigan       100%                 N/A  Company   Red Cedar Insurance D.C.         100%                 N/A  Company   Sycamore Insurance Michigan      100%                 50% ownership of Venture  Agency, Inc.                                          Agency Holdings, Inc. and                                                        50% ownership of Channel                                                        Oak General Agency, Inc.   White Pine        Michigan       100%                 N/A  Insurance Company                                ii. LIST OF AFFILIATES     Name      Jurisdiction  Percentage of   Third Party    Percentage of Shares                   of       Shares owned      Owner       owned by Third Party              Organization   by Sycamore                              Insurance                             Agency, Inc.  Channel Oak Michigan     50%             American     50%  General                                  Insurance  Agency, Inc.                             Holdings,                                           LLC  Venture     Michigan     50%             John C. Bures  50%  Agency  Holdings,  Inc.                                    SCHEDULE 5.5  29150461  





 






          iii. LIST OF COMPANY’S DIRECTORS AND SENIOR OFFICERS                 Name                               Title  James G. Petcoff                  Director /Chairman / CEO   Brian J. Roney                    President   Nicholas J. Petcoff               Director / EVP / Secretary  Harold J. Meloche                 Chief Financial Officer / Treasurer  Melina Eichner                    Controller  Bradford T. Lyons                 Senior Vice President  Brian J. Rennell                  Senior Vice President Claims  Andrew D. Petcoff                 Senior Vice President of Personal Lines  Jason E. Brawner                  Chief Information Officer / CISO  Richard J. Fiato                  Senior Vice President Corporate Legal  Rochelle Kaplan-Rudolph           Assistant Secretary / Corporate Legal  Hilary Petcoff                    Vice President ERM  Jeffrey A. Hakala                 Director  Mark R. McCammon                  Director  Jorge J. Morales                  Director  Isolde G. O'Hanlon                Director  Joseph D. Sarafa                  Director  Richard J. Williams, Jr.          Director                                    SCHEDULE 5.5  29150461  





 






                                                                 SCHEDULE 5.6                          LIST OF FINANCIAL STATEMENTS      1.  The Company’s FS 2015 S-1     2. The Company’s FS 2015 10-K     3. The Company’s FS 2016 Q1 10-Q     4. The Company’s FS 2016 Q2 10-Q     5. The Company’s FS 2016 Q3 10-Q     6. The Company’s FS 2016 10-K     7. The Company’s FS 2017 Q1 10-Q     8. The Company’s FS 2017 Q1 Consolidating     9. The Company’s FS 2017 Q2 10-Q     10. The Company’s FS 2017 Q2 Consolidating     11. The Company’s FS 2017 10-K     12. The Company’s FS 2018 Q1 10-Q     13. The Company’s FS 2018 Q2 10-Q     14. Conifer Insurance Company Annual Statutory Statement 2015     15. Conifer Insurance Company Q1 2016 Statutory Statement     16. Conifer Insurance Company Q2 2016 Statutory Statement     17. Conifer Insurance Company Q3 2016 Statutory Statement     18. Conifer Insurance Company Annual Statutory Statement 2016     19. Conifer Insurance Company Q1 2017 Statutory Statement     20. Conifer Insurance Company Q2 2017 Statutory Statement     21. Conifer Insurance Company Annual Statutory Statement 2017     22. Conifer Insurance Company Q1 2018 Statutory Statement     23. Conifer Insurance Company Q2 2018 Statutory Statement     24. White Pine Insurance Company Annual Statutory Statement 2015     25. White Pine Insurance Company Q1 2016 Statutory Statement     26. White Pine Insurance Company Q2 2016 Statutory Statement     27. White Pine Insurance Company Q3 2016 Statutory Statement     28. White Pine Insurance Company Annual Statutory Statement 2016     29. White Pine Insurance Company Q1 2017 Statutory Statement     30. White Pine Insurance Company Q2 2017 Statutory Statement     31. White Pine Insurance Company Annual Statutory Statement 2017     32. White Pine Insurance Company Q1 2018 Statutory Statement     33. White Pine Insurance Company Q2 2018 Statutory Statement                                    SCHEDULE 5.6  29150461  





 






                                                                                                              SCHEDULE 5.15                                                         PERMITTED LIENS         JURISDICTION     DATE FILED      FILE NUMBER          DEBTOR         SECURED PARTY       COLLATERAL/STATUS       Conifer Holdings,       Inc.      Michigan Department 1/2/14       2014000581-1      Conifer Holdings, Inc. U.S. Bank Equipment 1 Copiers E656 SCZIC16516; 1        of State                                                              Finance, a division of Copiers E3055C SC7KC34685;                                                                             U.S. Bank National 1 Copiers-CPC E3055C                                                                             Association        SC7KC34685-C; together with                                                                                                all replacements, parts, etc.       Michigan Department 6/30/14      2014095192-9      Conifer Holdings, Inc. NEC Financial  Dell Server together with all       of State                                                              Services, LLC      accessories, additions and                                                                                                attachments, etc.       Michigan Department 10/10/14     2014147336-8      Conifer Holdings, Inc. U.S. Bank Equipment 1 Copiers ESTUDIO3055C       of State                                                              Finance            SC7FD69418; 1 Copiers-CPC                                                                                                ESTUDIO3055C SC7FD69418-                                                                                               C; together with all                                                                                                replacements, parts, etc.       Michigan Department 3/17/15      2015036123-5      Conifer Holdings, Inc. U.S. Bank Equipment 1 Copiers E1105 JFJD10335;       of State                                                              Finance            together with all replacements,                                                                                                parts, etc.       Michigan Department 11/2/15      2015152363-4      Conifer Holdings, Inc. U.S. Bank Equipment 1 Copiers E5560CG       of State                                                              Finance            SSLD900175; 1  Copiers-CPC                                                                                                E5560CG SSLD900175-C;                                                                                                together with all replacements,                                                                                                parts, etc.       Michigan Department 8/31/16      20160908000774-6  Conifer Holdings, Inc. U.S. Bank Equipment 1 Copiers E5055AC       of State                                                              Finance            SCFGF42184; 1  Copiers                                                          SCHEDULE 5.15  29150461  





 






      JURISDICTION     DATE FILED      FILE NUMBER          DEBTOR         SECURED PARTY       COLLATERAL/STATUS                                                                                                E5055AC SCFGF42126; 1                                                                                                Copiers-CPC E5055AC                                                                                                SCFGF42184-C; 1 Copiers-CPC                                                                                                E5055AC SCFGF42126-C;                                                                                                together with all replacements,                                                                                                parts, etc.       Michigan Department 12/18/17     20171218000834-7  Conifer Holdings, Inc. NEC Financial  (41) Dell Precision 5000 Series       of State                                                              Services, LLC      Laptops, (24) DELL Optiplex                                                                                                7050 Micro PCs, (55) Microsoft                                                                                                Office 2016 Pro Plus Licenses                                                                                                together with all accessories,                                                                                                additions and attachments                                                                                                thereto, etc.       Michigan Department 1/30/18      20180130001094-9  Conifer Holdings, Inc. U.S. Bank Equipment 1 Copiers E6506act       of State                                                              Finance            SCHKG23465; 1 Copiers0CPC                                                                                                E6506ACT SCHKG23465-C; 1                                                                                                Copiers E8508A SCIKG24499;                                                                                                together with all replaces, parts,                                                                                                etc.                                                           SCHEDULE 5.13  29150461  





 






                                                                SCHEDULE 10.2                     LIST OF ALL OUTSTANDING INDEBTEDNESS   None.                                    SCHEDULE 10.2  29150461