EXHIBIT 11.11
ELEVENTH AMENDMENT TO CREDIT AGREEMENT
PERTAINING TO CREDIT FACILITY
ESTABLISHED
IN FAVOUR OF
KINGSWAY FINANCIAL SERVICES INC.
AND KINGSWAY U.S. FINANCE PARTNERSHIP
Exhibit 10.11
THIS ELEVENTH AMENDMENT TO CREDIT AGREEMENT, dated as of August 31, 2003,
is among:
KINGSWAY FINANCIAL SERVICES INC.
AND KINGSWAY U.S. FINANCE PARTNERSHIP
As Borrowers
AND
The Lenders named herein as Lenders
AND
LASALLE BANK NATIONAL ASSOCIATION,
As Administrative Agent and Co-Syndications Agent
AND
CANADIAN IMPERIAL BANK OF COMMERCE,
As Co-Syndications Agent and Documentation Agent
WHEREAS:
1. Pursuant to a Credit Agreement made as of the 23rd day of February, 1999
among the parties hereto, as subsequently amended (the "Credit Agreement"), the
Lenders and the Agents established certain credit facilities in favour of the
Borrowers:
2. The Agents, the Lenders and the Borrowers have agreed to amend certain
terms and conditions of the Credit Agreement, in the manner hereinafter set
forth;
FOR VALUABLE CONSIDERATION, the parties agree as follows:
ARTICLE 1
AMENDMENT TO INTERPRETATION
1.01 Amendment to the Definition of Funded Debt. Sub-section 1.01(41) of
the Credit Agreement is hereby amended by deleting it in its entirety and
replacing it with the following:
"Funded Debt" means the aggregate indebtedness of the Borrowers on a
Consolidated basis including, without limitation: (i) Capitalized Lease
Obligations, (ii) Purchase Money Obligations, (iii) contingent liabilities under
outstanding letters of credit (excluding undrawn letters of credit the
beneficiary of which is a Borrower, Guarantor, any Subsidiary of a Borrower,
State National Specialty Insurance Company Inc., State and County Mutual
Insurance Company or General Reinsurance Corporation), and (iv) all principal
and interest and all fees incurred in respect of such indebtedness; and, for
greater certainty, for the purposes of calculating the ratio of Total Funded
Debt to Total Capitalization pursuant to sub-section 8.02(1), "Funded Debt"
shall exclude the gross proceeds of the offerings of the Trust I Debentures, the
Trust II Debentures, the Second Round Trust Pool Debentures, the Third Round
Trust Pool Debentures and the Fourth Round Trust Pool Debentures."
1.02 Additional Permitted Indebtedness. Section 1.01(84) of the Credit
Agreement is hereby amended by:
(a) deleting sub-section 1.10(84)(xv) in its entirety and replacing it with
the following:
"Indebtedness in connection with the issuance of preferred securities
by a statutory trust to a pooling vehicle sponsored by Sandler X'Xxxxx &
Partners L.P. (the "Second Round Trust Pool Securities") provided that (i)
there shall be no cash redemption of the Second Round Trust Pool Securities
without the prior written consent of the Majority of the Lenders; (ii) a
Default or an Event of Default under this Agreement is not a default or
event of default in respect of such indebtedness and acceleration of the
Outstanding Obligations does not result in an acceleration of the
obligations under the debentures (the "Second Round Trust Pool Debentures")
or the Guarantees issued in connection with the Second Round Trust Pool
Securities; (iii) no cash dividends may be paid on the Second Round Trust
Pool Securities so long as a Default or Event of Default under this
Agreement has occurred and is continuing; and (iv) the terms and conditions
of the Second Round Trust Pool Securities are otherwise satisfactory to the
Majority of the Lenders, provided that the aggregate indebtedness in
respect of the Second Round Trust Pool Debentures does not exceed US
$15,464,000."
(b) deleting the period found at the end of sub-section 1.01(84)(xviii) and
replacing such period with a semi-colon, by adding the word "and" immediately
following the semi-colon and by adding the following as sub-section
1.01(84)(xix):
"(xix) Indebtedness of the Borrowers in connection with the issuance,
pursuant to up to four transactions, of preferred securities to one or more
pooling vehicles by any one of up to four statutory trusts (the "Fourth
Round Trust Pool Securities"); provided that:
(i) there shall be no cash redemption of any of the Fourth Round
Trust Pool Securities without the prior written consent of the
Majority of the Lenders;
(ii) a Default or an Event of Default under this Agreement is not a
default or event of default in respect of such Indebtedness and
acceleration of the Outstanding Obligations does not result in an
acceleration of the obligations under the debentures issued in
connection with the Fourth Round Trust Pool Securities (the "Fourth
Round Trust Pool Debentures"), or any Guarantees issued in
connection with the Fourth Round Trust Pool Debentures;
(iii) no cash dividends may be paid on the Fourth Round Trust Pool
Securities so long as a Default or Event of Default under this
Agreement has occurred and is continuing;
(iv) the Administrative Agent has received: (A) all material
documentation as determined by the Agent in its sole discretion
relating to the Fourth Round Trust Pool Debentures, the Fourth
Round Trust Pool Securities, including, without limitation, all
materials filed with any securities commission, containing terms
and conditions satisfactory to the Agent and the Majority of the
Lenders; and (B) and executed intercreditor agreement with the
holders of the Fourth Round Trust Pool Securities and the Fourth
Round Trust Pool Debentures or such other evidence of
subordination as may be satisfactory to the Agent and the
Majority of the Lenders in respect of the obligations of the
Borrowers, the Guarantor or their Subsidiaries to the holders of
the Fourth Round Trust Pool Securities and the Fourth Round Trust
Pool Debentures, to provide, among other things, for
subordination of the obligations of the Borrowers, the Guarantor
and the Subsidiaries in connection with the Fourth Round Trust
Pool Securities and the Fourth Round Trust Pool Debentures to the
payment in full of the Outstanding Obligations;
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(v) none of the statutory trusts issuing the Fourth Round Trust Pool
Debentures shall incur any debts, liabilities or obligations other
than reasonable fees and expenses of the trustees under the Fourth
Round Trust Pool Debentures (acting solely in its capacity as trustee
and not in their individual capacity), and the principal, premium (if
any) and interest in respect of the Fourth Round Trust Pool
Securities;
(vi) the aggregate indebtedness in respect of the Fourth Round Trust
Pool Debentures does not exceed US $65,000,000 in the aggregate,
without the prior written consent of the Majority of the Lenders; and
(vii) the terms and conditions of each of the Fourth Round Trust Pool
Securities are otherwise satisfactory to the Majority of the Lenders."
1.03 Amendment to the Definition of Total Capitalization. Sub-section
1.01(103) of the Credit Agreement is hereby amended by deleting it in its
entirety and replacing it with the following:
"Total Capitalization" means without duplication the sum of (i) Funded
Debt, plus (ii) shareholders equity including, for greater certainty, the
gross proceeds of the offerings of the Trust I Preferred Securities, the
Trust II Preferred Securities, the Second Round Trust Pool Securities, the
Third Round Trust Pool Securities and the Fourth Round Trust Pool
Securities, all of which shall be calculated in respect of Kingsway on a
Consolidated basis in accordance with GAAP."
ARTICLE II
AMENDMENT TO COVENANTS
2.01 Amendment to Funded Debt to Total Capitalization Ratio Covenant.
Sub-section 8.02(1) of the Credit Agreement is hereby amended by deleting it in
its entirety and replacing it with the following:
"Kingsway shall maintain at all times a ratio of Funded Debt to Total
Capitalization on a Consolidated basis of not greater than 0.30:1.00
calculated quarterly on the last day of each fiscal quarter of Kingsway;
provided that, for the purposes of the covenant only, neither the Trust I
Debentures nor the Trust II Debentures nor the Second Round Trust Pool
Debentures nor the Third Round Trust Pool Debentures nor the Fourth Round
Trust Pool Debentures shall be included in the calculation of Funded Debt
but the Trust I Debentures, Trust II Debentures, the Second Round Trust
Pool Debentures, the Third Round Trust Pool Debentures and the Fourth Round
Trust Pool Debentures shall be included in the calculation of Total
Capitalization."
2.02 Amendment to Minimum Tangible Net Worth Covenant. Sub-section 8.02(3)
of the Credit Agreement is hereby amended by deleting the sentence at the end of
such sub-section and adding the following sentence at the end of such
sub-section:
"For greater certainty, the proceeds of the offerings of the Trust I
Preferred Securities, the Trust II Preferred Securities, the Second Round
Trust Pool Securities, the Third Round Trust Pool Securities, the Fourth
Round Trust Pool Securities and any other preferred securities issued by
Kingsway or any of its Subsidiaries shall not be included in the
calculation of Minimum Tangible Net Worth."
2.03 Amendment to No Guarantees Covenant. Sub-section 8.03(5) of the Credit
Agreement is hereby amended by: (A) deleting the word "and" at the end of
sub-section 8.03(5)(x), and all of sub-section (xi); and (B) inserting the
following immediately after sub-section 8.03(5)(x):
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"(xi) the Guarantees issued by Kingsway or the Guarantor in connection
with the Fourth Round Trust Pool Securities issuance;
(xii) the Guarantee issued by Kingsway to guarantee the reinsurance
obligations of Lincoln General Insurance Company to Clarenden
Insurance Company; provided that the Lenders shall have received
copies, certified by the Chief Financial Officer of Kingsway, of the
executed guarantee and all material documentation relating thereto,
all in form and substance acceptable to the Majority of the Lenders;
and
(xiii) as otherwise permitted hereunder."
2.04 Amendment to Material Contracts Covenant. Sub-section 8.03(7)(d) of
the Credit Agreement is hereby amended by deleting it in its entirety and
replacing it with the following:
"(d) any material documents relating to the offering of the Trust I
Preferred Securities, the Trust II Preferred Securities, the Second Round
Trust Pool Securities, the Third Round Trust Pool Securities and the Fourth
Round Trust Pool Securities and any declaration of trust, indemnities,
indentures, guarantees and other documents, agreements and instruments in
connection therewith."
2.05 Amendment to Restricted Payments Covenant. Sub-section 8.03(14) of the
Credit Agreement is hereby amended by deleting sub-clause (b) in its entirety
and replacing it with the following:
"(b) The Borrowers will not, and will not permit or cause the Guarantor or
any of the Subsidiaries to:
(i) make (or give any notice in respect of) any voluntary or optional
payment or prepayment of principal on any Subordinated Debt, or directly or
indirectly make any redemption (including pursuant to any change of control
provision), retirement, defeasance or other acquisition for value of any
Subordinated Debt, or make any deposit or otherwise set aside funds for any
of the foregoing purposes; or
(ii) make any payment (including, without limitation, any payment of
principal, premium (if any) or interest) in respect of the Trust I
Debentures, the Trust I Preferred Securities, the Trust II Debentures, the
Trust II Preferred Securities, the Second Round Trust Pool Debentures, the
Second Round Trust Pool Securities, the Third Round Trust Pool Securities,
the Third Round Trust Pool Securities, the Fourth Round Trust Pool
Debentures or the Fourth Round Trust Pool Securities or any other
securities issued by any Borrower, the Guarantor or any of their
Subsidiaries or any guarantees or indemnities in respect thereof following
the occurrence of an Event of Default which is continuing or make any such
payment if the making of such payment would result in the occurrence of a
Default or Event of Default."
2.06 Amendment to Section 10.11. Section 10.11 of the Credit Agreement is
hereby amended by deleting the reference therein to "Section 10.20" and
replacing such reference with "Section 10.18".
ARTICLE III
CONDITIONS PRECEDENT TO THIS AGREEMENT
3.01 Conditions Precedent. The amendments set forth in this Eleventh
Amendment to Credit Agreement shall not become effective until the execution and
delivery of this Eleventh Amendment to Credit Agreement by the Borrowers and the
Majority of the Lenders, and the receipt by the
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Administrative Agent and the Majority of the Lenders of such documentation as
they may reasonably require to effect the amendments contemplated in this
Eleventh Amendment to Credit Agreement.
ARTICLE IV
MISCELLANEOUS
4.01 Nature of Amendments and Defined Terms. It is acknowledged and agreed
that the terms of this Eleventh Amendment to Credit Agreement are in addition to
and, unless specifically provided for, shall not limit, restrict, modify, amend
or release any of the understandings, agreements or covenants as set out in the
Credit Agreement. The Credit Agreement shall henceforth be read and construed in
conjunction with this Eleventh Amendment to Credit Agreement and the Credit
Agreement together with all of the powers, provisions, conditions, covenants and
agreements contained or implied in the Credit Agreement shall be and shall
continue to be in full force and effect. References to the "Credit Agreement" of
the "Agreement" in the Credit Agreement or in any other document delivered in
connection with, or pursuant to, the Credit Agreement, shall mean the Credit
Agreement, as amended hereby. Capitalised terms utilised in this agreement but
not defined in this Agreement shall have the meanings ascribed to such terms in
the Credit Agreement.
4.02 Assignment. This Eleventh Amendment to Credit Agreement shall enure to
the benefit of and be binding upon the parties hereto and their respective
successors and assigns but shall not be assignable by the Borrowers or either of
them without the prior written consent of the Agents and Lenders.
4.03 Severability. Any provision of this Eleventh Amendment to Credit
Agreement which is prohibited or unenforceable in any jurisdiction shall not
invalidate the remaining provisions hereof any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
4.04 Governing Law. This Eleventh Amendment to Credit Agreement shall be
governed by and construed in accordance with the laws of the Province of Ontario
and the laws of Canada applicable therein and shall be treated in all respects
as an Ontario contract and the parties hereby submit and attorn to the
non-exclusive jurisdiction of the courts of the Province of Ontario.
4.05 Further Assurances. The Borrowers shall from time to time and at times
hereafter, upon every reasonable request from the Agents or the Lenders, make,
do, execute and deliver or cause to be made, done, executed and delivered, all
such further acts, deeds and assurances and things as may be necessary in the
opinion of the Agents for more effectually implementing and carrying out the
true intent and meaning of this Eleventh Amendment to Credit Agreement.
4.06 Counterparts. This Eleventh Amendment to Credit Agreement may be
executed in any number of counterparts, each of which shall constitute an
original and all of which, taken together, shall constitute one and the same
agreement.
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IN WITNESS WHEREOF the parties hereto have executed this Eleventh Amendment
to Credit Agreement.
KINGSWAY FINANCIAL SERVICES INC.
By: /s/ Xxxxxxx X. Star
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Xxxxxxx X. Star
President & Chief Executive Officer
By: /s/ W. Xxxxx Xxxxxxx
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W. Xxxxx Xxxxxxx
Executive Vice President & Chief Financial Officer
KINGSWAY U.S. FINANCE PARTNERSHIP
by its Partners
KINGSWAY FINANCIAL SERVICES INC.
By: /s/ W. Xxxxx Xxxxxxx
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W. Xxxxx Xxxxxxx
Executive Vice President & Chief Financial Officer
METRO CLAIM SERVICES INC.
By: /s/ W. Xxxxx Xxxxxxx
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W. Xxxxx Xxxxxxx
Secretary
CANADIAN IMPERIAL BANK OF COMMERCE
By: /s/ Xxxxx Xxxxxx
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Xxxxx Xxxxxx
Executive Director
By: /s/ Xxxxxx Xxxxxx Xxxxxxx
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Xxxxxx Xxxxxx Xxxxxxx
Managing Director
LASALLE BANK NATIONAL ASSOCIATION
By: /s/ Xxxx Xxxxxxxx
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Xxxx Xxxxxxxx
Assistant Vice President
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LASALLE BANK NATIONAL ASSOCIATION,
AS ADMINISTRATIVE AGENT
By: /s/ Xxxx Xxxxxxxx
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Xxxx Xxxxxxxx
Assistant Vice President
CANADIAN IMPERIAL BANK OF COMMERCE,
AS DOCUMENTATION AGENT
By: /s/ Xxxxx Xxxxxx
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Xxxxx Xxxxxx
Executive Director
By: /s/ Xxxxxx Xxxx
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Xxxxxx Xxxx
Director
CANADIAN IMPERIAL BANK OF COMMERCE
NEW YORK AGENCY
By: /s/ Xxxxxxxxx Xxxx
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Xxxxxxxxx Xxxx
Executive Director
THE BANK OF NOVA SCOTIA
By: /s/ Xxxxxxx X. Xxxxxxx
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Xxxxxxx X. Xxxxxxx
Managing Director
WACHOVIA BANK, NATIONAL ASSOCIATION
By:
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Name:
Title:
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