Exhibit 10.8
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CDN $66,500,000 AMENDED
CREDIT AGREEMENT AMONG
KINGSWAY FINANCIAL SERVICES INC.
AND KINGSWAY U.S. FINANCE PARTNERSHIP
As Borrowers
AND
The Lenders named herein as Lenders
AND
CANADIAN IMPERIAL BANK OF COMMERCE
As Administrative Agent
AND
LASALLE BANK NATIONAL ASSOCIATION
As Syndication Agent
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CIBC WORLD MARKETS
As Sole Lead Arranger and Bookrunner
TABLE OF CONTENTS
ARTICLE ONE INTERPRETATION.............................................. 2
Section 1.01 Definitions............................................ 2
Section 1.02 Audited Financial Statements........................... 19
Section 1.03 Canadian Currency...................................... 19
Section 1.04 Interest Act........................................... 19
Section 1.05 Change in Rates........................................ 20
Section 1.06 Maximum Interest Rate.................................. 20
Section 1.07 Headings and Table of Contents......................... 20
Section 1.08 References............................................. 20
Section 1.09 Number and Gender ..................................... 21
Section 1.10 Copies................................................. 21
Section 1.11 Schedules.............................................. 21
ARTICLE TWO CREDIT FACILITIES........................................... 21
Section 2.01 Credit Facilities...................................... 21
Section 2.02 Revolving Feature of Credit Facility................... 22
Section 2.03 Lenders' Commitments................................... 22
Section 2.04 Purposes of Credit Facilities.......................... 22
Section 2.05 Evidence of Indebtedness............................... 22
Section 2.06 Illegality............................................. 23
ARTICLE THREE PROCEDURES APPLICABLE TO BORROWINGS....................... 23
Section 3.01 Notices of Borrowing................................... 23
Section 3.02 Conversions............................................ 23
Section 3.03 Provisions Relating to Bankers' Acceptances............ 23
Section 3.04 Provisions Relating to LIBOR Loans..................... 24
Section 3.05 Reliance on Oral Instructions.......................... 26
ARTICLE FOUR PAYMENTS................................................... 26
Section 4.01 Repayment.............................................. 26
Section 4.02 Mandatory Repayments................................... 26
Section 4.03 Permanent Prepayment................................... 26
Section 4.04 Payments Generally..................................... 27
Section 4.05 No Credit for Trust Funds.............................. 27
Section 4.06 No Withholding......................................... 27
ARTICLE FIVE INTEREST, FEES AND EXPENSES................................ 27
Section 5.01 Payment of Interest.................................... 27
Section 5.02 Stamping Fees.......................................... 28
Section 5.03 Standby Fees........................................... 28
Section 5.04 Upfront Fees........................................... 28
Section 5.05 Administration Fees.................................... 28
Section 5.06 Change in Circumstances................................ 28
Section 5.07 Reimbursement of Expenses.............................. 29
Section 5.08 Determination Conclusive............................... 29
Section 5.09 Default Interest....................................... 29
ARTICLE SIX CONDITIONS PRECEDENT........................................ 30
Section 6.01 Conditions - Initial borrowing......................... 30
Section 6.02 Conditions - All borrowings............................ 31
Section 6.03 Waiver................................................. 32
ARTICLE SEVEN REPRESENTATIONS AND WARRANTIES............................ 32
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Section 7.01 Representation and Warranties.......................... 32
Section 7.02 Survival of Representations and Warranties............. 40
ARTICLE EIGHT COVENANTS................................................. 41
Section 8.01 Positive Covenants..................................... 41
Section 8.02 Financial Covenants.................................... 46
Section 8.03 Restrictive Covenants.................................. 47
ARTICLE NINE EVENTS OF DEFAULT.......................................... 52
Section 9.01 Events of Default...................................... 52
Section 9.02 Lenders May Waive...................................... 55
Section 9.03 Remedies are Cumulative................................ 55
Section 9.04 Set-Off................................................ 55
Section 9.05 Cash Collateral Accounts............................... 55
ARTICLE TEN GENERAL..................................................... 56
Section 10.01 Redistribution of Payments............................. 56
Section 10.02 Enforcement............................................ 56
Section 10.03 Readjustment of Obligations Among Lenders.............. 56
Section 10.04 Notices................................................ 57
Section 10.05 Performance of Covenants by the Lenders................ 57
Section 10.06 Indemnity.............................................. 58
Section 10.07 The Canadian Borrower Liability for the
U.S. Borrower Obligations; Waivers, etc............... 58
Section 10.08 No Set-Off or Counterclaim............................. 59
Section 10.09 Severability........................................... 59
Section 10.10 Time of Essence........................................ 59
Section 10.11 Assignment............................................. 59
Section 10.12 Entire Agreement....................................... 59
Section 10.13 Amendments............................................. 59
Section 10.14 Law Governing.......................................... 60
Section 10.15 Forum Selection and Consent to Jurisdiction............ 60
Section 10.16 Waiver of Jury Trial, etc.............................. 60
Section 10.17 Conflict............................................... 60
Section 10.18 Loan Syndication....................................... 60
Section 10.19 Assignment and Acceptance.............................. 61
Section 10.20 Judgment Currency...................................... 61
Section 10.21 Successors and Assigns................................. 61
Section 10.22 Survival............................................... 62
Section 10.23 Non-U.S. Lenders....................................... 62
ARTICLE ELEVEN THE AGENTS............................................... 62
Section 11.01 Appointment and Authorization.......................... 62
Section 11.02 Interest Holders....................................... 63
Section 11.03 Documents.............................................. 63
Section 11.04 Agent and Affiliates................................... 63
Section 11.05 Responsibility of Agents............................... 63
Section 11.06 Action by Administrative Agent......................... 63
Section 11.07 Notice of Events of Default............................ 64
Section 11.08 Responsibility Disclaimed.............................. 64
Section 11.09 Indemnification........................................ 64
Section 11.10 Credit Decision. Each Lender Represents and
Warrants to the Agents that:.......................... 65
Section 11.11 Successor Agents....................................... 65
Section 11.12 Delegation by Agents................................... 65
Section 11.13 Determinations by Agents............................... 65
Section 11.14 Reliance Upon Agents................................... 66
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Section 11.15 Payment Protection..................................... 66
Section 11.16 Remittance of Payments................................. 66
Section 11.17 Prompt Notice to the Lenders........................... 66
Section 11.18 Counterparts........................................... 67
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AMENDED CREDIT AGREEMENT
This amended credit agreement dated as of the 27th day of May, 2003
AMONG:
KINGSWAY FINANCIAL SERVICES INC., an Ontario
corporation (the "Canadian Borrower"), and
KINGSWAY U.S. FINANCE PARTNERSHIP, a
Delaware partnership (the "U.S. Borrower"),
(collectively referred to herein as the "Borrowers" and
each individually as a "Borrower")
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CANADIAN IMPERIAL BANK OF COMMERCE, HSBC
BANK CANADA, LASALLE BANK NATIONAL
ASSOCIATION and CANADIAN IMPERIAL BANK OF
COMMERCE, NEW YORK AGENCY
(collectively referred to herein as the "Lenders" and
each individually as a "Lender")
- and -
CANADIAN IMPERIAL BANK OF COMMERCE, as
Administrative Agent (the "Administrative Agent")
- and -
LASALLE BANK NATIONAL ASSOCIATION, as
Syndication Agent (the "Syndication Agent")
WHEREAS the Borrowers, the Lenders, the Administrative Agent and the
Syndication Agent are parties to a credit agreement dated as of the 28/th/ day
of May 2002, as amended, revised and supplemented (the "Prior Credit Agreement")
and wish to amend and restate the Prior Credit Agreement in its entirety as set
forth herein;
AND WHEREAS the Borrowers wish to extend the Maturity Date (as defined in
the Prior Credit Agreement) for an additional 364 day period;
AND WHEREAS effective on the Closing Date: (i) the Prior Credit Agreement
is to be amended and restated pursuant to this Agreement; (ii) all Commitments,
under and as defined in the Prior Credit Agreement, shall continue as
Commitments under this Agreement; and (iii) all Outstanding Obligations, under
and as defined in the Prior Credit Agreement, of the Borrowers and Kingsway
America (as defined in the Prior Credit Agreement) shall continue as Outstanding
Obligations of the Borrowers and Kingsway America under this Agreement and the
other Loan Documents.
NOW THEREFORE, in consideration of the premises and the agreements
hereinafter set forth, the parties agree as follows:
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ARTICLE ONE
INTERPRETATION
Section 1.01 Definitions.
For the purposes of this Agreement and where the context does not otherwise
require, the following terms shall have the following meanings:
(1) "1999 Facility" means the credit agreement, dated February 23, 1999, as
amended, revised, supplemented, restated or otherwise modified, with
respect to U.S. $100,000,000 credit facilities, among the Borrowers and
Canadian Imperial Bank of Commerce, The Bank of Nova Scotia, LaSalle Bank
National Association and First Union National Bank, as Lenders, and The
Bank of Nova Scotia and Canadian Imperial Bank of Commerce, as
Co-Syndication Agent and Documentation Agent, and LaSalle Bank National
Association, as Administrative Agent and Co-Syndication Agent, and
Canadian Imperial Bank of Commerce, New York Agency.
(2) "Additional Compensation" has the meaning given that term in Section 5.06.
(3) "Affiliate" of a Person means any other Person which, directly or
indirectly, controls or is controlled by or is under common control with
the first Person (excluding any trustee under, or any committee with
responsibility for administering, any Plan), and for purposes of this
definition, "controls" (including with correlative meanings the terms
"controlled by" and "under common control with") means the direct or
indirect possession by a Person of:
(a) power to vote 10% or more of the securities (on a fully diluted
basis) or other equity or membership interests of another Person
having ordinary voting power for the election of directors or
managing general partners or members;
(b) power to direct or cause the direction of the management and policies
of another Person whether by contract or otherwise; or
(c) beneficial ownership of 10% or more of any class of voting stock of
another Person or 10% or more of all outstanding equity interests or
other interests of such other Person.
(4) "Agents" means collectively the Administrative Agent, the Syndication
Agent and CIBC World Markets, as the sole lead arranger and bookrunner in
respect of the Credit Facilities, and "Agent" means any one of them.
(5) "Agreement" means this agreement and the schedules hereto as may be
amended, extended, renewed, restated, revised, supplemented or otherwise
modified in whole or in part at any time and from time to time.
(6) "Alternate Base Rate" means for any day, a rate per annum (rounded
upwards, if necessary, to the next 1/16 of 1%) equal to the greater of:
(a) the U.S. Prime Rate in effect on such day; and
(b) the Federal Funds Effective Rate in effect on such day plus 3/4 of 1%
per annum.
For purposes of this definition:
"Federal Funds Effective Rate" means, for any day, the weighted average of
the rates on overnight federal funds transactions with members of the
Federal Reserve System arranged by federal funds brokers, as published on
the next succeeding Business Day by the Federal Reserve
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Bank of New York, or, if such rate is not so published for any day that is
a Business Day, the average quotations, for the day, of such transactions
received by the Administrative Agent from three federal funds brokers of
recognized standing selected by it.
"U.S. Prime Rate" means the rate of interest per annum publicly announced
from time to time by CIBC as its prime rate in effect at its principal
office in New York City. The U.S. Prime Rate is not intended to be the
lowest rate of interest charged by CIBC in connection with extensions of
credit to debtors.
(7) "Alternate Base Rate Loans" means loans in U.S. Dollars made by a U.S.
Lender to the U.S. Borrower on which the interest rate is calculated with
reference to the Alternate Base Rate.
(8) "Applicable Law" means, at any time, with respect to any Person, property,
transaction or event, all present and future applicable laws, statutes,
regulations, treaties, judgments and decrees and (whether or not having
the force of law) all applicable official directives, rules, consents,
approvals, by-laws, permits, authorizations, guidelines, orders and
policies of any governmental or regulatory body or Persons having
authority over any of the parties hereto including, without limitation,
applicable regulatory financial ratio guidelines.
(9) "BA Equivalent Loan" has the meaning set forth in Section 3.03(7) hereof.
(10) "Bankers' Acceptance" means a bill of exchange or draft which is drawn by
the Canadian Borrower and:
(a) is issued initially in an amount of not less than Cdn $1,000,000 and
in whole multiples of Cdn $100,000 thereafter;
(b) is for a term of approximately one month, two months, three months or
six months as stipulated by the Canadian Borrower;
(c) matures on a Business Day not later than the Maturity Date; and
(d) is payable only in Canada.
(11) "Borrowers" means, collectively, the Canadian Borrower and the U.S.
Borrower, and "Borrower" means either one of them.
(12) "Borrowing" means a use of the Credit Facilities by way of, in the case of
the Canadian Borrower, a Prime Rate Loan, a U.S. Base Rate Loan, a LIBOR
Loan, a Bankers' Acceptance or a BA Equivalent Loan, and in the case of
the U.S. Borrower, an Alternate Base Rate Loan or a LIBOR Loan.
(13) "Borrowing Date" means a Business Day on which a Borrowing is made.
(14) "Branch of Account" means in respect of the Canadian Borrower and the
Canadian Lenders, the main branch of CIBC located at Commerce Court West,
Toronto, Ontario, M5L 1A2 or such other place as designated by the
Administrative Agent, and in respect of the U.S. Borrower and the U.S.
Lenders, means such branch as designated by the Administrative Agent from
time to time.
(15) "Business Day" means: (i) when used otherwise than in connection with the
funding or repayment of an Alternate Base Rate Loan or a LIBOR Loan, a day
of the year (other than Saturdays or Sundays) on which the Branch of
Account for the Canadian Borrower is open to the public for the
transaction of banking business in the ordinary course; and (ii) when used
in connection with the funding or repayment of: (A) an Alternate Base Rate
Loan, a day of the year
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(other than Saturdays or Sundays) on which the Branch of Account for each
of the Canadian Borrower and the U.S. Borrower is open to the public for
the transaction of banking business in the ordinary course, and (B) a
LIBOR Loan, a day of the year (other than Saturdays or Sundays) on which
the Branch of Account for each of the Canadian Borrower and the U.S.
Borrower is, and banks in London, England are, open to the public for the
transaction of banking business in the ordinary course.
(16) "Canadian Borrower" means Kingsway Financial Services Inc., an Ontario
corporation, and its successors and permitted assigns.
(17) "Canadian Commitment" means the commitment of each Canadian Lender to
permit Borrowings by the Canadian Borrower in the aggregate amount of
Canadian Dollars or the Equivalent Amount in U.S. Dollars set forth
opposite such Canadian Lender's name on Schedule "A", as such commitment
may be reduced from time to time pursuant to Section 10.03(2) and as such
Schedule "A" may be amended from time to time in accordance with the
provisions of this Agreement.
(18) "Canadian Dollars" and "Cdn $" each means lawful money of Canada.
(19) "Canadian Facility" means the credit facility made available by the
Canadian Lenders to the Canadian Borrower under Section 2.01(1)..
(20) "Canadian Lenders" means, on the Closing Date, CIBC and HSBC Bank Canada
and thereafter all financial institutions then participating in the
Canadian Facility.
(21) "Canadian Property and Casualty Industry Average Combined Ratio" means
such ratio as established on a quarterly and annual basis by the Insurance
Bureau of Canada.
(22) "Canadian Rateable Portion" of a Canadian Lender means the quotient
obtained by dividing that Canadian Lender's Canadian Commitment by the
Total Canadian Commitment as set forth on Schedule "A", as such Canadian
Commitment or Total Canadian Commitment may be reduced from time to time
pursuant to Section 10.03(2) and as such Schedule "A" may be amended from
time to time in accordance with the provisions of this Agreement.
(23) "Capital Expenditures" means expenditures for the purchase, lease or
acquisition of assets required to be capitalized in accordance with GAAP
including, without limiting the generality of the foregoing, fixed assets
and real property.
(24) "Capital Lease" means any lease of any property (whether real, personal or
mixed) by any Person as lessee that, in accordance with GAAP, either would
be required to be classified and accounted for as a capital lease on a
balance sheet of such Person or otherwise be disclosed as such in a note
to such balance sheet.
(25) "Capital Surplus Ratio" means the aggregate of Net Written Premiums as a
percentage of Statutory Capital and Surplus.
(26) "Capitalized Lease Obligations" means monetary obligations under
agreements for the lease or rental of real or personal property that in
accordance with GAAP are required to be classified and accounted for as
Capital Leases, and, for purposes of this Agreement, the amount of such
obligations shall be the capitalized amount thereof, determined in
accordance with GAAP, and the stated maturity thereof shall be the date of
the last payment of rent or any other amount due under such lease prior to
the first date upon which such lease may be terminated by the lessee
without payment of a penalty.
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(27) "CDOR Rate" means on any date, in respect of any Bankers' Acceptance, the
per annum rate of interest which is the rate based on the average of the
discount rates applicable to Canadian Dollar bankers' acceptances, for a
term equivalent to the term of the relevant Bankers' Acceptances,
appearing on the "Reuters Screen CDOR Page" (as defined in the
International Swap Dealers Association, Inc. definitions as modified and
amended from time to time) for acceptances of Schedule I banks under the
Bank Act (Canada) as of 10:00 a.m. Toronto time on such date, or if such
date is not a Business Day, then on the immediately preceding Business
Day; provided, however, that if no such average rate appears on the
Reuters Screen CDOR Page as contemplated, the CDOR Rate on any date shall
be calculated as the arithmetic mean of the rates for the term referred to
above applicable to Canadian Dollar bankers' acceptances quoted by CIBC as
at 10:00 a.m. Toronto time, on such date, or if such date is not a
Business Day, than on the immediately preceding Business Day.
(28) "Change of Voting Control" means any Person or group of Persons acting in
concert that, as a result of a tender or exchange offer, open market
purchases, privately negotiated purchases or otherwise, becomes the
"beneficial owner" (within the meaning of such term under Rule 13d-3 under
the Securities Exchange Act of 1934, as amended) of securities of a
Borrower, Kingsway America or any of their Subsidiaries representing 20%
or more of the combined voting power of the then outstanding securities of
a Borrower, Kingsway America or any of their Subsidiaries ordinarily (and
apart from rights accruing under special circumstances) having the right
to vote in the election of directors.
(29) "CIBC" means Canadian Imperial Bank of Commerce, a Canadian chartered
bank.
(30) "Claims Incurred" means the aggregate of all claims paid during an
accounting period adjusted by the change in claims reserved for that
accounting period together with: (i) the related loss adjustment expense,
and (ii) expenses of claims handling customarily recognized by the
Canadian Borrower in its calculation of Claims Ratio in its quarterly
reporting.
(31) "Claims Ratio" or "Loss Ratio" means Claims Incurred, net of reinsurance,
expressed as a percentage of Net Earned Premiums.
(32) "Closing Date" means May 27, 2003.
(33) "COBRA" means continuation coverage described in Part 6 of Title 1 of
ERISA.
(34) "Code" means the U.S. Internal Revenue Code of 1986, as amended, reformed
or otherwise modified from time to time.
(35) "Combined Ratio" means the sum of the Claims Ratio plus the Expense Ratio.
(36) "Commitment" means the commitment of each Lender to permit Borrowings by
the Borrowers in the aggregate amount of Canadian Dollars or the
Equivalent Amount in U.S. Dollars set forth opposite such Lender's name on
Schedule "A", as such commitment may be reduced from time to time pursuant
to Section 10.03 and as such Schedule "A" may be amended from time to time
in accordance with this Agreement.
(37) "Commonly Controlled Entity" means an entity, whether or not incorporated,
which is under common control with a Borrower within the meaning of
Section 4001 of ERISA or is part of a group which includes a Borrower and
which is treated as a single employer under Section 414 of the Code.
(38) "Consolidated" means consolidated in accordance with GAAP.
(39) "Contract Period" means the term of a Bankers' Acceptance.
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(40) "Contractual Currency" has the meaning set out in Section 10.20.
(41) "Controlled Group" means all members of a controlled group of corporations
and all members of a controlled group of trades or businesses (whether or
not incorporated) under common control which, together with a Borrower,
are treated as a single employer under Section 414(b) or 414(c) of the
Code.
(42) "Conversion" means the conversion of one manner of Borrowing permitted
hereunder into another manner of Borrowing permitted hereunder.
(43) "Conversion Date" means the date upon which a Conversion is effected.
(44) "Credit Facilities" means, collectively, the Canadian Facility and the
U.S. Facility.
(45) "Default" means any of the events described in Section 9.01 regardless of
whether any requirement in connection with such event for the giving of
notice, the lapse of time, or the happening of any further condition,
event or act has been satisfied or met.
(46) "Discount Proceeds" means in respect of any Bankers' Acceptance an amount
which is calculated by: (i) dividing the face amount thereof by the sum of
one plus the product of the: (a) Discount Rate expressed in a decimal
fraction, multiplied by (b) a fraction, the numerator of which is the
Contract Period of such Bankers' Acceptance and the denominator of which
is 365; and (ii) deducting from the result obtained the Stamping Fee for
such Bankers' Acceptance.
(47) "Discount Rate" means, on any date in respect of a Bankers' Acceptance to
be accepted by: (i) a Canadian Lender that is listed in Schedule I to the
Bank Act, the CDOR Rate at approximately 10:00 a.m. (Toronto time) on such
Borrowing Date for Bankers' Acceptances having a comparable maturity date
as the maturity date of such Bankers' Acceptance; and (ii) for a Canadian
Lender that is listed in Schedule II to the Bank Act, the rate determined
by the Administrative Agent to be the lesser of: (A) the CDOR Rate plus
0.10%, and (B) the discount rate (expressed as a percentage calculated on
the basis of a year of 365 days) quoted by such Canadian Lender at 10:00
a.m. (Toronto time) on such date as the discount rate at which it would,
in the normal course of its business, purchase on such date bankers'
acceptances having an aggregate face amount equal to, and with a term to
maturity the same as, the Bankers' Acceptance to be accepted by such
Canadian Lender on such date, and in the case of BA Equivalent Loans,
means the CDOR Rate plus 0.10%.
(48) "EBITDA" means, during any period, Net Income for such period adding back
amounts deducted in such period for Interest Expense, income taxes
(whether paid or deferred), depreciation, amortization, and extraordinary
losses (or deducting amounts included for extraordinary gains during such
period) all of which shall be determined in respect of the Canadian
Borrower on a Consolidated basis in accordance with GAAP.
(49) "Equivalent Amount" means, on any date, the equivalent amount in Canadian
Dollars of an amount in U.S. Dollars, or the equivalent amount in U.S.
Dollars of an amount in Canadian Dollars, as applicable, after giving
effect to a conversion of such currencies at the noon rate as published by
the Bank of Canada on any given day as quoted for wholesale transactions
by the Administrative Agent.
(50) "ERISA" means the Employee Retirement Income Security Act of 1974 of the
United States of America, as amended from time to time together with the
regulations thereunder having the force of law, in each case as in effect
from time to time. References to Sections of ERISA also refer to any
successor Section.
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(51) "Event of Default" means any of the events specified in Section 9.01,
provided that any requirement in connection with such event for the giving
of notice, the lapse of time or the happening of any further condition,
event or act has been satisfied or met.
(52) "Expense Ratio" means the commission expense, premium tax expense and all
general and administrative expenses (other than amounts included in
general and administrative expenses on account of the amortization and/or
impairment expense of goodwill) incurred by the Borrowers during an
accounting period calculated on a Consolidated basis in accordance with
GAAP and expressed as a percentage of Net Earned Premiums.
(53) "Financial Year" means, with respect to any Person, the 12 month period
ending on the fiscal-year end of such Person in each year.
(54) "F.R.S. Board" means the Board of Governors of the U.S. Federal Reserve
System or any successor thereto.
(55) "Funded Debt" means the aggregate Indebtedness for borrowed money of the
Canadian Borrower 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, Kingsway
America, any Subsidiary of a Borrower, State National Specialty Insurance
Company Inc., State and County Mutual Insurance Company, General
Reinsurance Corporation, Mutual Service Insurance or Fairfield Insurance
Company), and (iv) all principal, interest and 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 Debentures, Trust Pool Debentures, Second
Round Trust Pool Debentures and Third Round Trust Pool Debentures (each as
defined in Section 1.01(93) below.
(56) "GAAP" means generally accepted accounting principles which are in effect
in Canada from time to time applied in a consistent manner from period to
period.
(57) "Governmental Authority" means any nation or government, any province,
state, municipality, local or other political subdivision thereof and any
agency, instrumentality or other entity thereof exercising executive,
legislative, judicial, regulatory or administrative functions of or
pertaining to government.
(58) "Guarantee" means, with respect to a Person, any absolute or contingent
liability of that Person under any guarantee, agreement, endorsement
(other than for collection or deposit in the ordinary course of business),
discount with recourse or other obligation to pay, purchase, repurchase or
otherwise be or become liable or obligated upon or in respect of any
Indebtedness of any other Person and including any absolute or contingent
obligations to:
(a) advance or supply funds for the payment or purchase of any
Indebtedness of any other Person,
(b) purchase, sell or lease (as lessee or lessor) any property, assets,
goods, services, materials or supplies primarily for the purpose of
enabling any other Person to make payment of Indebtedness or to
assure the holder thereof against loss, or
(c) indemnify or hold harmless any other Person from or against any
losses, liabilities or damages, in circumstances intended to enable
such other Person to incur or pay any Indebtedness or to comply with
any agreement relating thereto or otherwise to assure or protect
creditors against loss in respect of such Indebtedness,
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but shall not include any contract of reinsurance entered into by any
Subsidiary of such Person with any other Subsidiary of such Person.
Each Guarantee shall be deemed to be in an amount equal to the amount of
the Indebtedness in respect of which the Guarantee is given, unless the
Guarantee is limited to a determinable amount in which case the amount of
the Guarantee shall be deemed to be the lesser of the amount of the
Indebtedness in respect of which the Guarantee is given and such
determinable amount.
(59) "Guaranteed Pension Plan" means any pension plan maintained by a Borrower
or Kingsway America, or to which a Borrower or Kingsway America
contributes some or all of the benefits under which are guaranteed by
PBGC.
(60) "Indebtedness" of a Person means, without duplication,
(a) all debts, liabilities and obligations, direct, indirect, liquidated,
unliquidated, contingent and other, including principal, interest,
charges and fees, which in accordance with GAAP would be classified
upon such Person's balance sheet as liabilities including, without
limitation, liabilities under currency and interest rate hedging
agreements and similar agreements, all Capitalized Lease Obligations,
Purchase Money Obligations and all Guarantees of such debts,
liabilities and obligations; and
(b) all obligations secured by any Security Interest, including
principal, interest, charges and fees, existing on property owned or
acquired by the Person subject to such Security Interest whether or
not the Person has assumed or otherwise become liable for the payment
of such obligations.
(61) "Insurance Regulatory Authority" means, with respect to any Insurance
Subsidiary, the insurance department or similar governmental authority
charged with regulating insurance companies or insurance holding
companies, in its jurisdiction 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.
(62) "Insurance Subsidiary" means any Subsidiary of a Borrower 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 Law of its jurisdiction of domicile.
(63) "Intercreditor Agreement" means the Pari Passu Agreement, dated as of the
27th day of May, 2003, between the Lenders and certain lenders under the
1999 Facility, as such agreement may be amended, extended, renewed,
restated, revised, supplemented or otherwise modified in whole or in part.
(64) "Interest Coverage Ratio" means the ratio of EBITDA to Interest Expense.
(65) "Interest Expense" means, during any period, the aggregate amount of
interest expenses in respect of Indebtedness (other than intercompany
indebtedness) including, without limitation, all but the principal
component of expenses in respect of Capitalized Lease Obligations paid,
accrued or scheduled to be paid or accrued during such period, all of
which shall be determined in respect of the Canadian Borrower on a
Consolidated basis in accordance with GAAP. For the purposes of this
definition, interest expense on Capitalized Lease Obligations shall be
calculated at the interest rate specified in the relevant leases, or if no
such rate is specified therein, an interest rate reasonably determined in
accordance with GAAP.
(66) "Interest Payment Date" means in respect of: (i) a Prime Rate Loan, U.S.
Base Rate Loan and Alternate Base Rate Loan, the first Business Day of
each month; and (ii) a LIBOR Loan, the last
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day of the applicable LIBOR Period; save in respect of a LIBOR Loan with a
LIBOR Period which exceeds ninety (90) days, in which case "Interest
Payment Date" means the first Business Day following the 90th day of such
LIBOR Period and the last day of such LIBOR Period.
(67) "Kingsway America" means Kingsway America Inc., a Delaware corporation,
and its successors and permitted assigns.
(68) "Kingsway America Guarantee" means the unlimited and unconditional
guarantee issued by Kingsway America in favour of the Administrative
Agent, the Canadian Lenders and the U.S. Lenders in respect of the
Outstanding Obligations dated as of May 27, 2003, as such guarantee may be
amended, extended, renewed, restated, revised, supplemented or otherwise
modified in whole or in part.
(69) "Lenders" means, collectively, the Canadian Lenders and the U.S. Lenders,
and "Lender" means any one of them.
(70) "LIBO Rate" means, in respect of any LIBOR Loan:
(a) the rate of interest per annum of the offered quotations for deposits
in U.S. Dollars for a period equal or comparable to the LIBOR Period
in respect of such LIBOR Loan in an amount comparable to the amount
of such LIBOR Loan as such rate is reported on the display designated
as "page 3750" or "page 3740", as applicable (or any replacement
pages) by "Telerate - The Financial Information Network" published by
Telerate Systems, Inc. at or about 10:00 a.m. (London, England time)
on the applicable Rate Fixing Day; or
(b) if a rate cannot be determined under paragraph (a) above, the rate
determined by the Administrative Agent to be the arithmetic average
(rounded up if necessary, to the nearest 1/16 of 1%) of such rates as
reported on the display page designated as the page (or any
replacement page) for the offering of deposits in U.S. Dollars (for
example, the LIBO page in the case of U.S. Dollars) by Reuters Money
Market Service (or its successor) for a period equal to or comparable
to the LIBOR Period in respect of such LIBOR Loan and in an amount
comparable to the amount of such LIBOR Loan at or about 10:00 a.m.
(London, England time) on the applicable Rate Fixing Day provided
that at least two such rates are reported on such page; or
(c) if a rate cannot be determined under either of paragraphs (a) or (b)
above, the rate determined by the Administrative Agent for a
particular LIBOR Period to be the arithmetic average of the rates per
annum at which deposits in the currency in which the LIBOR Loan is
requested in immediately available funds are offered to the Lenders
in the London interbank market for a period equal to or comparable to
the LIBOR Period in respect of such LIBOR Loan and in an amount
comparable to the amount of such LIBOR Loan at or about 10:00 a.m.
(London, England time) on the applicable Rate Fixing Day;
For the purposes of this definition, "Rate Fixing Day" means in respect of
each LIBOR Period, the second Business Day before the first day of such
LIBOR Period.
(71) "LIBO Rate (Reserve Adjusted)" means, relative to any Borrowing in U.S.
Dollars to be made, continued or maintained as, or converted into, a LIBOR
Loan for any LIBOR Period, a rate per annum (rounded upwards, if
necessary, to the nearest 1/16 of 1%) determined pursuant to the following
formula:
LIBO Rate
LIBO Rate (Reserve Adjusted) = ---------------------------------------
1.00 - LIBOR Reserve Percentage
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The LIBO Rate (Reserve Adjusted) for any LIBOR Period will be determined
by the Administrative Agent on the basis of the LIBOR Reserve Percentage
in effect two Business Days before the first day of such LIBOR Period.
(72) "LIBOR Loan" means a loan in U.S. Dollars made by a Lender to a Borrower
on which the interest rate is calculated with reference to the LIBO Rate
(Reserve Adjusted).
(73) "LIBOR Margin" means the applicable percentage as set out in Schedule "E".
For greater certainty, the LIBOR Margin varies based upon the senior
unsecured debt rating of the Canadian Borrower in the manner as provided
in Schedule "E".
(74) "LIBOR Period" means the period for computing interest from time to time
on a LIBOR Loan as stated herein.
(75) "LIBOR Reserve Percentage" means, relative to any LIBOR Period, the
reserve percentage, if any (expressed as a decimal) equal to the maximum
aggregate reserve requirements (including all basic, emergency,
supplemental, marginal and other reserves and taking into account any
transitional adjustments or other scheduled changes in reserve
requirements) specified under regulations issued from time to time by the
F.R.S. Board and then applicable to assets or liabilities consisting of
and including "Eurocurrency Liabilities", as currently defined in
Regulation D of the F.R.S. Board, having a term approximately equal or
comparable to such LIBOR Period.
(76) "Lines of Business" means the lines of business comprising property and
casualty insurance, property and casualty reinsurance, surety, premium
financing, claims adjusting, insurance agency, and any ancillary business
in which Kingsway America and its Subsidiaries are engaged as of the date
hereof and any other business substantially similar to such lines of
business.
(77) "Loan Documents" means this Agreement, the Kingsway America Guarantee, the
Intercreditor Agreement, the Acknowledgement of Senior Indebtedness dated
December 4, 2002 from Kingsway Connecticut Statutory Trust I, Kingsway
America and the Canadian Borrower and any other document, agreement or
certificate executed in connection herewith or therewith, including,
without limitation, any currency or interest rate hedging agreements or
any agreements of similar effect.
(78) "Majority of the Lenders" means Lenders with Commitments hereunder of not
less than 60% of the Total Commitment, provided that the "Majority of the
Lenders" means 100% of the Lenders for the purpose of voting in respect of
any of the following matters:
(a) any increase in the Total Commitment or any Commitment or the amount
of Borrowings permitted to be outstanding hereunder;
(b) any decrease in any interest or other rate payable hereunder or in
any fee payable hereunder;
(c) any extension of the Maturity Date under Section 4.01(2) or any
reduction or forgiveness of principal of, or interest on, any
Borrowing;
(d) any amendment to this definition or to Section 10.13;
(e) the release of the Kingsway America Guarantee;
(f) any change to the types of Borrowing other than as contemplated
hereunder;
(g) any postponement of any Interest Payment Date;
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(h) any waiver of any Event of Default under Sections 9.01(8), (11), (12)
or (14) ;
(i) any amendment to this Agreement providing for mandatory prepayment of
all or any portion of the Credit Facilities.
(79) "Material Adverse Effect" means a material adverse effect on: (i) the
business, assets, prospects or financial or other condition of a Borrower
or Kingsway America, (ii) the Borrowers' ability to pay or perform the
Outstanding Obligations in whole or in part in accordance with the terms
hereof, (iii) the rights and remedies of an Agent or a Lender under the
Loan Documents, or (iv) the business, assets or financial or other
condition of a Subsidiary of a Borrower or Kingsway America which results
in a material adverse effect on a Borrower or Kingsway America.
(80) "Material Subsidiary" means all those Subsidiaries marked as a Material
Subsidiary on Schedule "B" and any other Subsidiary of either of the
Borrowers or Kingsway America which beneficially own assets of more than
U.S. $5,000,000 in the aggregate.
(81) "Maturity Date" means the date which is 364 days from the Closing Date or
if the maturity date extended in accordance with Section 4.01(2), the last
day of any such extended period(s).
(82) "Multiemployer Plan" means a Plan which is a multiemployer plan as
described in Section 4001(a)(3) of ERISA.
(83) "Net Earned Premiums" means with respect to any Insurance Subsidiary at
any time, the Net Written Premiums written by such Insurance Subsidiary
relating to that portion of the term of its insurance policies which fall
within a given period as shown in the case of an Insurance Subsidiary
domiciled in the United States on line 34, page 7, Part 2, column 4 of the
Annual Statement of such Insurance Subsidiary or on the equivalent line of
the Annual Statement in respect of Insurance Subsidiaries not domiciled in
the United States, or the amount determined in a consistent manner for any
date other than a date as of which an Annual Statement of such Insurance
Subsidiary is prepared.
(84) "Net Income" means earnings of the Borrowers after deducting all expenses
and taxes in accordance with GAAP, calculated on a Consolidated basis.
(85) Intentionally Deleted.
(86) "Net Written Premiums" means, with respect to any Insurance Subsidiary at
any time, the amount of premiums written (after deducting or adding
premiums on business ceded to or assumed from others) as shown in the case
of an Insurance Subsidiary domiciled in the United States on line 34, page
9, Part 2B, column 4 of the Annual Statement of such Insurance Subsidiary
or on the equivalent line of the Annual Statement in respect of Insurance
Subsidiaries not domiciled in the United States, or the amount determined
in a consistent manner for any date other than a date as of which an
Annual Statement of such Insurance Subsidiary is prepared.
(87) "Outstanding Borrowings" means the aggregate principal amount of all
outstanding Borrowings advanced under the Credit Facilities.
(88) "Outstanding Obligations" means without duplication the aggregate of: (i)
Outstanding Borrowings, (ii) all unpaid interest and fees in respect of
Outstanding Borrowings as herein provided, (iii) all other indebtedness,
liabilities and obligations (including without limitation under any
indemnities) herein and under the Loan Documents, and (iv) all other fees,
charges and expenses required to be paid by a Borrower to the Agents or
the Lenders or any of them, hereunder or under any of the Loan Documents.
(89) "Participants" has the meaning set out in Section 10.18.
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(90) "PBGC" means the Pension Benefit Guaranty Corporation established pursuant
to Subtitle A of Title IV of ERISA.
(91) "Permitted Acquisition" means:
(a) any acquisition by any of the Borrowers, Kingsway America or any of
their Subsidiaries with respect to which all of the following
conditions are satisfied:
(i) each business acquired shall be within the Lines of Business
in all material respects,
(ii) any capital stock given as consideration in connection
therewith shall be the capital stock of the Canadian Borrower,
(iii) in the case of an acquisition involving the acquisition of
control of capital stock of any Person immediately after
giving effect to such acquisition, the Person who shall have
acquired such control (or the surviving Person if the
acquisition is effected through a merger or consolidation)
shall be the Canadian Borrower or a wholly-owned subsidiary of
the Canadian Borrower, and
(iv) all of the conditions and requirements of Section 8.03(6)
applicable to such acquisition are satisfied; or
(b) any other acquisition to which the Majority of the Lenders (or the
Administrative Agent on their behalf) shall have given their prior
written consent (which consent may be in their sole discretion and
may be given subject to such additional terms and conditions as the
Majority of the Lenders shall establish) and with respect to which
all of the conditions and requirements set forth in this definition
and in Section 8.03(6), and in or pursuant to any such consent, have
been satisfied or waived in writing by the Majority of the Lenders
(or the Agent on their behalf).
(92) "Permitted Encumbrances" means:
(a) inchoate or statutory liens or trust claims for taxes, assessments
and other governmental charges or levies which are not delinquent or
the validity of which are currently being contested in good faith by
appropriate proceedings provided that there shall have been set aside
a reserve to the extent required by GAAP in an amount which is
reasonably adequate with respect thereto;
(b) Security Interests securing Purchase Money Obligations or Capitalized
Lease Obligations provided the Security Interest charges only the
asset subject of the Purchase Money Obligations or Capitalized Lease
Obligations and no other asset;
(c) Security Interests, other than those described in this Section
1.01(92), the existence of which have been disclosed in writing to
the Administrative Agent and consented to by the Administrative Agent
and the Majority of the Lenders in writing; and
(d) Security Interests securing Indebtedness of Subsidiaries of the
Borrower which are premium finance companies not exceeding U.S.
$10,000,000 in the aggregate;
(e) Security Interests securing indebtedness described in Section
1.01(93)(k);
(f) Security Interests described in Schedule "C";
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(g) a mortgage in the principal amount of U.S. $698,987 issued by Auto
Body Tech Inc. in favour of Republic National Bank bearing interest
at 10% per year maturing July 2017;
(h) Security Interests securing the indebtedness described in Section
1.01(93)(m);
(i) Security Interests securing the indebtedness under the letters of
credit described in Section 1.01(93)(n); and
(j) a first mortgage in favour of Lincoln General Insurance Company,
American Service Insurance Company, American Country Insurance
Company and Universal Casualty Company or such other parties as may
refinance the Indebtedness described in Section 1.01(93)(t) charging
the premises municipally known as 150 Northwest Point, Elk Grove
Village, Illinois, US, 61007.
(93) "Permitted Indebtedness" means the following Indebtedness:
(a) the Outstanding Obligations;
(b) current accounts payable of the Borrowers, Kingsway America and their
Subsidiaries arising in the ordinary course of business from the
purchase of goods and services;
(c) intentionally deleted;
(d) Capitalized Lease Obligations and Purchase Money Obligations of the
Borrowers, Kingsway America and their Subsidiaries (including,
without limitation, Indebtedness to non-vendor third parties incurred
to finance the acquisition of new assets);
(e) Indebtedness of the Borrowers, Kingsway America and their
Subsidiaries in respect of which a Majority of the Lenders have given
their prior written consent as to existence and ranking;
(f) any other Indebtedness of the Borrowers, Kingsway America and their
Subsidiaries not exceeding U.S. $10,000,000 in the aggregate (or such
greater amount with the consent of a Majority of the Lenders) for
borrowed money not otherwise permitted hereunder which is incurred by
any Subsidiary of the Canadian Borrower that is a premium finance
company;
(g) Indebtedness of the Borrowers and Kingsway America pursuant to the
1999 Facility;
(h) Indebtedness of the Borrowers and Kingsway America in favour of any
other lender in respect of 364 day committed credit facilities
provided such facilities are on substantially the same terms and
conditions as the Credit Facilities and provided the lenders under
such credit facilities enter into intercreditor agreements in form
and substance satisfactory to the Agents and the Lenders;
(i) intercompany Indebtedness among the Borrowers, Kingsway America and
any of their Subsidiaries, provided that: (A) such Indebtedness is
unsecured and subordinated in right of collection and payment to the
Outstanding Obligations pursuant to subordination agreements in form
and substance satisfactory to the Agents and the Lenders; (B)
Subsidiaries of the Canadian Borrower domiciled in the United States
of America are permitted to make intercompany advances only to: (x)
the Canadian Borrower or (y) Subsidiaries of the Canadian Borrower
domiciled outside of the United States of America and Canada only to
the extent that all such advances to Subsidiaries of the Canadian
Borrower domiciled outside of the United States of America and Canada
do not exceed U.S. $5,000,000 in the aggregate;
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(j) Indebtedness of the Borrowers under currency and interest rate
hedging agreements entered into in the normal course of business;
(k) Indebtedness under the mortgage described in Section 1.01(92)(g) not
to exceed U.S. $640,000;
(l) Intentionally deleted;
(m) Indebtedness under the syndicated letter of credit facility
established by Royal Bank of Canada Europe Limited as facility agent
in favour of Kingsway Reinsurance Corporation not exceeding U.S.
$350,000,000 in respect of letters of credit to be issued on the
application of Kingsway Reinsurance Corporation for the benefit of
certain Subsidiaries of the Canadian Borrower, State National
Specialty Insurance Company, State and County Mutual Insurance
Company or General Reinsurance Corporation;
(n) Indebtedness under letters of credit issued in favour of Mutual
Service Insurance or Fairfield Insurance Company on the application
of American Country Insurance Company in the ordinary course of
business in the aggregate amount not to exceed U.S. $3,250,000;
(o) Indebtedness (the "Debenture Indebtedness") of the Canadian Borrower
pursuant to a Cdn $78,000,000 offering on December 2, 2002 of 8.25%
debentures maturing December 31, 2007 (the "Debenture Offering");
(p) Indebtedness of the Canadian Borrower, Kingsway America and certain
of their Subsidiaries in connection with preferred securities issued
by Kingsway Financial Capital Trust I (the "Trust Preferred
Securities"), provided that:
(i) there is no cash redemption of the Trust Preferred Securities
without the prior written consent of the Majority of the
Lenders,
(ii) a Default or 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 or the Guarantees issued in connection with the
Trust Preferred Securities (collectively, the "Debentures"),
(iii) no cash dividends may be paid on the Trust Preferred
Securities so long as a Default or Event of Default under this
Agreement has occurred and is continuing,
(iv) the terms and conditions of the Trust Preferred Securities are
otherwise satisfactory to the Majority of the Lenders,
(v) the Administrative Agent shall have received: (A) all material
documentation as determined by the Administrative Agent in its
sole discretion relating to the Trust Preferred Securities and
the Debentures, including, without limitation, all materials
filed with any securities commission, and the Administrative
Agent and the Lenders shall be satisfied with the terms and
conditions thereof, and (B) an executed intercreditor
agreement with the holders of the Trust Preferred Securities
and the Debentures or such other evidence of subordination as
may be satisfactory to the Administrative Agent and the
Lenders in respect of the obligations of the Borrowers,
Kingsway America and their Subsidiaries to the holders of the
Trust Preferred Securities and the Debentures, to provide,
among other things, for subordination of the Trust Preferred
Securities and the Debentures to the payment in full of the
Outstanding Obligations;
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(vi) Kingsway Financial Capital Trust I shall not incur any debts,
liabilities or obligations other than the reasonable fees and
expenses of the trustees under the Debentures (acting solely
in their capacity as trustee and not in their individual
capacity) and the principal, premium (if any) and interest in
respect of the Trust Preferred Securities; and
(vii) the aggregate Indebtedness in respect of the Trust Preferred
Securities does not exceed U.S. $84,536,000, subject to the
consent of the Majority of the Lenders;
(q) Indebtedness of the Canadian Borrower, Kingsway America and certain
of their Subsidiaries in connection with preferred securities issued
by Kingsway Connecticut Statutory Trust I on December 4, 2002 to a
pooling vehicle (all such securities being collectively referred to
herein as the "Trust Pool Securities") provided that:
(i) there is no cash redemption of the Trust Pool Securities
without the prior written consent of the Majority of the
Lenders,
(ii) a Default or 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 or the Guarantees issued in connection with the
Trust Pool Securities (collectively, the "Trust Pool
Debentures");
(iii) no cash dividends may be paid on the Trust Pool Securities so
long as a Default or Event of Default under the Credit
Agreement has occurred and is continuing;
(iv) Kingsway Connecticut Statutory Trust I shall not incur any
debts, liabilities or obligations other than the reasonable
fees and expenses of the trustees under the Trust Pool
Debentures (acting solely in their capacity as trustee and not
in their individual capacity) and the principal, premium (if
any) and interest in respect of the Trust Pool Securities; and
(v) the aggregate Indebtedness in respect of the Trust Pool
Securities does not exceed U.S. $15,464,000 (of which U.S.
$464,000 represents Indebtedness owing from Kingsway
Connecticut Statutory Trust I to a Subsidiary of the Canadian
Borrower);
(r) Indebtedness of the Canadian Borrower, Kingsway America and certain
of their Subsidiaries in connection with the issuance of preferred
securities by Kingsway Delaware Statutory Trust III on May 22, 2003
to a pooling vehicle (all such securities being collectively referred
to herein as the "Second Round Trust Pool Securities") provided that:
(i) there is 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 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 or the Guarantees issued in connection with the
Second Round Trust Pool Securities (collectively, the "Second
Round Trust Pool Debentures");
(iii) no cash dividends may be paid on the Second Round Trust Pool
Securities so long as a Default or Event of Default under the
Credit Agreement has occurred and is continuing;
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(iv) Kingsway Delaware Statutory Trust III shall not incur any
debts, liabilities or obligations other than the reasonable
fees and expenses of the trustees under the Second Round Trust
Pool Debentures (acting solely in their capacity as trustee
and not in their individual capacity) and the principal,
premium (if any) and interest in respect of the Second Round
Trust Pool Securities; and
(v) the aggregate Indebtedness in respect of the Second Round
Trust Pool Debentures does not exceed U.S. $15,464,000 (of
which U.S. $464,000 represents Indebtedness owing from
Kingsway Delaware Statutory Trust III to a Subsidiary of the
Canadian Borrower);
(s) Indebtedness of the Canadian Borrower, Kingsway America and certain
of their Subsidiaries in connection with the issuance on May 15, 2003
of preferred securities by Kingsway Connecticut Statutory Trust II to
a pooling vehicle (all such securities being collectively referred to
herein as the "Third Round Trust Pool Securities") provided that:
(i) there is no cash redemption of the Third Round Trust Pool
Securities without the prior written consent of the Majority
of the Lenders,
(ii) a Default or 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 or the Guarantees issued in connection with the
Third Round Trust Pool Securities (collectively, the "Third
Round Trust Pool Debentures");
(iii) no cash dividends may be paid on the Third Round Trust Pool
Securities so long as a Default or Event of Default under this
Agreement has occurred and is continuing;
(iv) Kingsway Connecticut Statutory Trust II shall not incur any
debts, liabilities or obligations other than the reasonable
fees and expenses of the trustees under the Third Round Trust
Pool Debentures (acting solely in their capacity as trustee
and not in their individual capacity) and the principal,
premium (if any) and interest in respect of the Third Round
Trust Pool Securities; and
(v) the aggregate Indebtedness in respect of the Third Round Trust
Pool Debentures does not exceed U.S. $18,042,000 (of which
U.S. $542,000 represents Indebtedness owing from Kingsway
Connecticut Statutory Trust II to a Subsidiary of the Canadian
Borrower); and
(t) Indebtedness in favour of Lincoln General Insurance Company, American
Service Insurance Company, American Country Insurance Company and
Universal Casualty Company, or such other parties as may refinance
the Indebtedness (supported by the first mortgage described in
Section 1.01(92)(j)), not to exceed U.S. $14,085,000 in aggregate.
(94) "Person" includes an individual, a partnership, a joint venture, a trust,
an unincorporated organization, a company, a corporation, an association,
a government or any department or agency thereof and any other
incorporated or unincorporated entity.
(95) "Plan" means a "pension plan", as such term is defined in Section 3(2) of
ERISA, which is subject to Title IV of ERISA (other than a Multiemployer
Plan), and to which either Borrower or any of such Borrower's Subsidiaries
or any corporation, trade or business that is, along with such Borrower, a
member of a Controlled Group, may have liability.
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(96) "Prime Rate" means an annual fluctuating rate of interest declared by CIBC
from time to time as its prime interest rate for Canadian Dollar
commercial loans in Canada.
(97) "Prime Rate Loans" means loans in Canadian Dollars made by a Canadian
Lender to the Canadian Borrower on which the interest rate is calculated
with reference to the Prime Rate.
(98) "Purchase Money Obligations" means the outstanding balance of the purchase
price of real and/or personal property (including shares), title to which
has been acquired or will be acquired upon payment of such purchase price,
or Indebtedness to non-vendor third parties incurred to finance the
acquisition of such new and not replacement real and/or personal property
or any refinancing of such Indebtedness or outstanding balance.
(99) "Quarterly Certificate" means the officer's certificate described in
Section 8.01(8), substantially in the form of certificate annexed as
Schedule "D".
(100) "Rateable Portion" means, in respect of a Lender, the quotient obtained by
dividing such Lender's Commitment by the Total Commitment at the time of
such calculation.
(101) "Reorganization" means a corporate reorganization, amalgamation and/or
series of asset or share transfers or similar transactions.
(102) "Reportable Event" means any of the events set forth in Section 4043(b) of
ERISA, other than those events as to which the thirty day notice period is
waived under subsections .13, .14, .16, .18, .19 or .20 of PBGC Regulation
2615.
(103) "Rollover" means: (i) in respect of a maturing Bankers' Acceptance or a
maturing BA Equivalent Loan, the replacement in whole or in part of a
maturing Bankers' Acceptance or BA Equivalent Loan with another Bankers'
Acceptance or another BA Equivalent Loan, respectively, or (ii) in respect
of a maturing LIBOR Loan, the replacement in whole or in part of a
maturing LIBOR Loan with another LIBOR Loan.
(104) "Rollover Date" means the date upon which a Rollover occurs.
(105) "Security Interest" includes a mortgage, charge, floating charge, pledge,
hypothec, assignment, lien, interest, claim, encumbrance, conditional sale
agreement or other title retention agreement, subordination, trust or
other security interest or arrangement of any kind or character intended
to create a security interest in substance regardless of whether the
person creating the interest retains an equity of redemption and any
agreement to provide or enter into at any time or on the happening of any
event such a security interest or arrangement.
(106) "Senior Funded Debt" means Funded Debt other than Subordinated Debt.
(107) "Single Employer Plan" means any Plan which is covered by Title IV of
ERISA, but which is not a Multiemployer Plan.
(108) "Stamping Fee" means, with respect to a Bankers' Acceptance, the fee
payable in Canadian Dollars on the date of issuance thereof calculated:
(i) by multiplying the face amount of the Bankers' Acceptance by the
number of days in the Contract Period, then (ii) dividing the product
thereof by 365, then (iii) multiplying the quotient by the Stamping Fee
Margin.
(109) "Stamping Fee Margin" means the applicable percentage as set out in
Schedule "E". For greater certainty, the Stamping Fee Margin varies based
upon the senior unsecured debt rating of the Canadian Borrower in the
manner as provided in Schedule "E".
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(110) "Statutory Capital and Surplus" means, in respect of any Insurance
Subsidiary as of any date, the sum (without duplication) of the total
amounts shown: (i) if such Insurance Subsidiary is not legally domiciled
in the United States, as being the shareholders' equity of such Insurance
Subsidiary as determined in accordance with GAAP; and (ii) if such
Insurance Subsidiary is domiciled in the United States: (A) on line 27,
column 1, page 3 of the Annual Statement of such Insurance Subsidiary, or
(B) as determined in a consistent manner for any date other than the date
as of which an Annual Statement is prepared.
(111) "Subordinated Debt" means Indebtedness of the Borrowers which has been
validly and absolutely postponed and subordinated in right of payment and
collection to the payment in full of the Outstanding Obligations.
(112) "Subsidiaries" means: (i) on and following the Closing Date, with respect
to the Borrowers, those entities listed in Schedule "B"; and (ii) at any
time following the Closing Date, with respect to any Person, any
corporation, partnership, joint venture, limited liability company, trust
or estate of which (or in which) more than 50% of: (a) the issued and
outstanding capital stock having ordinary voting power to elect a majority
of the board of directors of such corporation (irrespective of whether at
the time capital stock of any other class or classes of such corporation
will or might have voting power upon the occurrence of any contingency),
(b) the interest in the capital or profits of such limited liability
company, partnership or joint venture, or (c) the beneficial interest in
such trust or estate, is in each case at such time directly or indirectly
owned or controlled by such Person, by such Person and one or more of its
other Subsidiaries or by one or more of such Person's other Subsidiaries,
and a Subsidiary means any one of them.
(113) "Tangible Net Worth" means, at any time, shareholders equity less goodwill
less other assets normally regarded as intangible assets, all as
determined in respect of the Canadian Borrower on a Consolidated basis in
accordance with GAAP.
(114) "Tax" and "Taxes" means all present and future taxes, levies, imposts,
stamp taxes, duties, charges to tax, fees, deductions, withholdings and
any restrictions or conditions resulting in a charge to tax and all
penalties, interest and other payments on or in respect thereof.
(115) "Tax Returns" means all reports, estimates, information statements and
returns relating to, or required to be filed in connection with, any Taxes
pursuant to the statutes, laws, rules and regulations of any federal,
provincial, municipal, city or foreign governmental taxing authority and
"Tax Return" shall mean any one thereof.
(116) "Total Canadian Commitment" means the aggregate Canadian Commitments of
the Canadian Lenders.
(117) "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 Preferred Securities, Trust
Pool Securities, Second Round Trust Pool Securities and Third Round Trust
Pool Securities (each as defined in Section 1.01(93)); all of which shall
be calculated in respect of the Canadian Borrower on a Consolidated basis
in accordance with GAAP.
(118) "Total Commitment" means the aggregate Commitments of the Lenders.
(119) "Total U.S. Commitment" means the aggregate U.S. Commitments of the U.S.
Lenders.
(120) "Trusts" means, collectively, Kingsway Financial Capital Trust I, Kingsway
Connecticut Statutory Trust I, Kingsway Connecticut Statutory Trust II,
Kingsway Delaware Statutory Trust III and any successors thereof.
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(121) "U.S. Base Rate" means an annual fluctuating rate of interest declared by
CIBC from time to time as its lending rate in respect of U.S. Dollar
commercial loans made in Canada to Canadian borrowers.
(122) "U.S. Base Rate Loans" means loans in U.S. Dollars made by a Canadian
Lender to the Canadian Borrower on which the interest rate is calculated
with reference to the U.S. Base Rate.
(123) "U.S. Borrower" means Kingsway U.S. Finance Partnership, a Delaware
partnership, and its successors and permitted assigns.
(124) "U.S. Commitment" means the commitment of each U.S. Lender to permit
Borrowings by the U.S. Borrower in the aggregate amount of U.S. Dollars
equal to the Equivalent Amount of Canadian Dollars set forth opposite such
U.S. Lender's name on Schedule "A", as such commitment may be reduced from
time to time pursuant to Section 10.03(3) and as such Schedule "A" may be
amended from time to time in accordance with this Agreement.
(125) "U.S. Dollars" and "U.S. $" each means lawful money of the United States
of America.
(126) "U.S. Facility" means the credit facility made available by the U.S.
Lenders to the U.S. Borrower under Section 2.01(2).
(127) "U.S. GAAP" means generally accepted accounting principles which are in
effect in the United States of America from time to time applied in a
consistent manner from period to period.
(128) "U.S. Lenders" means, on the Closing Date, LaSalle Bank National
Association and Canadian Imperial Bank of Commerce, New York Agency, and
thereafter means all financial institutions then participating in the U.S.
Facility.
(129) "U.S. Rateable Portion" means, in respect of a U.S. Lender, the quotient
obtained by dividing such U.S. Lender's U.S. Commitment by the Total U.S.
Commitment at the time of such calculation.
Section 1.02 Audited Financial Statements.
All references in this Agreement to audited financial statements of a
corporation, including the balance sheet and related statements of income,
retained earnings and changes in financial position, mean Consolidated financial
statements prepared by the corporation in accordance with GAAP or U.S. GAAP, as
applicable, together with an auditor's opinion that the statements fairly
present the financial position of the corporation and the results of its
operations for the Financial Year reported on in accordance with GAAP or U.S.
GAAP, as applicable. For greater certainty, financial statements prepared in
respect of the Canadian Borrower and Subsidiaries thereof domiciled in Canada
shall be prepared in accordance with GAAP, and financial statements of the U.S.
Borrower, Kingsway America and Subsidiaries thereof domiciled in the United
States shall be prepared in accordance with U.S. GAAP.
Section 1.03 Canadian Currency.
Unless otherwise specified herein, all amounts and values referred to in this
Agreement shall be calculated in lawful money of Canada.
Section 1.04 Interest Act.
Unless otherwise specified, all annual rates of interest referred to herein are
based on a calendar year of 365 or 366 days, as the case may be. Where a rate of
interest hereunder is calculated on the basis of a year (the "Deemed Year")
which contains fewer days than the actual number of days in the calendar year of
calculation, such rate of interest shall be expressed as a yearly rate for the
purposes of the Interest Act
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(Canada) by multiplying such rate of interest by the actual number of days in
the calendar year of calculation and dividing it by the number of days in the
Deemed Year.
Section 1.05 Change in Rates.
Any change in the Prime Rate, the U.S. Base Rate or the Alternate Base Rate is
to be effective on the date such change is established whether or not a Borrower
receives notice thereof.
Section 1.06 Maximum Interest Rate.
(1) In the event that any provision of this Agreement would oblige a Borrower
to make any payment of interest or any other payment which is construed by
a court of competent jurisdiction to be interest in an amount or
calculated at a rate which would be prohibited by applicable law,
regulation, order, rule or direction (a "Usury Restraint") which prohibits
or restricts the charging, receipt or retention of interest or other
amounts at the rates and amounts set forth herein (the "Stated Rate") in
excess (the "Excess") of the maximum rates or amount (the "Maximum Rate")
stipulated in the Usury Restraint, then notwithstanding such provision,
such amount or rate shall be deemed to have been adjusted nunc pro tunc to
the Maximum Rate, such adjustment to be effected, to the extent necessary,
as follows:
(a) firstly, by reducing the amount or rate of interest required to be
paid under Section 5.01 of this Agreement; and
(b) thereafter, by reducing any fees, commissions, premiums and other
amounts which would constitute interest for the purposes of such
Usury Restraint;
(2) If, notwithstanding the provisions of clause (a) of this Section 1.06 and
after giving effect to all adjustments contemplated thereby, the Agents,
the Lenders, or any of them, shall have received an amount in excess of
the Maximum Rate, then such Excess shall be applied by the Administrative
Agent (on behalf of the Lenders) rateably in accordance with the Lenders'
respective Commitments, to the reduction of the principal balance of the
Outstanding Borrowings and not to the payment of interest or if such
excessive interest exceeds such principal balance, such Excess shall be
refunded to the Borrowers; and
(3) Any amount or rate of interest referred to in this Section shall be
determined in accordance with generally accepted actuarial practices and
principles at an effective annual rate of interest over the term of this
Agreement on the assumption that any charges, fees or expenses that fall
within the meaning of "interest" (as defined in Usury Restraint) shall, if
they relate to a specific period of time, be prorated over that period of
time and otherwise be prorated over the terms of this Agreement and, in
the event of dispute, a certificate of a Fellow of the Canadian Institute
of Actuaries appointed by the Administrative Agent (on behalf of the
Lenders) shall be conclusive for the purposes of such determination.
Section 1.07 Headings and Table of Contents.
The division of this Agreement into Articles and Sections and the provision of a
Table of Contents and the insertion of headings are for convenience of reference
only and shall not affect the meaning or interpretation of this Agreement.
Section 1.08 References.
All references to Sections, Articles and Schedules are to Sections and Articles
of and Schedules to this Agreement. The words "hereto", "herein", "hereof",
"hereunder", "this Agreement" and similar expressions mean and refer to this
Agreement.
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Section 1.09 Number and Gender.
Where the context so requires, words importing the singular include the plural
and vice versa, and words importing gender include the masculine, feminine and
neuter genders.
Section 1.10 Copies.
Whenever a Borrower is required by this Agreement to deliver documentation to
the Administrative Agent for distribution to the Lenders, such Borrower shall
deliver to the Administrative Agent a sufficient number of copies of the
relevant document so that each Lender is provided with at least one copy.
Section 1.11 Schedules.
The Schedules forming part of this Agreement are as follows:
Schedule "A" - Commitments
Schedule "B" - Subsidiaries
Schedule "C" - Security Interests
Schedule "D" - Quarterly Certificate
Schedule "E" - Pricing Grid
Schedule "F" - Litigation
Schedule "G" - Taxes
Schedule "H" - Labour Matters
Schedule "I" - Pensions
Schedule "J" - Permits
Schedule "K" - Jurisdictions
Schedule "L" - Assignment and Acceptance
ARTICLE TWO
CREDIT FACILITIES
Section 2.01 Credit Facilities.
Effective on the Closing Date: (i) the Prior Credit Agreement is amended and
restated pursuant to this Agreement; (ii) all Commitments under and as defined
in the Prior Credit Agreement shall continue as Commitments under this Agreement
to the extent permitted under this Agreement; and (iii) all Outstanding
Obligations under and as defined in the Prior Credit Agreement shall continue as
Outstanding Obligations under this Agreement and the other Loan Documents to the
extent permitted by this Agreement.
(1) Subject to the provisions of this Agreement, each of the Canadian Lenders
severally agrees to make available to the Canadian Borrower such Lender's
Canadian Commitment in respect of a revolving term credit facility
available by way of Prime Rate Loans, Bankers' Acceptances, U.S. Base Rate
Loans, LIBOR Loans and BA Equivalent Loans (the "Canadian Facility").
(2) Subject to the provisions of this Agreement, each of the U.S. Lenders
severally agrees to make available to the U.S. Borrower such Lender's U.S.
Commitment in respect of a revolving term credit facility available by way
of Alternate Base Rate Loans and LIBOR Loans (the "U.S. Facility").
(3) The maximum principal aggregate amount available under the Credit
Facilities is Cdn $66,500,000 or the Equivalent Amount in U.S. Dollars.
Prior to the Closing Date, the Borrowers shall advise the Administrative
Agent as to the allocation of such maximum principal aggregate amount as
between the Canadian Facility and the U.S. Facility. The Borrowers shall
be entitled to
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change any such allocation at the beginning of each fiscal quarter of the
Canadian Borrower by providing the Administrative Agent with notice of the
desired reallocation not less than five Business Days prior to the first
day of such fiscal quarter. Should any such reallocation result in the
outstanding principal amount of either Credit Facility being in excess of
the maximum principal amount permitted to be outstanding under such
Facility, the applicable Borrower shall pay to the applicable Lender prior
to the effective date of any such reallocation the amount necessary to
reduce such excess to zero. If the applicable Borrower fails to reduce
such excess to zero prior to the effective date of the reallocation, the
applicable Lender shall have no obligation to effect the reallocation. The
allocation on the Closing Date is as set out in Schedule "A". For greater
certainty, the Borrowers shall be entitled to borrow from CIBC and
Canadian Imperial Bank of Commerce, New York Agency up to the maximum
aggregate Commitment of such Lenders and may allocate Borrowings as
between such Lenders in accordance with this Section, notwithstanding that
as at the Closing Date the Commitment of CIBC set out in Schedule "A" is
stated to be zero.
(4) The obligations of the Lenders hereunder with respect to the Credit
Facilities are several (and not joint or joint and several) and,
accordingly, no Lender shall be liable to either Borrower or any other
Person for any failure or delay in performance by any other Lender
hereunder, under any Loan Document or under any other document, instrument
or agreement contemplated hereunder. In the event any Lender shall fail to
perform any of its obligations hereunder at any time, the remaining
Lenders, or any one or more of them, shall have the option, but shall be
under no obligation, to assume the obligations hereunder of such
defaulting Lender, and if the remaining Lenders, or any one or more of
them, shall elect to assume such defaulted obligations, appropriate
amendments, if necessary, shall be made to this Agreement to reflect such
assumption.
Section 2.02 Revolving Feature of Credit Facility.
Subject to the limitations in this Agreement, the Borrowers may increase or
decrease Borrowings under the Credit Facilities by borrowing, repaying and
reborrowing any Prime Rate Loan, U.S. Base Rate Loan, Alternate Base Rate Loan
and LIBOR Loan and by issuing, repaying and reissuing any Bankers' Acceptance.
Section 2.03 Lenders' Commitments.
As nearly as may be practicable in the circumstances, (1) the portion of the
Outstanding Borrowings under the Canadian Facility at any time provided by each
Canadian Lender shall be approximately equal to each such Lender's Canadian
Rateable Portion, (2) the portion of the Outstanding Borrowings under the U.S.
Facility at any time provided by each U.S. Lender shall be approximately equal
to each such Lender's U.S. Rateable Portion.
Section 2.04 Purposes of Credit Facilities.
The Borrowers shall use the proceeds of Borrowings for general corporate
purposes, to repay the Northern Trust Indebtedness and to fund Permitted
Acquisitions.
Section 2.05 Evidence of Indebtedness.
(1) Each Lender shall maintain accounts and records evidencing the obligations
of the Borrowers to such Lender hereunder. The Lenders' accounts and
records shall constitute prima facie evidence of the indebtedness of the
Borrowers to the Lenders hereunder in the absence of manifest error.
(2) The Administrative Agent shall open and maintain on its books control
accounts evidencing Borrowings advanced by the Lenders hereunder and all
other amounts owed by the Borrowers to the Lenders hereunder.
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Section 2.06 Illegality.
If the introduction of or any change in any Applicable Law or in the
interpretation or application thereof by any court or by any governmental
authority charged with the administration thereof, makes it unlawful or
prohibited for a Lender to make, fund or maintain its commitment or any portion
thereof or to perform any of its obligations under this Agreement, such Lender
may, by ten days written notice to the Administrative Agent and the Borrowers
(unless the provision of the Applicable Law requires earlier prepayment in which
case the notice period shall be such shorter period as required to comply with
the Applicable Law), terminate its obligations under this Agreement and in such
event, subject to the right of any Lender to assume the obligations of the
terminating Lender, the Borrowers shall prepay such Borrowings forthwith (or at
the end of such period as the terminating Lender in its discretion agrees),
without notice or penalty (other than breakage costs), together with all accrued
but unpaid interest and fees as may be applicable to the date of payment, or
such Lender may, by written notice to the Borrowers, convert such Borrowings
forthwith into another basis of Borrowing available under this Agreement.
ARTICLE THREE
PROCEDURES APPLICABLE TO BORROWINGS
Section 3.01 Notices of Borrowing.
Subject to the terms and conditions hereof, the Canadian Borrower may obtain a
Borrowing by way of Prime Rate Loans, U.S. Base Rate Loans, Bankers' Acceptances
or BA Equivalent Loans (including Conversions and Rollovers) by giving the
Administrative Agent prior written notice by 10:00 a.m. (Toronto time) not less
than one Business Day prior to the date of its intention to so borrow and may
obtain a Borrowing by way of LIBOR Loans by giving the Administrative Agent
prior written notice by 10:00 a.m. (Toronto time) not less than three Business
Days prior to the date of its intention to so borrow.
Subject to the terms and conditions hereof, the U.S. Borrower may obtain a
Borrowing by way of Alternate Base Rate Loans by giving the Administrative Agent
prior written notice by 10:00 a.m. (Toronto time) not less than one Business Day
prior to the date of its intention to so borrow and may obtain a Borrowing by
way of a LIBOR Loan by giving the Administrative Agent prior written notice by
10:00 a.m. (Toronto time) not less than three Business Days prior to the date of
its intention to so borrow.
Section 3.02 Conversions.
Subject to delivery of timely notice in accordance with this Agreement and the
other provisions of this Agreement: (i) the Canadian Borrower may convert Prime
Rate Loans into Bankers' Acceptances at any time; (ii) the Canadian Borrower may
convert Bankers' Acceptances into Prime Rate Loans on the applicable maturity
date of such Bankers' Acceptances; (iii) a Borrower may convert LIBOR Loans into
U.S. Base Rate Loans or Alternate Base Rate Loans, as applicable, on the
applicable maturity date of such LIBOR Loans; and (iv) a Borrower may convert
Alternate Base Rate Loans or U.S. Base Rate Loans, as applicable, into LIBOR
Loans at any time.
Section 3.03 Provisions relating to Bankers' Acceptances.
(1) The Canadian Borrower shall deliver to each Canadian Lender which is to
accept Bankers' Acceptances from time to time, a supply of drafts in the
appropriate form, executed on behalf of the Canadian Borrower, but with
the date, the face amount and the maturity thereof left blank. In the
alternative, the Canadian Borrower shall provide to the Canadian Lenders a
power of attorney with respect to Bankers' Acceptances. On the applicable
Borrowing Date, Conversion Date, or Rollover Date, an accepting Lender
shall withdraw one or more presigned drafts from its inventory thereof, or
act upon the power of attorney with respect to a draft, and complete the
same by inserting the applicable Borrowing Date, Conversion Date or
Rollover Date, the face amount thereof, and the maturity date thereof and,
upon payment of the Stamping Fee to the
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Administrative Agent (for rateable distribution to each Lender), shall
accept such draft, discount same at the Discount Rate, and shall remit the
Discount Proceeds thereof to the Canadian Borrower.
(2) If a Bankers' Acceptance is outstanding at any time that the
Administrative Agent or the Lenders have demanded repayment of the
Outstanding Obligations pursuant to the terms of this Agreement, the
Canadian Borrower shall forthwith upon such demand pay to the
Administrative Agent on behalf of the accepting Lenders, an amount equal
to the face amount of such Bankers' Acceptance. The proceeds of such
payment shall be held by the Administrative Agent for set-off against the
liability of the Canadian Borrower in respect of such Bankers' Acceptance.
The accepting Lenders shall credit the Borrowers with interest on such
proceeds at the prevailing rate for comparative term deposits maturing on
the maturity date of the Bankers' Acceptance.
(3) Upon maturity of a Banker's Acceptance, the Canadian Borrower shall pay to
the Administrative Agent an amount equal to the face amount of the
maturing Bankers' Acceptance unless prior to the maturity date the
Canadian Borrower shall have requested either a Rollover or a Conversion
of the maturing Bankers' Acceptance.
(4) Until termination or expiration of the Credit Facilities, a maturing
Bankers' Acceptance may be renewed by a Rollover or converted into a Prime
Rate Loan on the applicable Rollover Date or Conversion Date, provided no
Default or Event of Default shall exist.
(5) Should the conditions set out in Section 3.03(3) or (4) not be satisfied,
or should a Bankers' Acceptance not be available for a period which
matures prior to the expiry or termination of the Canadian Facility, then
the maturing Bankers' Acceptance shall be converted by the Administrative
Agent and the accepting Lender into a Prime Rate Loan.
(6) The acceptance by a Lender of a Bankers' Acceptance shall be deemed to be
a Borrowing in an amount equal to the face amount of such Bankers'
Acceptance for the purpose of determining: (i) the portion of the Canadian
Facility remaining available for drawdown; (ii) the maximum level of
Borrowings permitted to be outstanding hereunder; (iii) the portion of a
Lender's Commitment advanced.
(7) If a Lender is not permitted by Applicable Law, or does not by virtue of
customary market practice, accept Bankers' Acceptances, each time a
Borrower requests a Bankers' Acceptance such Lender shall, in lieu of
accepting a Bankers' Acceptance make a BA Equivalent Loan ("BA Equivalent
Loan") in an amount equal to the sum of the Discount Proceeds (plus the
applicable Stamping Fee) which would be derived from a hypothetical sale
of a draft accepted by it ("Notional Acceptances"). In addition, such
Lender shall be entitled to deduct from the amount of the BA Equivalent
Loan an amount equal to the Stamping Fee that would have been payable to
it with regard to the Notional Acceptances with respect thereto. Other
than as set forth in this Section 3.03(7), unless the context clearly
requires otherwise, each reference in this Agreement to Bankers'
Acceptances shall be deemed to include BA Equivalent Loans and all the
terms and conditions of this Agreement with respect to Bankers'
Acceptances shall be applicable to BA Equivalent Loans.
Section 3.04 Provisions relating to LIBOR Loans.
(1) Subject to availability, each LIBOR Loan shall have a LIBOR Period of
approximately one month, two months, three months or six months at the
option of the Borrower. A Borrower shall not be entitled to obtain a LIBOR
Loan which matures after the Maturity Date.
(2) The principal amount of LIBOR Loans outstanding at any time shall be not
less than U.S. $2,000,000 and are available in whole multiples of U.S.
$100,000.
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(3) If the Administrative Agent shall have determined in good faith that (a)
U.S. Dollar deposits in the relevant amount and for the relevant LIBOR
Period are not available to the Administrative Agent in the London
interbank eurocurrency market or (b) by reason of circumstances affecting
the London interbank eurocurrency market, adequate means do not exist for
ascertaining the interest rate applicable hereunder to LIBOR Loans, then,
upon notice from the Administrative Agent to the Borrowers and the
Lenders, the obligations of all Lenders hereunder to make or continue any
Borrowings as, or to convert any Borrowings into, LIBOR Loans shall
forthwith be suspended until the Administrative Agent shall notify the
Borrowers and the Lenders that the circumstances causing such suspension
no longer exist and the Administrative Agent and the Lenders shall be
entitled to convert the contemplated LIBOR Loan into a U.S. Base Rate Loan
or Alternate Base Rate Loan, as applicable.
(4) In the event any Lender shall incur any loss or expense (including any
loss or expense incurred by reason of the liquidation or reemployment of
deposits or other funds acquired by such Lender to make, continue or
maintain any portion of the principal amount of any Borrowing as, or to
convert any portion of the principal amount of any Borrowing into, a LIBOR
Loan) as a result of:
(a) any conversion or repayment or prepayment of the principal amount of
any LIBOR Loans on a date other than the scheduled last day of the
LIBOR Period applicable thereto;
(b) any Borrowings not being made as LIBOR Loans on the applicable
Borrowing Date; or
(c) any Borrowings not being converted into LIBOR Loans on the applicable
Conversion Date,
then, upon the written notice of such Lender to the Borrowers (with a copy
to the Administrative Agent), the Borrowers shall promptly (and, in any
event, within three Business Days of receipt of such notice) pay directly
to such Lender such amount as will (in the reasonable determination of
such Lender) reimburse such Lender for such loss or expense. Such written
notice shall, in the absence of manifest error, be conclusive and binding
on the Borrowers.
(5) Overdue amounts in respect of a LIBOR Loan (including overdue interest)
may at the option of the Administrative Agent be either converted into a
U.S. Base Rate Loan or Alternate Base Rate Loan, as appropriate, or
considered to be a LIBOR Loan for one or more LIBOR Periods or durations
as the Administrative Agent may determine, and bearing interest at the
applicable interest rate both before and after default, Demand and
judgment.
(6) The Borrowers shall repay the principal amount of each LIBOR Loan on the
Rollover Date unless:
(a) the maturing LIBOR Loan is renewed pursuant to a Rollover or
converted pursuant to a Conversion; or
(b) repayment of the Outstanding Obligations shall have been accelerated
or otherwise required to be paid at an earlier date pursuant to the
terms hereof, in which case LIBOR Loans shall be repaid on the date
such repayment is due.
(7) If on the applicable Rollover Date a LIBOR Loan is not repaid on its
renewal pursuant to a Rollover or converted pursuant to a Conversion, the
Lenders may convert the maturing LIBOR Loan into a U.S. Base Rate Loan or
Alternate Base Rate Loan, as applicable.
(8) Each Lender may, if it so elects, fulfill its obligation to make, continue
or convert a LIBOR Loan hereunder by causing one of its foreign branches
or Affiliates (or an international banking facility created by such
Lender) to make or maintain such LIBOR Loan; provided, however, that such
LIBOR Loan shall nonetheless be deemed to have been made and to be held by
such Lender,
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and the obligation of a Borrower to repay such LIBOR Loan shall
nevertheless be to such Lender for the account of such foreign branch,
Affiliate or international banking facility.
Section 3.05 Reliance on Oral Instructions.
The Lenders and the Agents shall be entitled to act upon the oral instructions
of any Person whom the Lenders or the Agents believe is a Person a Borrower has
identified as being a Person authorized to give instructions regarding matters
contemplated by this Agreement, including, without limiting the generality of
the foregoing, the Credit Facilities. None of the Lenders nor any of the Agents
shall be responsible for any error or omission relating to such instructions.
Oral instructions shall, at the request of an Agent or a Lender, be confirmed
immediately in writing by the Borrowers. A Borrower may revoke the authority of
any authorized Person by notifying the Administrative Agent in writing, which
notice shall be effective on the Business Day immediately following the date of
its actual receipt by the Administrative Agent.
ARTICLE FOUR
PAYMENTS
Section 4.01 Repayment.
(1) Unless the Outstanding Obligations shall have been required to be paid at
an earlier date pursuant to the terms hereof, the Borrowers shall repay
the Outstanding Obligations in full on the Maturity Date or the then
applicable maturity date if the Lenders have agreed to extend the maturity
date of the Credit Facilities in accordance with Section 4.01(2).
(2) Upon the written request of the Borrowers to the Administrative Agent, the
Lenders shall have the right in their sole discretion by a decision of the
Majority of the Lenders to extend the maturity date of the Credit
Facilities for successive periods of 364 days. Any such written request
shall be delivered by the Borrowers and received by the Administrative
Agent not more than 90 days and not less than 60 days prior to the
Maturity Date or the then applicable maturity date. The Administrative
Agent will give written notice to the Borrowers of the decision of the
Majority of the Lenders to extend or not to extend the maturity date of
the Credit Facilities within 30 days of the date that it receives the
extension request. If the Administrative Agent fails to give such written
notice to the Borrowers within such 30 day period, the Majority of the
Lenders shall be deemed to have decided not to extend the maturity date of
the Credit Facilities.
Section 4.02 Mandatory Repayments.
If for any reason, Outstanding Borrowings exceed the maximum principal amount
permitted hereunder, including, without limitation, as a result of currency
fluctuations, the Borrowers shall forthwith pay to the Administrative Agent for
distribution to the Lenders rateably, an amount sufficient to reduce the
Outstanding Borrowings to the maximum levels permitted hereunder.
Section 4.03 Permanent Prepayment.
A Borrower shall have the right at any time or from time to time to permanently
prepay without fee or penalty all or any Prime Rate Loans, U.S. Base Rate Loans,
Alternate Base Rate Loans or BA Equivalent Loans by providing the Administrative
Agent with five day's prior written notice of its intention to do so. A Borrower
shall have the right at any time or from time to time to permanently prepay all
or any LIBOR Loans with five days' prior written notice of its intention to do
so without fee or penalty except for the payment of customary breakage costs. No
permanent prepayment, in whole or in part, will be permitted of any Bankers'
Acceptance prior to maturity of such Banker's Acceptance. Amounts permanently
prepaid under this Section 4.03 may not be reborrowed by either of the
Borrowers.
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Section 4.04 Payments Generally.
Each payment under this Agreement shall be made for value at or before 1:00 p.m.
(Toronto time) on the day such payment is due, provided that, if any such day is
not a Business Day, such payment shall be deemed for all purposes of this
Agreement to be due on the Business Day next following such day (and any such
extension shall be taken into account for purposes of the computation of
interest and fees payable under this Agreement). All payments shall be made to
the Branch of Account.
Section 4.05 No Credit for Trust Funds.
For greater certainty, payments of any nature whatsoever made by a Borrower or
Kingsway America to an Agent or a Lender which the recipient is required to pay
to any Person by reason of any trust imposed by law or by any Person upon
amounts received by the recipient from a Borrower or Kingsway America, shall not
be credited against, or deemed to be payment on account of, all or any portion
of the Outstanding Borrowings. All costs and expenses incurred by any Agent or
any Lender, their agents, representatives and solicitors in connection with the
repayment of such monies to any Person shall be for the account of the Borrowers
and payable on demand. Interest shall accrue on these costs and expenses, until
paid, at the Prime Rate.
Section 4.06 No Withholding.
Each interest, fee or similar payment under this Agreement, including any
penalties affected thereto, shall be made without set off or counterclaim and
without withholding for or on account of any present future taxes or duties
imposed by any federal, state, provincial or other taxing authority. In the
event a Borrower is required to deduct or withhold any amount for or on account
of any such taxes or duties, such Borrower shall pay to the Lenders such
additional amounts as may be necessary to ensure that the Lenders receive a net
amount equal to the face amount which they would have received had such
interest, fee or similar payment been made without such deduction or
withholding.
ARTICLE FIVE
INTEREST, FEES AND EXPENSES
Section 5.01 Payment of Interest.
(1) Rate. The interest rate payable on Outstanding Borrowings shall vary based
upon the senior unsecured debt rating of the Canadian Borrower; provided
that in the case of a LIBOR Loan or a Bankers' Acceptance, any variance in
interest rate or in the LIBOR Margin or Stamping Fee Margin shall be
effective only in respect of LIBOR Loans advanced, converted or renewed or
Bankers' Acceptance accepted, as applicable, following the change in
rating and all Bankers' Acceptance and LIBOR Loans outstanding on the date
of a change in rating shall continue to bear interest at the rate payable
thereon on the date immediately prior to the date of the rating change
until maturity of such LIBOR Loans or Bankers' Acceptances, as the case
may be. The Borrowers shall pay interest on Outstanding Borrowings at the
rates set out in the grid annexed as Schedule "E".
(2) Calculation. Interest on Prime Rate Loans, U.S. Base Rate Loans and
Alternate Base Rate Loans shall be calculated daily and payable monthly in
arrears on each Interest Payment Date for the period commencing on the
first day of the previous month and terminating on the last day of such
month, both inclusive, and shall accrue on a daily basis on the principal
amount of such Loans remaining unpaid from time to time and on the basis
of the actual number of days elapsed on the basis of a year of 365 days,
with interest on overdue interest at the same rate. Interest on LIBOR
Loans shall be paid in arrears on the applicable Interest Payment Date and
shall be calculated on the applicable daily balance for the actual number
of days elapsed on the basis of a year of 360 days.
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Section 5.02 Stamping Fees.
Upon acceptance by a Canadian Lender of a Bankers' Acceptance or upon the
advance of a BA Equivalent Loan, the Canadian Borrower shall pay the applicable
Stamping Fee to such Lender. The Stamping Fee Margin in respect of any Bankers'
Acceptance or any BA Equivalent Loan shall be determined on the basis of the
senior unsecured debt rating of the Canadian Borrower as set out on the grid
annexed as Schedule "E".
Section 5.03 Standby Fees.
The Borrowers shall pay a standby fee calculated on the unused portion of the
Total Commitment. The fees payable shall be determined on the senior unsecured
debt rating of the Canadian Borrower as set out in the grid annexed as Schedule
"E". Standby Fees are calculated daily and payable quarterly in arrears on the
first Business Day of the following fiscal quarter of the Canadian Borrower.
Section 5.04 Extension Fee.
The Borrowers shall pay on or prior to the Closing Date to the Administrative
Agent (for distribution to the Lenders rateably in accordance to their
respective Rateable Portions) an extension fee equal to 0.175% of the Total
Commitment.
Section 5.05 Administration Fees.
The Borrowers shall pay to the Administrative Agent the administration fees as
agreed between the Borrowers and the Administrative Agent.
Section 5.06 Change in Circumstances.
(1) Reduction in Rate of Return. If at any time, and from time to time, the
Administrative Agent or a Lender determines, acting reasonably, that (a)
any change in any Applicable Law or any interpretation thereof after the
date of execution hereof, or (b) compliance by a Lender with any
direction, requirement or request from any regulatory authority given
after the date of execution hereof, whether or not having the force of
law, has or would have, as a consequence of such Lender's obligation under
this Agreement and taking into consideration such Lender's policies with
respect to capital adequacy, the effect of reducing the rate of return on
such Lender's capital to a level below that which such Lender could have
achieved but for such change or compliance, then from time to time, upon
demand by the Administrative Agent (on behalf of such Lender), the
Borrowers shall pay such Lender such additional amounts as will compensate
such Lender for such reduction.
(2) Taxes, Reserves, Capital Adequacy, etc. If after the date of execution
hereof, any introduction of any Applicable Law or any change or
introduction of a change in any Applicable Law (whether or not having the
force of law) or in the interpretation or application thereof by any court
or by any governmental agency, central bank or other authority or entity
charged with the administration thereof or any change in the compliance of
any Lender therewith now or hereafter:
(a) subjects such Lender to, or causes the withdrawal or termination of a
previously granted exemption with respect to, any Tax or changes the
basis of taxation, or increases any existing Tax, on payments of
principal, interest, fees or other amounts payable by the Borrowers
to such Lender under this Agreement (except for taxes on the overall
net income of such Lender),
(b) imposes, modifies or deems applicable any reserve, special deposit,
deposit insurance or similar requirement against assets held by, or
deposits in or for the account of or loans by or any other
acquisition of funds by, an office of such Lender,
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(c) imposes on such Lender or expects there to be maintained by such
Lender any capital adequacy or additional capital requirement in
respect of any Borrowing or its Commitment hereunder or any other
condition with respect to this Agreement, or
(d) imposes any Tax on reserves or deemed reserves with respect to the
undrawn portion of the Credit Facilities,
and the result of any of the foregoing, in the sole determination of such
Lender acting reasonably, shall be to increase the cost to, or reduce the
amount of principal, interest or other amount received or receivable by
such Lender hereunder or its effective return hereunder in respect of
making, maintaining or funding a Borrowing under this Agreement, such
Lender shall, acting reasonably, determine that amount of money which
shall compensate such Lender for such increase in cost or reduction in
income (herein referred to as "Additional Compensation"). Upon such Lender
having determined that it is entitled to Additional Compensation in
accordance with the provisions of this Section 5.06, such Lender shall
promptly so notify the Borrowers through the Administrative Agent, and
shall provide to the Borrowers, through the Administrative Agent, a
photocopy of the relevant law, rule, guideline, regulation, treaty or
official directive and a certificate of a duly authorized officer of such
Lender setting forth the Additional Compensation and the basis of
calculation thereof, which shall be prima facie evidence of such
Additional Compensation. The affected Lender shall promptly notify the
Borrowers, through the Administrative Agent, and the Borrowers shall pay
such Lender within ten Business Days of the giving of such notice, the
Additional Compensation calculated to the date of such notification. An
affected Lender shall be entitled to be paid such Additional Compensation
from time to time to the extent that the provisions of this Section 5.06
are then applicable notwithstanding that a Lender has previously been paid
Additional Compensation. If it is commercially reasonable, the affected
Lender shall make reasonable efforts to limit the incidents of any such
Additional Compensation.
Section 5.07 Reimbursement of Expenses.
All statements, reports, certificates, opinions and other documents or
information required to be furnished to the Agents or the Lenders by a Borrower
or any Subsidiary of a Borrower under this Agreement shall be supplied without
cost to the Agents or the Lenders. The Borrowers, jointly and severally, agree
to pay promptly on demand all of the Agents' and the Lenders' reasonable legal
fees and disbursements, documentation costs and other reasonable expenses
incurred in connection with the preparation, negotiation, documentation and
operation of this Agreement and any amendment of or supplement, waiver or
modification to this Agreement, and any other document prepared in connection
herewith, whether or not any amounts are advanced under this Agreement. In
addition, the Borrowers agree to pay the reasonable legal fees and disbursements
and other expenses incurred by the Agents and the Lenders in the enforcement or
preservation of any rights under this Agreement and all documents delivered in
connection herewith (including pursuant to a work-out or restructuring).
Section 5.08 Determination Conclusive.
Each determination by the Administrative Agent or the Lenders, as applicable, of
any rate or fee shall, in the absence of manifest error, be final, conclusive
and binding on the Borrowers.
Section 5.09 Default Interest.
Upon the occurrence of an Event of Default, the Borrowers shall pay interest on
Outstanding Borrowings both before and after judgment at a rate per annum equal
to the U.S. Base Rate plus 2.5%, calculated on a daily basis and on the basis of
the actual number of days elapsed, computed from the date of occurrence of the
Event of Default for so long as such Event of Default continues. Such interest
shall be payable upon Demand by the Administrative Agent or any Lender and shall
be compounded on each Interest Payment Date.
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ARTICLE SIX
CONDITIONS PRECEDENT
Section 6.01 Conditions - Initial Borrowing.
The obligation of the Lenders to make available the initial Borrowing under this
Agreement is subject to the terms and conditions of this Agreement and is
conditional upon satisfactory evidence being given to the Administrative Agent,
the Lenders and their counsel as to compliance with the following conditions:
(1) Resolutions and Certificates. The Administrative Agent shall have
received, duly executed and in form and substance satisfactory to it:
(a) a certified or notarial copy of the constating documents and by-laws
of the Canadian Borrower, Kingsway America and Metro Claim Services
Inc. together with all amendments thereto and a certificate of good
standing for each such Person, each case certified as of a recent
date by the appropriate governmental officer in its jurisdiction of
organization and a copy of the resolutions of the board of directors
of the Canadian Borrower and Kingsway America authorizing the
execution, delivery and performance of the Loan Documents and any
other instruments contemplated hereunder, certified by an appropriate
officer of the Canadian Borrower and Kingsway America, as applicable;
(b) a certificate of incumbency for the Canadian Borrower and Kingsway
America showing the names, offices and specimen signatures of the
officers who will execute the Loan Documents and any other
instruments contemplated hereunder and thereunder;
(c) a copy of the partnership agreement constituting the U.S. Borrower;
(d) a copy of the constating documents and by-laws of each partner of the
U.S. Borrower (collectively the "Partners" and each a "Partner") and
a copy of the resolutions of the board of directors of each Partner
authorizing the execution, delivery and performance of this Agreement
and any other instruments contemplated hereunder;
(e) a certificate of incumbency of each Partner showing the names,
offices and specimen signatures of the officers who will execute this
Agreement and any other instruments contemplated hereunder and
thereunder;
(f) such additional supporting documents as the Administrative Agent or
its counsel may reasonably request.
(2) Financing Documentation. The Administrative Agent shall have received
certified copies of all loan and security documentation affecting the
Borrowers, Kingsway America and their Subsidiaries as at the Closing Date
and the Lenders shall be satisfied with the terms and conditions thereof.
(3) Delivery of Guarantee. The Administrative Agent shall have received from
the Borrowers and from Kingsway America the duly signed and executed
Kingsway America Guarantee (in form and substance satisfactory to the
Administrative Agent, the Lenders and their counsel).
(4) Legal Opinions. The Administrative Agent shall have received from Canadian
counsel to the Canadian Borrower, favourable legal opinions in connection
with this Agreement and from United States counsel to the U.S. Borrower
and Kingsway America, favourable legal opinions in connection with this
Agreement and the Kingsway America Guarantee, in each case in form and
substance satisfactory to the Administrative Agent and the Lenders.
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(5) Promissory Notes. The Administrative Agent shall have received from the
Borrowers promissory notes, in form and substance satisfactory to the
Administrative Agent, the Lenders and their counsel, to replace promissory
notes issued by the Borrowers on May 28, 2002.
(6) Intercreditor Agreement. The Administrative Agent shall have received the
duly signed and executed Intercreditor Agreement, in form and substance
satisfactory to the Administrative Agent, the Lenders and their counsel,
from each of the parties thereto.
(7) Material Adverse Effect. Nothing shall have occurred nor any fact become
known which an Agent or any Lender was not previously aware of and which
could reasonably be expected to have a Material Adverse Effect.
(8) Material Adverse Change. There shall have been no material adverse change
from the Canadian Borrower's audited Consolidated financial statements for
the financial year ending December 31, 2002.
(9) Fees and Disbursements. The Agents and the Lenders shall have received
payment in full of the extension fee specified in Section 5.04 and all
fees and out of pocket expenses payable to the Agents and the Lenders
which have become due (including fees and expenses of counsel to the
Agents).
(10) Security Interests. All Security Interests charging any asset of the
Borrowers, Kingsway America or any Subsidiary of the Borrowers shall have
been discharged other than Permitted Encumbrances and the Administrative
Agent shall have received completed PPSA and UCC-3 termination statements,
as appropriate.
(11) Consolidated Financial Statements. The Administrative Agent shall have
received Consolidated financial statements of the Canadian Borrower for
the period ending December 31, 2002, reasonably satisfactory to the
Administrative Agent.
(12) Documentation. The Administrative Agent shall have received this Agreement
duly executed by the Borrowers together with all other ancillary and
supporting documentation as the Administrative Agents and the Lenders may
require.
Section 6.02 Conditions - All Borrowings.
The obligation of the Lenders to make available any Borrowing under this
Agreement (including the initial Borrowing) is conditional upon the following:
(1) Representations and Warranties True. The representations and warranties
contained in Section 7.01, in the Kingsway America Guarantee and in any
other Loan Document are and shall continue to be true and correct in every
material respect as if made by the Borrowers or Kingsway America or any of
their Subsidiaries, as applicable, contemporaneously with any Borrowing.
(2) Indebtedness. Except for the Permitted Indebtedness, no Borrower, Kingsway
America nor any Subsidiary of any Borrower or Kingsway America shall have
any other Indebtedness.
(3) No Default. No Default or Event of Default has occurred and is continuing
both immediately before and after giving effect to the Borrowing.
(4) No Third Party Notice. None of the Agents or any Lender shall have
received notice from any third party the effect of which in law would be
to make any Agent or any Lender liable to such third party for the amount
to be advanced, if such amount was advanced, including, without
limitation, third party demands made by Canada Customs and Revenue Agency
and any notice of seizure of bank accounts from any Governmental
Authority.
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(5) Notice to Administrative Agent. The Administrative Agent shall have
received the relevant notice of Borrowing as required in this Agreement.
Section 6.03 Waiver.
The terms and conditions stated in this Article Six are inserted for the sole
benefit of the Agents and the Lenders and may be waived by them in whole or in
part and with or without terms or conditions in respect of all or any
Borrowings.
ARTICLE SEVEN
REPRESENTATIONS AND WARRANTIES
Section 7.01 Representation and Warranties.
The Borrowers jointly and severally represent and warrant to the Agents and the
Lenders that:
(1) Due Incorporation of the Canadian Borrower and Subsidiaries. The Canadian
Borrower is duly incorporated, organized and validly subsisting and in
good standing under the laws of Ontario. Kingsway America and each
Subsidiary of the Canadian Borrower and Kingsway America is duly
incorporated, organized and validly subsisting and in good standing under
the laws of its incorporating jurisdiction. The Canadian Borrower,
Kingsway America and each Subsidiary of the Canadian Borrower and Kingsway
America has all necessary corporate power and authority to own its
properties and assets and to carry on its business as now conducted and is
or will be duly licensed or registered or otherwise qualified in all
jurisdictions wherein the nature of its assets or the business transacted
by it makes such licensing, registration or qualification necessary,
except where failure to do so could not reasonably be expected to have a
Material Adverse Effect.
(2) U.S. Borrower. The U.S. Borrower is a duly constituted and validly
subsisting general partnership in good standing under the laws of Delaware
of which the Canadian Borrower and Metro Claim Services Inc., an Ontario
corporation, are the only partners. The U.S. Borrower has all necessary
power and authority to carry on business as now conducted and is or will
be duly licensed or registered or otherwise qualified in all jurisdictions
wherein the nature of its assets or the business transacted by it makes
such licensing, registration or qualification necessary except where
failure to do so could not reasonably be expected to have a Material
Adverse Effect.
(3) Power. Each Borrower and Kingsway America has full power and capacity to
enter into, deliver and perform its obligations under this Agreement, the
Kingsway America Guarantee and all other instruments contemplated
hereunder, as applicable.
(4) Due Authorization and No Conflict - the Canadian Borrower. The execution,
delivery and performance by the Canadian Borrower of this Agreement, and
Kingsway America of the Kingsway America Guarantee, and all other
instruments contemplated hereunder and the consummation of the
transactions contemplated hereby and thereby
(a) have been duly authorized by all necessary corporate action,
(b) do not and will not conflict with, result in any breach or violation
of, or constitute with notice, lapse of time or both, a default under
the constating documents or by-laws of, or any Applicable Laws,
determination or award presently in effect and applicable to, the
Borrowers or Kingsway America, or of any material commitment,
agreement, indenture or any other instrument to which a Borrower or
Kingsway America is now a party or is otherwise bound, and
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(c) do not result in or require the creation of any Security Interest
upon or with respect to any of the properties or assets of the
Canadian Borrower, Kingsway America or any of their Subsidiaries.
(5) Due Authorization and No Conflict - U.S. Borrower. The execution and
delivery by the U.S. Borrower of this Agreement and all other instruments
contemplated hereunder and the consummation of the transactions
contemplated hereby and thereby
(a) have been duly authorized,
(b) do not and will not conflict with, result in any breach or violation
of, or constitute with notice, lapse of time or both, a default under
the partnership agreement constituting the U.S. Borrower or under the
constating documents or by-laws of either Partner, or any Applicable
Laws, determination or award presently in effect and applicable to
the U.S. Borrower or the Partners, or of any material commitment,
agreement, indenture or any other instrument to which the U.S.
Borrower or either of the Partners is now a party or is otherwise
bound, and
(c) do not result in or require the creation of any Security Interest
upon or with respect to any of the properties or assets of the U.S.
Borrower or either of the Partners.
(6) Government Approval, Regulation, etc. No authorization or approval or
other action by, and no notice to or filing with, any Governmental
Authority or other Person (including shareholders, if applicable) is
required for the due execution, delivery or performance by either Borrower
or Kingsway America of this Agreement, the Kingsway America Guarantee or
any other instrument contemplated hereunder other than filings under
applicable securities laws and filings with Insurance Regulatory
Authorities. Neither Borrower nor Kingsway America is an "investment
company" within the meaning of the Investment Company Act of 1940, as
amended, or a "holding company", or a "subsidiary company" of a "holding
company", or an "affiliate" of a "holding company" or of a "subsidiary
company" of a "holding company", within the meaning of the Public Utility
Holding Company Act of 1935, as amended.
(7) Business of the Borrowers. The Borrowers do not carry on any business,
activity or operation of any kind whatsoever, other than the Lines of
Business.
(8) Valid and Enforceable Obligations. This Agreement, the Kingsway America
Guarantee and all other instruments contemplated hereunder are, or when
executed and delivered to the Administrative Agent will be, legal, valid
and binding obligations of the Borrowers and Kingsway America, as
applicable, enforceable in accordance with their respective terms, subject
to applicable bankruptcy, insolvency, moratorium and other laws affecting
the enforcement of the rights of creditors generally.
(9) Title. Subject to Permitted Encumbrances, each Borrower, Kingsway America
and each of their Subsidiaries has good and marketable title to its real
and personal property, free and clear of all Security Interests.
(10) No Actions. Save as set forth in Schedule "F", there are no actions,
suits, proceedings, inquiries or investigations existing, pending or, to
the knowledge of either Borrower or Kingsway America, threatened,
affecting a Borrower, Kingsway America or any of their Subsidiaries in any
court or before or by any federal, provincial, state or municipal or other
governmental department, commission, board, tribunal, bureau or agency,
Canadian or foreign, which are reasonably likely to materially and
adversely affect the financial condition, property, assets, operations or
business of a Borrower, Kingsway America or any of their Subsidiaries or
the ability of the Borrowers to repay the Outstanding Obligations or any
part thereof or the ability of Kingsway America to satisfy
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its obligations under the Kingsway America Guarantee or which could
reasonably be expected to have a Material Adverse Effect.
(11) Financial Information. Subject to any limitations stated therein, the
financial statements of the Canadian Borrower furnished to the Agents and
the Lenders under this Agreement or which were furnished to the Agents or
to the Lenders to induce them to enter into this Agreement or otherwise in
connection with this Agreement fairly represent the financial condition of
the Borrowers on a Consolidated basis as at the date thereof, and no
material adverse change has occurred in their financial position between
such date and the Closing Date. Such financial statements and all other
information, certificates, statutes, reports and other papers and data
furnished to the Agents and the Lenders are accurate, complete and correct
in all material respects, except that the Borrowers do not represent or
warrant that any forecast contained in any financial projections will
ultimately prove to be accurate. The Borrowers on a Consolidated basis
have no liabilities, including as to contingencies and unusual or forward
commitments, that are not disclosed in the foregoing financial statements
or the footnotes thereto or otherwise disclosed to the Lenders in writing
or incurred pursuant to this Agreement.
(12) No Defaults or Events of Default. No event has occurred and is continuing,
and no circumstance exists which has not been waived, and which
constitutes a Default or Event of Default hereunder or a default or event
of default in respect of any material commitment, agreement or any other
instrument to which a Borrower, Kingsway America or any of their
Subsidiaries is now a party or is otherwise bound, entitling any other
party thereto to accelerate the maturity of amounts of principal owing
thereunder, or terminate any such material commitment, agreement or
instrument, or which could reasonably be expected to have a Material
Adverse Effect.
(13) Compliance with Law. None of the Borrowers, Kingsway America or any of
their Subsidiaries is in violation of any terms of its constating
documents (including the partnership agreement constituting the U.S.
Borrower) or by-laws or of any law, regulation, rule, order, judgment,
writ, injunction, decree, determination or award presently in effect and
applicable to it, the violation of which could reasonably be expected to
have a Material Adverse Effect.
(14) Reporting Issuer. The Canadian Borrower is a "reporting issuer" (as that
term is defined in the Securities Act (Ontario)) in good standing.
(15) Compliance with Securities Laws. Each Borrower, Kingsway America and each
of their Subsidiaries is in compliance in all material respects with the
provisions and requirements of all Applicable Laws including, without
limitation, the completion on a proper and timely basis of all necessary
filings under any and all such Applicable Laws.
(16) Capital. The Canadian Borrower is authorized to issue an unlimited number
of common shares, and has issued, as of March 20, 2003, approximately
48,904,348 as fully paid and non-assessable common shares. Except for
directors' qualifying shares of Kingsway General Insurance Company and
York Fire and Casualty Insurance Company and preferred shares issued by
the Trusts, all of the shares of all classes in the capital stock of
Kingsway America, Metro Claim Services Inc. and each corporate Subsidiary,
all securities and interests in the Trusts and all partnership interests
in Subsidiary partnerships are directly or indirectly beneficially owned
by the Canadian Borrower. Kingsway Finance Nova Scotia, ULC owns all of
the shares of all classes in the capital stock of Kingsway America. The
U.S. Borrower and Metro Claim Services Inc. collectively own all ownership
interests of Kingsway U.S. Tier II Finance Partnership which in turn owns
all of the shares of all classes in the capital stock of Kingsway Finance
Nova Scotia, ULC.
(17) Non-Dilution. No Person now has any agreement, option or right capable of
becoming an agreement or option for the pledge, purchase, subscription or
issuance from any Borrower, Kingsway America or any of their Subsidiaries
of any shares of the Canadian Borrower, Kingsway
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America or any of their Subsidiaries, issued or unissued, which will cause
a Change of Voting Control.
(18) No Foreign Business. The Borrowers do not carry on any business, employ
any employees, or own any material assets outside Canada, the United
States of America, Barbados or Bermuda.
(19) Subsidiaries. The Canadian Borrower does not own any shares or voting
securities of any Person directly or indirectly other than Kingsway
America and the Subsidiaries identified herein, other than shares and
voting securities maintained in the investment portfolios managed by the
Canadian Borrower and certain of its Subsidiaries in the ordinary course
of business and in respect of the Lines of Business.
(20) Taxes. Except as set forth in Schedule "G", each Borrower, Kingsway
America and each of their Subsidiaries has filed all foreign, federal,
provincial and local Tax Returns which are required to be filed and has
paid all Taxes due pursuant to such returns or pursuant to any assessment
received by such Borrower, Kingsway America or any of their Subsidiaries
except such Taxes, if any, as are being contested in good faith and as to
which adequate reserves have been provided in accordance with GAAP. All
information provided in such Tax Returns pertaining to the Borrowers,
Kingsway America or any of their Subsidiaries is true, complete, and
accurate in all material respects. The charges, accruals and reserves on
the books of the Borrowers, Kingsway America and their Subsidiaries, as
applicable, in respect of any Taxes or other governmental charges payable
for the current or prior year which are not yet due are adequate in
accordance with GAAP to the extent that the Borrowers are aware of them.
Schedule "G" sets forth as of the Closing Date those taxable years for
which a Borrower's, Kingsway America's or any of their Subsidiary's Tax
Returns are currently being audited by Canada Customs and Revenue Agency
and/or other applicable Governmental Authority and any assessments or
threatened assessments otherwise outstanding. Except as set out in
Schedule "G", neither Borrower, nor Kingsway America nor any of their
Subsidiaries has received any notice of assessment of additional taxes or
any other claim of notice of any nature whatsoever that any Tax or
additional Tax is due which has not been paid or otherwise finally settled
or satisfied. Except as set out in Schedule "G", to the knowledge of the
Borrowers, there are no actions, suits, proceedings, investigations or
claims, threatened or pending, in respect of any Taxes. Except as set
forth on Schedule "G", there are no matters under discussion with any
Governmental Authority relating to any Taxes asserted by any such body.
Each Borrower, Kingsway America and each of their Subsidiaries has
withheld from its employees, customers and any other applicable payees
(and timely paid to the Governmental Authority) the proper and accurate
amount of all Taxes and other amounts required to be withheld or collected
and remitted in compliance with all Applicable Laws. There are no liens
for Taxes on the assets of any Borrower, Kingsway America or any of their
Subsidiaries except for liens arising under Applicable Law, that are
unregistered or otherwise unperfected, for Taxes not yet due. Neither
Borrower, nor Kingsway America nor any of their Subsidiaries has executed
nor filed with Canada Customs and Revenue Agency nor any other
Governmental Authority any agreement, waiver or other document extending
or having the effect of extending the period for assessment, reassessment
or collection of any Taxes or the filing of any Tax Returns. As of the
Closing Date, the Borrowers, Kingsway America and each of their
Subsidiaries have no liabilities for Taxes which could reasonably be
expected to have a Material Adverse Effect.
(21) Labour Matters. Except as set forth in Schedule "H", there are no strikes
or other labour disputes against any Borrower, Kingsway America or any of
their Subsidiaries that is pending or threatened. All payments due from
either Borrower, Kingsway America or any of their Subsidiaries on account
of workers compensation, Canada Pension Plan, Quebec Pension Plan, ERISA,
employee health plans, social security and insurance of every kind and
employee income tax source deductions and vacation pay have been paid.
Except as set forth in Schedule "H", neither Borrower nor Kingsway America
nor any of their Subsidiaries has any obligation under any collective
bargaining agreement. There is no organizing activity involving either
Borrower, Kingsway America or any of their Subsidiaries by any labour
union or group of employees.
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Except as set forth in Schedule "H", no labour organization or group of
employees has made a pending demand for recognition and there are no
complaints or charges against either Borrower, Kingsway America or any of
their Subsidiaries pending or threatened to be filed with any Governmental
Authority or arbitrator based on, arising out of, in connection with, or
otherwise relating to the employment or termination of employment by
either Borrower, Kingsway America or any of their Subsidiaries of any
individual. Hours worked by and payment made to employees of the
Borrowers, Kingsway America and their Subsidiaries have not been in
violation of any applicable laws which could reasonably be expected to
have a Material Adverse Effect. The Borrowers, Kingsway America and their
Subsidiaries are in material compliance with the terms and conditions of
all collective bargaining agreements, consulting agreements, management
agreements and employee agreements and all other labour agreements.
(22) Pensions. Except as set forth in Schedule "I",
(a) all employee and employer contributions under any pension plan
operated by either of the Borrowers, Kingsway America or any of their
Subsidiaries have been made and the fund or funds established under
such plans are funded in accordance with applicable regulatory
requirements and the rules of such plans and there exists no going
concern unfunded liabilities or solvency deficiencies thereunder.
(b) no pension plan operated by either of the Borrowers, Kingsway America
or any of their Subsidiaries has been terminated or partially
terminated or is insolvent or in reorganization, nor have any
proceedings been instituted to terminate or reorganize any such
pension plan;
(c) none of the Borrowers, nor Kingsway America nor any of their
Subsidiaries has withdrawn from any pension plan in a complete or
partial withdrawal, nor has a condition occurred which if continued
would result in a complete or partial withdrawal;
(d) none of the Borrowers, nor Kingsway America nor any of their
Subsidiaries has any withdrawal liability, including contingent
withdrawal liability, to any pension plan;
(e) none of the Borrowers, nor Kingsway America nor any of their
Subsidiaries has any liability in respect of any pension plan other
than for required insurance premiums or contributions or remittances
which have been paid, contributed and remitted when due;
(f) each Borrower, Kingsway America and each of their Subsidiaries has
made all contributions to its pension plans required by law or the
terms thereof to be made by it when due and is not in arrears in the
payment of any contribution, payment, remittance or assessment or in
default in filing any reports, returns, statements and similar
documents in respect of the pension plans required to be made or paid
by it pursuant to any pension plan, any law, act, regulation,
directive or order or any employment, union, pension, deferred profit
sharing, benefit, bonus or other similar agreement or arrangement;
(g) none of the Borrowers, nor Kingsway America nor any of their
Subsidiaries is liable or, to the best knowledge of the Borrowers,
alleged to be liable, to any employee or former employee, director or
former director, officer or former officer resulting from any
violation or alleged violation of any pension plan, any fiduciary
duty, and law or agreement in relation to any pension plan and does
not have any unfunded pension or like obligations (including any past
service or experience deficiency funding liabilities), other than
accrued obligations not yet due, for which they have made full
provision in their books and records;
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(h) all vacation pay, bonuses, salaries and wages, to the extent accruing
due, are properly reflected in the books and records of the
Borrowers, Kingsway America and their Subsidiaries;
(i) without limiting the foregoing, all of the Borrowers', Kingsway
America's and their Subsidiaries' pension plans are duly registered
where required by, and are in compliance and good standing in all
material respects under, all applicable laws, acts, statutes,
regulations, orders, directives and agreements, including, without
limitation, ERISA, the Code, the Income Tax Act (Canada), and the
Pension Benefits Act, 1987 (Ontario), any successor legislation
thereto, and all other applicable laws of any jurisdiction;
(j) there are no outstanding, pending or threatened investigations,
claims, suits or proceedings in respect of any pension plans
(including to assert rights or claims to benefits or that could give
rise to any material liability, but excluding routine claims for
benefits and qualified domestic relations orders) operated by either
Borrower, Kingsway America or any of their Subsidiaries;
(k) no promises of benefit improvements have been made except where such
improvements could not reasonably be expected to have a Material
Adverse Effect and, in any event, no such improvements will result in
a solvency deficiency or going concern unfunded liability in the
affected pension plans operated by either Borrower, Kingsway America
or any of their Subsidiaries;
(l) all the material obligations of the Borrowers, Kingsway America and
their Subsidiaries (including fiduciary, funding, investment and
administration obligations) required to be performed in connection
with any pension plans and the funding agreements therefor have been
performed in a timely fashion;
(m) there have been no improper withdrawals or applications of the assets
of the pension plans or the benefit plans operated by either
Borrower, Kingsway America or any of their Subsidiaries.
(23) ERISA. Except to the extent that any of the following could not reasonably
be expected to have a Material Adverse Effect:
(a) neither a Reportable Event nor an "accumulating funding deficiency"
(within the meaning of the Code, or Section 302 of ERISA) has
occurred during the five-year period prior to the date on which this
representation is made or deemed made with respect to any Plan, and
each Plan has complied in all material respects with the applicable
provisions of ERISA and the Code. No termination of a Single Employer
Plan has occurred and no lien in favour of the PBGC of a Plan has
arisen during the five-year period prior to the date as of which this
representation is deemed made. The present value of all accrued
benefits under each Single Employer Plan in which a Borrower,
Kingsway America or any of their Subsidiaries is a participant (based
on those assumptions used to fund the Plans) did not, as of the last
annual valuation date prior to the date on which this representation
is made or deemed made, exceed the value of the assets of such Plan
allocable to such accrued benefits;
(b) none of the Borrowers, nor Kingsway America nor any of their
Subsidiaries has had a complete or partial withdrawal from any
Multiemployer Plan, nor would a Borrower, Kingsway America or any of
their Subsidiaries become subject to any liability under ERISA if it
were to withdraw completely from all Multiemployer Plans as of the
valuation date most closely preceding the date on which this
representation is made or deemed made;
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(c) none of the Borrowers, nor Kingsway America nor any of their
Subsidiaries nor any Commonly Controlled Entity has any contingent
liability with respect to any post-retirement medical benefit under a
medical benefit plan, other than liability for COBRA; and
(d) no Multiemployer Plan to which any of the Borrowers, Kingsway America
or any of their Subsidiaries may have liability is in
"reorganization" or "insolvent" within the meaning of such terms as
used in ERISA.
(24) Accuracy of Information. All factual information previously or
contemporaneously furnished by or on behalf of a Borrower, Kingsway
America or any of their Subsidiaries in writing for purposes of or in
connection with this Agreement, the Kingsway America Guarantee or any
instrument or transaction contemplated hereby is true and accurate in
every material respect and such information is not incomplete by the
omission of any material fact necessary to make such information not
misleading.
(25) Solvency. Both before and immediately after giving effect to any Borrowing
requested hereunder:
(a) the fair saleable value of the assets (as defined below) of each
Borrower, Kingsway America and their Subsidiaries on a Consolidated
basis exceeds the total amount of liabilities (including contingent,
subordinated, unmatured and unliquidated liabilities) of each such
Borrower, Kingsway America and such Subsidiaries on a Consolidated
basis, on a going-concern basis;
(b) the present fair saleable value (as defined below) of the assets of
each Borrower, Kingsway America and their Subsidiaries on a
Consolidated basis exceeds the probable total liabilities (including
contingent, subordinated, unmatured and unliquidated liabilities) of
each such Borrower, Kingsway America and such Subsidiaries on a
Consolidated basis as such liabilities become absolute and matured;
(c) each Borrower, Kingsway America and their Subsidiaries on a
Consolidated basis will be able to pay their debts, including
contingent liabilities, as they mature and become due;
(d) each Borrower, Kingsway America and their Subsidiaries on a
Consolidated basis are not, and will not be, engaged in a business
for which their Consolidated capital is, or would be, unreasonably
small for their Consolidated businesses; and
(e) each Borrower, Kingsway America and their Subsidiaries on a
Consolidated basis have not incurred (by way of assumption or
otherwise) any obligations or liabilities (contingent or otherwise)
under this Agreement or the Kingsway America Guarantee, nor have they
made any conveyance pursuant to or in connection therewith, with
actual intent to hinder, delay or defraud either present or future
creditors of the Borrowers, Kingsway America or any of their
Subsidiaries.
For purposes of this Section, the "fair saleable value" of each
Borrower's, Kingsway America's and their Subsidiaries' assets means the
amount which may be realized within a reasonable time, either through
collection or sale of such assets at the regular market value, based upon
the amount which could be obtained for such assets within such period by a
capable and diligent seller from an interested buyer who is willing (but
is under no compulsion) to purchase under ordinary selling conditions.
(26) Subsidiary Status; Liabilities, etc. Immediately prior to and following
the Closing Date:
(i) the U.S. Borrower, Kingsway U.S. Tier II Finance Partnership and
Kingsway Finance Nova Scotia, ULC had no assets or liabilities
(other than directly held interests in
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Subsidiaries and, immediately prior to the Closing Date, liabilities
under the Prior Credit Agreement and the 1999 Facility and,
immediately following the Closing Date, liabilities under this
Agreement and the 1999 Facility) and had performed no business other
than preparing for and administering the transactions herein
contemplated,
(ii) Kingsway Connecticut Statutory Trust I had no assets or liabilities
(other than ownership of the Trust Pool Debentures and liabilities
pursuant to the Trust Pool Securities) and had performed no business
other than preparing for and administering the transactions in
relation to the Trust Pool Securities,
(iii) Kingsway U.S. Funding Inc. and Kingsway Financial Capital Trust I
had no assets or liabilities (other than directly held interests in
Kingsway Financial Capital Trust I by Kingsway U.S. Funding Inc.,
ownership by Kingsway Financial Capital Trust I of the Debentures
and liabilities of Kingsway Financial Capital Trust I pursuant to
the Trust Preferred Securities) and had performed no business other
than preparing for and administering the transactions in relation to
the Trust Preferred Securities,
(iv) Kingsway Delaware Statutory Trust III had no assets or liabilities
(other than ownership of the Second Round Trust Pool Debentures and
liabilities pursuant to the Second Round Trust Pool Securities) and
had performed no business other than preparing for and administering
the transactions in relation to the Second Round Trust Pool
Securities, and
(v) Kingsway Connecticut Statutory Trust II had no assets or liabilities
(other than ownership of the Third Round Trust Pool Debentures and
liabilities pursuant to the Third Round Trust Pool Securities) and
had performed no business other than preparing for and administering
the transactions in relation to the Third Round Trust Pool
Securities.
(27) Financial Year End. The Financial Year ends of each of the Borrowers,
Kingsway America and each of their Subsidiaries is December 31.
(28) Guarantees. None of the Borrowers, nor Kingsway America nor any of their
Subsidiaries has guaranteed the obligations of any Person for borrowed
money, save as identified in Section 8.03(5).
(29) Margin Stock.
(a) None of the Borrowers, nor Kingsway America nor any of their
Subsidiaries owns stock on margin except as previously disclosed to
the Administrative Agent in writing,
(b) neither Borrower, nor Kingsway America nor any of their Subsidiaries
is engaged in the business of extending credit for the purpose of
purchasing or carrying margin stock, and no proceeds of any Borrowing
will be used to purchase or carry any margin stock or for a purpose
which violates, or would be consistent with, F.R.S. Board Regulation
T, U or X. Terms for which meanings are provided in F.R.S. Board
Regulation T, U or X or any regulations substituted therefor, as from
time to time in effect, are used in this Section 7.01(29) with such
meanings.
(30) Disclosure. No representation or warranty made by a Borrower or Kingsway
America in any of the Loan Documents contains any untrue statement of a
fact or omits to state a material fact necessary in order to make the
statements contained therein, taken as a whole, not misleading in light of
the circumstances in which they are made. There is no fact known to either
Borrower which the Borrowers have not disclosed to the Agent and the
Lenders which could reasonably be expected to have a Material Adverse
Effect so far as the Borrowers can now reasonably foresee or which may
materially adversely affect the ability of the Borrowers to perform their
obligations under this Agreement.
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(31) Governmental and Third Party Authorization; Permits.
(a) No consent, approval, authorization or other action by, notice to, or
registration or filing with, any Governmental Authority or other
Person is or will be required as a condition to or otherwise in
connection with the due execution, delivery and performance by each
Borrower or Kingsway America of this Agreement or any of the other
Loan Documents to which it is or will be a party or the legality,
validity or enforceability hereof or thereof, other than (i)
consents, authorizations and filings that have been (or on or prior
to the Closing Date will have been) made or obtained and that are (or
on the Closing Date will be) in full force and effect, which
consents, authorizations and filings are listed on Schedule "J", and
(ii) consents and filings the failure to obtain or make which could
not, individually or in the aggregate, reasonably be expected to have
a Material Adverse Effect.
(b) Each of the Borrowers, Kingsway America and each of their
Subsidiaries has, and is in good standing with respect to, all
governmental approvals, licenses, permits and authorizations
necessary to conduct its business as presently conducted and to own
or lease and operate its properties, except for those approvals,
licenses, permits and authorizations the failure to obtain of which
could not, individually or in the aggregate, reasonably be expected
to have a Material Adverse Effect.
(c) Schedule "K" lists with respect to each Material Subsidiary, as of
the Closing Date, all of the jurisdictions in which such Material
Subsidiary holds licenses (including, without limitation, licenses or
certificates of authority from relevant Insurance Regulatory
Authorities), permits or authorizations to transact insurance and
reinsurance business (collectively, the "Licenses"). To the knowledge
of the Borrowers: (i) no such License is the subject of a proceeding
for suspension, revocation or limitation or any similar proceedings;
(ii) there is no sustainable basis for such a suspension, revocation
or limitation; and (iii) no such suspension, revocation or limitation
is threatened by a relevant Insurance Regulatory Authority. No
Material Subsidiary transacts any insurance business, directly or
indirectly, in any jurisdiction other than those listed on Schedule
"K", where such business requires any license, permit or other
authorization of an Insurance Regulatory Authority of such
jurisdiction.
(32) Trusts. None of the Trusts has redeemed any of the preferred securities
issued by each such Trust (except for those redemptions for which the
prior written consent of the Majority of the Lenders has been provided to
the Canadian Borrower) and none of the Trusts has incurred any
Indebtedness other than: (a) the reasonable fees and expenses of the
trustees (acting solely in their capacity as trustee and not in their
individual capacity) as agreed pursuant to the agreements, documents and
other instruments delivered in connection with the incurrence of Permitted
Indebtedness in respect of each such Trust; and (b) the principal, premium
(if any) and interest in respect of the preferred securities issued by
each such Trust.
(33) Northern Trust Indebtedness. None of the Borrowers, Kingsway America nor
any of their Subsidiaries has any debts, liabilities or other obligations
owing to The Northern Trust Company or any of its Affiliates or successors
(collectively, "Northern Trust"), all Security Interests which may have
been offered by the Borrowers, Kingsway America or any of their
Subsidiaries to Northern Trust have been released and discharged and no
Security Interests in favour of Northern Trust currently exist.
Section 7.02 Survival of Representations and Warranties.
The representations and warranties contained in this Article Seven shall survive
the execution and delivery of this Agreement and the making of Borrowings
hereunder, regardless of any investigation or
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examination made by the Agents, the Lenders or their counsel and the Lenders
shall be deemed to have relied upon each of such representation and warranty in
making available each Borrowing hereunder.
ARTICLE EIGHT
COVENANTS
Section 8.01 Positive Covenants.
From the date hereof and until the Outstanding Obligations are permanently paid
in full, the Borrowers will, and will cause Kingsway America and each of their
Subsidiaries to, observe and perform each of the following covenants, unless
compliance therewith shall have been waived in writing by the Majority of the
Lenders:
(1) Existence - Corporate. The Canadian Borrower will do or cause to be done
all such things as are necessary to maintain its corporate existence and
the corporate existence of Kingsway America and each of their Subsidiaries
in good standing, to ensure that it, Kingsway America and each of their
Subsidiaries have at all times the right and are duly qualified to conduct
their businesses and to obtain and maintain all rights, privileges and
franchises necessary for the conduct of their business, except where
failure to do so could not reasonably be expected to have a Material
Adverse Effect on such businesses or on the ability of the Canadian
Borrower, Kingsway America or any of their Subsidiaries to perform its
obligations hereunder or under the Loan Documents.
(2) Existence - U.S. Borrower. The U.S. Borrower will do or cause to be done
all such things as are necessary to maintain its existence (including for
United States tax purposes, its status as a United States corporation) and
the corporate existence of each of the partners of the U.S. Borrower in
good standing, to ensure that it has at all times the right and is duly
qualified to conduct its business and to obtain and maintain all rights,
privileges and franchises necessary for the conduct of its business, except
where failure to do so could not reasonably be expected to have a Material
Adverse Effect on such business or on its ability to perform its
obligations hereunder. The U.S. Borrower will make and maintain without
revocation an effective election under the Code to be treated as a
corporation for United States federal income tax purposes; provided,
however, the U.S. Borrower may fail to make such election or may revoke
such election with the prior written consent of the Majority of the Lenders
if such failure or revocation could not reasonably be expected to have a
Material Adverse Effect.
(3) Conduct of Business. Each Borrower will maintain, operate and use its
properties and assets, and will carry on and conduct its business: (i) in
substantially the same fields of enterprise as it is currently conducted
and (ii) in a proper and efficient manner so as to preserve and protect
such properties and assets and business and the profits thereof and will
cause Kingsway America and each of their Subsidiaries to do likewise in
respect of their respective properties, assets and business.
(4) Payment of Principal, Interest and Expenses. The Borrowers will duly and
punctually pay or cause to be paid to the Administrative Agent and the
Lenders the Outstanding Obligations at the times and places and in the
manner provided for herein.
(5) Payment of Taxes and Claims. The Borrowers will pay and discharge, and will
cause Kingsway America and each of their Subsidiaries to pay and discharge,
promptly when due all Taxes, assessments and other governmental charges or
levies imposed upon it or upon its properties or assets or upon any part
thereof, as well as all claims of any kind (including claims for labour,
materials and supplies) which, if unpaid, would by law become a lien,
charge, trust or other claim
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upon any such properties or assets; but neither Borrower, nor Kingsway
America nor any of their Subsidiaries shall be required to pay any such
Tax, assessment, charge or levy or claim if the amount, applicability or
validity thereof shall currently be contested in good faith by appropriate
proceedings and if the Borrowers, Kingsway America or any of their
Subsidiaries, as applicable, shall have set aside on its books a reserve to
the extent required by GAAP in an amount which is reasonably adequate with
respect thereto.
(6) Notice of Default or Event of Default. The Borrowers will promptly notify
the Administrative Agent and the Lenders of the occurrence of any Default
or Event of Default and shall provide the Administrative Agent and the
Lenders with a detailed statement of a senior officer of the Borrowers,
without personal liability, describing in detail the steps taken by the
Borrowers to cure such Default or Event of Default.
(7) Financial Statements. The Borrowers will deliver to each Lender:
(a) As soon as available and in any event within sixty (60) days after the
end of each of the first three fiscal quarters of each of their
Financial Years, beginning with the fiscal quarter ending June 30,
2003: (i) unaudited Consolidated and consolidating financial
statements of the Canadian Borrower and Kingsway America, and (ii)
unaudited Consolidated and non-Consolidated financial statements of
the U.S. Borrower, as of the end of such fiscal quarter consisting of
balance sheets, statements of income, cash flows and shareholders'
equity for the fiscal quarter then ended and for that portion of their
Financial Year then ended, in each case setting forth comparative
Consolidated figures as of the end of and for the corresponding period
in the preceding Financial Year, all in reasonable detail and prepared
in accordance with GAAP (subject to the absence of notes required by
GAAP and U.S. GAAP, as applicable, and subject to normal year-end
adjustments) applied on a basis consistent with that of the preceding
fiscal quarter or containing disclosure of the effect on the financial
condition or results of operations of any change in the application of
accounting principles and practices during such fiscal quarter; and
(b) As soon as available and in any event within one hundred and twenty
(120) days after the end of each of their Financial Years, beginning
with the Financial Year of the Canadian Borrower ending December 31,
2002: (i) audited Consolidated and unaudited consolidating financial
statements of the Canadian Borrower and Kingsway America, and (ii)
unaudited Consolidated and non-Consolidated financial statements of
the U.S. Borrower, all as of the end of such Financial Year consisting
of balance sheets, statements of cash flow, income and shareholders'
equity for the Financial Year then ended, including the notes thereto,
in each case setting forth comparative figures as of the end of and
for the preceding Financial Year together with comparative projected
figures for their Financial Year then ended, all in reasonable detail
and certified by the independent public accounting firms regularly
retained by the Borrowers or another independent public accounting
firm of recognized national standing reasonably acceptable to the
Administrative Agent, together with (y) a report thereon by such
accountants that is not qualified as to going concern or scope of
audit and to the effect that such financial statements present fairly
the Consolidated financial condition and results of operations of the
Borrowers and Kingsway America as of the dates and for the periods
indicated in accordance with GAAP and U.S. GAAP, as applicable,
applied on a basis consistent with that of the preceding year or
containing disclosure of the effect on the financial condition or
results of operations of any change in the application of accounting
principles and practices during such year, and (z) if required by a
Lender, a report by such accountants to the effect that, based on and
in connection with their examination of the financial statements of
the Borrowers and Kingsway America, such accountants obtained no
knowledge of the occurrence or existence of any Default or Event of
Default relating to accounting or financial reporting matters, or a
statement specifying the nature and period of existence of any such
Default or Event of Default disclosed by their audit; provided
however, that such accountants shall not be liable by
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reason of the failure to obtain knowledge of any Default or Event of
Default that would not be disclosed or revealed in the course of their
audit examination.
(8) Quarterly Certificate. The Borrowers shall deliver to the Administrative
Agent not later than sixty (60) days after the end of the last day of each
of the first three fiscal quarters of the Borrowers and within one hundred
and twenty (120) days after the end of each Financial Year of the
Borrowers, a certificate of a senior officer of each of the Borrowers,
without personal liability, in form and content satisfactory to the
Administrative Agent, which is to: (i) confirm compliance by the Borrowers
with the terms and conditions hereof including the covenants contained in
Section 8.02; (ii) include detailed calculations of the financial tests
contained in Section 8.02; (iii) confirm that no Default or Event of
Default has occurred and is continuing; and (iv) confirm that the Borrowers
are operating in accordance with applicable regulatory financial ratio
guidelines.
(9) Notice of Default or Event of Default in respect of Other Indebtedness. The
Borrowers will provide the Administrative Agent and each Lender with
written notice promptly upon becoming aware of: (i) any actual (or, to the
best of their knowledge, pending) occurrence of a default or any event of
default in respect of any Indebtedness of the Borrower, Kingsway America or
any of their Subsidiaries (including, without limitation, any of the
Trusts) or material contract to which any of the Borrower, Kingsway America
or any of their Subsidiaries (including, without limitation, any of the
Trusts) is a party; and (ii) any acceleration, demand or enforcement of any
Indebtedness of the Borrower, Kingsway America or any of their Subsidiaries
(including, without limitation, any of the Trusts).
(10) Statutory Financial Statements. The Borrowers will deliver to each Lender:
(a) as soon as available and in any event within sixty (60) days after the
end of each of the first three fiscal quarters of each Financial Year
of the Borrowers, beginning with the first fiscal quarter ending after
the date hereof, a quarterly statement of each Insurance Subsidiary as
of the end of such fiscal quarter and for that portion of the
Financial Year of the Borrowers then ended, in the form filed with the
relevant Insurance Regulatory Authority, prepared in accordance with
Statutory Accounting Practices; and
(b) as soon as available and in any event within seventy (70) days after
the end of each Financial Year of the Borrowers, beginning with the
Financial Year ended December 31, 2003, an Annual Statement of each
Insurance Subsidiary as of the end of such Financial Year and for the
Financial Year of the Borrowers then ended, in the form filed with the
relevant Insurance Regulatory Authority, prepared in accordance with
SAP.
(11) Other Information. Each Borrower will furnish to the Administrative Agent
promptly on request such other information in its possession respecting its
financial condition and its business and operations as the Lenders may from
time to time reasonably require.
(12) Books and Records. Each Borrower will at all times maintain proper records
and books of account and therein make true and correct entries of all
dealings and transactions relating to its business including records of any
transactions between a Borrower, Kingsway America and their Subsidiaries,
and will make the same available for inspection by the Administrative Agent
and the Lenders or any agent of the Administrative Agent or the Lenders at
all reasonable times.
(13) Notice of Litigation. Each Borrower will give to the Administrative Agent
prompt written notice of any material action, suit, litigation, or other
proceeding which is commenced or threatened against it or any of their
Subsidiaries (including, without limitation, any of the Trusts).
(14) Use of Proceeds. The Borrowers will use the proceeds of all Borrowings for
the purposes contemplated hereunder, and for no other purpose.
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(15) Reserves. The Borrowers will, and will cause Kingsway America and their
Subsidiaries to, maintain appropriate reserves for Taxes, depreciation and
other contingent expenses or liabilities in accordance with GAAP.
(16) Securities Regulatory Filings; Certain Other Notices. The Borrowers will
provide to the Administrative Agent a copy of each material written
communication received by either Borrower, Kingsway America or any of their
Subsidiaries from or delivered by a Borrower, Kingsway America or any of
their Subsidiaries to (without duplication): (i) any securities regulatory
authority, including annual filings, information circulars, directors'
circulars, statements of executive compensation and material change
reports, (ii) any holder of any securities or Indebtedness of a Borrower,
Kingsway America or any of their Subsidiaries, or (iii) any provincial,
state or federal regulatory body, in each case, within ten (10) days of
such receipt or delivery.
(17) Report to Other Creditors. The Borrowers will provide to the Administrative
Agent copies of any statement or report provided to any other party by a
Borrower, Kingsway America or any of their Subsidiaries pursuant to the
terms of each contract or agreement relating to Indebtedness of a Borrower,
Kingsway America or any of their Subsidiaries and not otherwise required to
be provided to the Administrative Agent pursuant to this Agreement promptly
following the provision to such other party.
(18) Other Information. The Borrowers will furnish to the Administrative Agent,
promptly on request, such other information in their possession respecting
their financial condition and their businesses and operations, and the
financial condition of Kingsway America and each of their Subsidiaries and
each of their businesses and operations, as the Administrative Agent and
the Lenders may from time to time reasonably require.
(19) Insurance. The Borrowers will insure and keep insured their properties and
assets and shall cause Kingsway America and each of their Subsidiaries to
insure and to keep insured their properties and assets, placed with such
insurers and with such coverage and against such loss or damage to the full
insurable value of such properties and assets without co-insurance as the
Administrative Agent shall reasonably require or, in the absence of such
requirement, to the extent insured against by comparable corporations
engaged in comparable businesses. The Borrowers shall pay or cause to be
paid all premiums necessary to maintain any such insurance policies in good
standing as such premiums become due and payable.
(20) Access. Each Borrower will permit, and will cause Kingsway America and each
of their Subsidiaries to permit, the Administrative Agent (on behalf of the
Lenders) through its officers or employees or through any consultants
retained by it, upon request, to have reasonable access at any reasonable
time and from time to time, to either of the Borrowers', Kingsway America's
or any of their Subsidiaries' premises and to any records, information or
data in their possession so as to enable the Administrative Agent to
ascertain the state of the Borrowers', Kingsway America's of any of their
Subsidiaries' financial condition or operations, and will permit the
Administrative Agent to make copies of and abstracts from such records,
information or data and will upon request of the Lenders deliver to the
Administrative Agent copies of such records, information or data.
(21) Notice of Adverse Change. The Borrowers will give to the Administrative
Agent prompt written notice of any event (including, without limitation,
any proposed change in any Tax Law) which may result in a Material Adverse
Effect.
(22) Material Contracts. The Borrowers will, and will cause Kingsway America and
each of their Subsidiaries to, perform all material obligations of a
Borrower, Kingsway America or any of their Subsidiaries, as applicable,
pursuant to all documents, contracts and agreements material to the
operations of a Borrower, Kingsway America or any of their Subsidiaries.
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(23) Compliance with Laws. The Borrowers will, and will cause Kingsway America
and each of their Subsidiaries to, comply in all material respects with all
Applicable Laws.
(24) Notice of Employment Matters. The Borrowers will promptly give written
notice to the Administrative Agent and to the Lenders of the occurrence or
expected occurrence of: (i) any Reportable Event with respect to any Plan
or arrangement with respect to any Plan which could reasonably be expected
to result in the incurrence by either Borrower, Kingsway America or any of
their Subsidiaries of any material liability, fine or penalty, a failure to
make any required contribution to a Plan, any lien in favour of the PBGC or
a Plan, or any withdrawal from, or the termination, reorganization or
insolvency (within the meaning of such terms as used in ERISA) of any
Multiemployer Plan; or (ii) the institution of any proceedings or the
taking of any action by the PBGC or either Borrower of any Commonly
Controlled Entity or any Multiemployer Plan with respect to the withdrawal
from, or the terminating, reorganization or insolvency (within the meaning
of such terms as used in ERISA) of any Plan or which would materially
increase the contingent liability of either Borrower, Kingsway America or
any of their Subsidiaries with respect to any post-retirement Plan benefit
other than liability for COBRA.
(25) Investments. The Borrowers will provide to the Administrative Agent such
periodic reports in respect of investments and invested assets as the
Administrative Agent and the Lenders may reasonably request.
(26) Parity of Debt. The Borrowers will ensure that the Outstanding Obligations
shall rank in right of payment in priority to, or in parity with, any other
Senior Funded Debt other than Senior Funded Debt secured by Permitted
Encumbrances.
(27) Business of Subsidiaries. The Borrowers will ensure that:
(i) the U.S. Borrower, Kingsway U.S. Tier II Finance Partnership and
Kingsway Finance Nova Scotia ULC have no assets or liabilities (other
than directly held interests in Subsidiaries and liabilities under
this Agreement and the 1999 Facility) and have not performed any
business other than preparing for and administering the transactions
herein contemplated,
(ii) Kingsway Connecticut Statutory Trust I has no assets or liabilities
(other than ownership of the Trust Pool Debentures and liabilities
pursuant to the Trust Pool Securities) and has not performed any
business other than preparing for and administering the transactions
in relation to the Trust Pool Securities,
(iii) Kingsway U.S. Funding Inc. and Kingsway Financial Capital Trust I
have no assets or liabilities (other than directly held interests in
Kingsway Financial Capital Trust I by Kingsway U.S. Funding Inc.,
ownership by Kingsway Financial Capital Trust I of the Debentures and
liabilities of Kingsway Financial Capital Trust I pursuant to the
Trust Preferred Securities) and have not performed any business other
than preparing for and administering the transactions in relation to
the Trust Preferred Securities,
(iv) Kingsway Delaware Statutory Trust III has no assets or liabilities
(other than ownership of the Second Round Trust Pool Debentures and
liabilities pursuant to the Second Round Trust Pool Securities) and
has not performed any business other than preparing for and
administering the transactions in relation to the Second Round Trust
Pool Securities, and
(v) Kingsway Connecticut Statutory Trust II has no assets or liabilities
(other than ownership of the Third Round Trust Pool Debentures and
liabilities pursuant to the Third Round Trust Pool Securities) and
has not performed any business other than preparing for and
administering the transactions in relation to the Third Round Trust
Pool Securities.
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(28) Senior Unsecured Debt Rating. The Canadian Borrower will maintain at all
times a senior unsecured debt rating with Moody's or Standard & Poor's debt
rating services to be updated annually.
(29) Ownership of Subsidiaries. The Canadian Borrower will at all times hold
directly or indirectly 100% of all issued and outstanding securities of all
classes issued by the U.S. Borrower, Kingsway America, Metro Claim Services
Inc. and all of its other Subsidiaries, except for: (i) qualifying shares
issued to directors of Kingsway America and all Subsidiaries of the
Canadian Borrower, and (ii) preferred securities in respect of the Trusts.
Section 8.02 Financial Covenants.
(1) Funded Debt to Total Capitalization Ratio. The Canadian Borrower 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 the Canadian Borrower; provided
that, for the purposes of this covenant only, neither the Debentures nor
the Trust Pool Debentures nor the Second Round Trust Pool Debentures nor
the Third Round Trust Pool Debentures shall be included in the calculation
of Funded Debt but the Debentures, Trust Pool Debentures, Second Round
Trust Pool Debentures and Third Round Trust Pool Debentures shall be
included in the calculation of Total Capitalization.
(2) Minimum Tangible Net Worth. The Canadian Borrower shall maintain at all
times a Tangible Net Worth on a Consolidated basis of not less than
$300,000,000, calculated quarterly on the last day of each fiscal quarter
of the Canadian Borrower; provided that minimum Tangible Net Worth on a
Consolidated basis shall increase in each fiscal quarter by an amount equal
to 50% of Consolidated Net Income during each such quarter plus by an
amount equal to 25% of the proceeds of any equity issuance during each such
quarter, with no downward adjustment made for net losses. For the purposes
of this Section 8.02(2), the calculation of Tangible Net Worth shall
exclude the gross proceeds of the offerings of the Trust Preferred
Securities, Trust Pool Securities, Second Round Trust Pool Securities,
Third Round Trust Pool Securities and any other preferred securities issued
by the Canadian Borrower or any of its Subsidiaries (including, without
limitation, any of the Trusts).
(3) Combined Ratio. The Canadian Borrower shall maintain at all times a
Combined Ratio on a Consolidated basis of not greater than the greater of:
(i) 105%; and (ii) the Canadian Property and Casualty Industry Average
Combined Ratio during the immediately preceding four consecutive fiscal
quarters of the Canadian Borrower, calculated on the last day of each
fiscal quarter of the Canadian Borrower on a rolling four-quarter basis and
in a consistent manner.
(4) Capital Surplus Ratio. The Canadian Borrower shall maintain at all times a
Capital Surplus Ratio on a Consolidated basis calculated quarterly on the
last day of each fiscal quarter of the Canadian Borrower on a rolling
four-quarter basis and in a consistent manner as follows:
(i) of not greater than 3.25:1.00, from the Closing Date to and including
June 30, 2003; and
(iii) of not greater than 3.00:1.00, thereafter.
(5) Interest Coverage Ratio. The Canadian Borrower shall maintain at all times
an Interest Coverage Ratio on a Consolidated basis of not less than
3.00:1.00, calculated on the last day of each fiscal quarter of the
Canadian Borrower on a rolling four-quarter basis and in a consistent
manner.
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Section 8.03 Restrictive Covenants.
From the date hereof and until the Outstanding Obligations are permanently paid
in full, the Borrowers shall adhere to, and shall cause Kingsway America and
each of their Subsidiaries to adhere to, the following covenants, unless waived
in writing by the Majority of the Lenders:
(1) Not to Amalgamate, etc. Neither Borrower, nor Kingsway America nor any of
their Subsidiaries shall enter into any transaction or series of related
transactions (whether by way of amalgamation, merger, winding-up,
consolidation, reorganization, reconstruction, dissolution, continuance,
transfer, sale, lease or otherwise) whereby all or substantially all of any
undertaking, properties, rights or assets of a Borrower, Kingsway America
or any of their Subsidiaries would become the property of any Person other
than a Borrower, Kingsway America or a Material Subsidiary.
(2) Indebtedness. Neither Borrower, nor Kingsway America nor any of their
Subsidiaries shall create, assume, issue or permit to exist, directly or
indirectly, any Indebtedness except for Permitted Indebtedness.
(3) Negative Pledge. Neither Borrower, nor Kingsway America nor any of their
Subsidiaries shall create, assume, incur or suffer to exist any Security
Interest in or upon any of their respective undertakings, properties,
rights or assets (including, without limitation, insurance policies
required pursuant to Section 8.01(19)), other than Permitted Encumbrances.
(4) No Impairment of Upstreaming. Except to the extent that an Insurance
Subsidiary is regulated by an Insurance Regulatory Authority, neither
Borrower, nor Kingsway America nor any of their Subsidiaries shall directly
or indirectly enter into, assume or be bound by any agreement or instrument
that restricts or limits the ability of the Borrowers, Kingsway America or
any of their Subsidiaries to make dividend payments or other distributions
in respect of its capital stock, to repay indebtedness owed to a Borrower,
Kingsway America or any of their Subsidiaries, to make loans or advances to
a Borrower, Kingsway America or any of their Subsidiaries, or to transfer
any of its assets or properties to a Borrower, Kingsway America or any of
their Subsidiaries, in each case other than such restrictions or
encumbrances existing under or by reason of the Loan Documents.
(5) No Guarantees. Neither Borrower, nor Kingsway America nor any of their
Subsidiaries shall be, or become liable, directly or indirectly,
contingently or otherwise, for any obligation of any other Person by
Guarantee other than:
(a) the Guaranty Agreement effective January 1, 2001 (the "State and
County Guaranty") issued by the Canadian Borrower in favour of State
and County Mutual Fire Insurance Company ("State and County") in
respect of the liabilities of:
(i) Kingsway Reinsurance Corporation ("Kingsway Reinsurance") under
that certain 100% Quota Share Reinsurance Agreement effective
January 1, 2001 (the "State and County Reinsurance Agreement")
between Kingsway Reinsurance and State and County, and
(ii) Southern United General Agency of Texas, Inc. ("General Agency")
under that certain agreement effective January 1, 2001 (the
"State and County General Agency Agreement") whereby State and
County appointed General Agency, to the extent provided therein,
to act as general agent for State and County;
(b) the Guaranty Agreement effective April 1, 2001 (the "State National
Guaranty") issued by the Canadian Borrower in favour of State National
Insurance Company, Inc. ("State
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National"), State National Specialty Insurance Company ("State
National - Florida") and State and County in respect of the
liabilities of:
(i) Kingsway Reinsurance under that certain 100% Quota Share
Reinsurance Agreement effective April 1, 2001 between Kingsway
Reinsurance and State and County,
(ii) Lincoln General Insurance Company ("Lincoln General") under that
certain 90% Quota Share Reinsurance Agreement effective April 1,
2001 among Lincoln General, State National and State National -
Florida,
(iii) Lincoln General under that certain Excess Stop Loss Reinsurance
Agreement effective April 1, 2001 among Lincoln General, State
National and State National - Florida, and
(iv) Reliant American Insurance Company ("Reliant American") under
that certain agreement effective April 1, 2001 (the "Reliant
American General Agency Agreement") whereby State National,
State National - Florida and State and County appointed Reliant
American, to the extent provided therein, to act as general
agent for State National, State National - Florida and State and
County;
(c) the letters of credit that may be obtained, from time to time, by
Kingsway Reinsurance Corporation for the benefit of Old American
County Mutual Fire Insurance Company ("Old American") to support the
liabilities of Kingsway Reinsurance under that certain Quota Share
Reinsurance Agreement effective October 5, 2001 between Kingsway
Reinsurance and Old American (the "Old American Reinsurance
Agreement");
(d) the Indemnity and Hold Harmless Agreement effective October 5, 2001
(the "MSI Indemnity") issued by Kingsway America, on behalf of itself
and its affiliated companies, in favour of MSI Insurance Companies
("MSI") in respect of the insurance policies issued in MSI's name on
behalf of Kingsway America by West Point Underwriters;
(e) the Indemnity and Hold Harmless Agreement effective February 1, 2002
issued by the Canadian Borrower in favour of Aegis Security Insurance
Company;
(f) the letters of credit that may be obtained, from time to time, by the
Canadian Borrower for the benefit of MSI to support the liabilities of
Kingsway America under the MSI Indemnity Agreement;
(g) the Guarantee issued or to be issued by Kingsway America in favour of
the Insurance Commission of Idaho in respect of maintaining the
capital and surplus requirements of American Service Insurance
Company;
(h) the Guarantee of Kingsway America in respect of the 1999 Facility;
(i) the Guarantee issued by Kingsway America (in form and substance
satisfactory to the Lenders) in respect of the Indebtedness described
in Section 1.01(93)(o);
(j) the Guarantees issued by the Canadian Borrower and Kingsway America
(in form and substance satisfactory to the Lenders) in connection with
the Trust Preferred Securities, Debentures, Trust Pool Securities,
Trust Pool Debentures, Second Round Trust Pool Securities, Second
Round Trust Pool Debentures, Third Round Trust Pool Securities and
Third Round Trust Pool Debentures; and
(k) as otherwise permitted hereunder.
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(6) Restrictions on Subsidiaries and Investments. Neither Borrower, nor
Kingsway America nor any of their Subsidiaries shall directly or indirectly
acquire or invest in any body corporate (other than investments made within
the investment portfolios managed by the Canadian Borrower and certain of
its Subsidiaries in the ordinary course of business and in respect of the
Lines of Business) or form any Subsidiary or affiliate (other than a Person
that is a Subsidiary of either of the Borrowers as at the date of this
Agreement) or invest or make a loan to any Person (other than investments
or loans made within the investment portfolios managed by the Canadian
Borrower and certain of its Subsidiaries in the ordinary course of business
and in respect of the Lines of Business) unless no Default or Event of
Default shall have occurred and be continuing or would result therefrom and
the following conditions are satisfied:
(a) Neither Borrower, nor Kingsway America nor any of their Subsidiaries
shall acquire or attempt to acquire voting control directly or
indirectly of any corporation by the acquisition of securities, by
contract or otherwise (unless such action is supported or approved by
the board of directors of the target corporation and such acquisition
does not place a Lender in a position of conflict of interest);
(b) Neither Borrower, nor Kingsway America nor any of their Subsidiaries
shall make any acquisition or investment in or enter into a venture
which is outside the scope of its core lines of business as at the
date of this Agreement;
(c) No individual acquisition or investment shall exceed U.S. $50,000,000;
(d) Acquisitions and investments shall not exceed U.S. $125,000,000 in the
aggregate in any Financial Year of the Canadian Borrower, provided
that if acquisitions and investments in any Financial Year of the
Canadian Borrower total less than U.S. $125,000,000 in the aggregate
the Borrowers shall be entitled to carry forward 50% of the amount not
so expended to the immediately following Financial Year of the
Canadian Borrower; and
(e) Prior to completion of the contemplated acquisition or investment, the
Borrowers shall provide pro forma financial statements and a
compliance certificate demonstrating compliance with the financial
covenants set out in Section 8.02 certified by a senior officer of the
Canadian Borrower, without personal liability, confirming that the
Borrowers will not be in breach of any covenants as a result of the
contemplated acquisition or investment.
(7) Material Contracts. Neither Borrower, nor Kingsway America nor any of their
Subsidiaries shall cancel or terminate any material contract or amend,
supplement or otherwise modify any material contract, or waive any default
or breach under any material contract, or take any other action in
connection with any material contract that could reasonably be expected to
have a Material Adverse Effect. In any event and without limitation of any
of the foregoing, the Borrowers, Kingsway America and each of their
Subsidiaries shall not consent to, enter into or permit the entering into
of any amendment, supplement or other modification of any of the terms or
provisions contained in, or applicable to:
(a) any documents relating to preferred stock issued by any Borrower,
Kingsway America or any of their Subsidiaries (including, without
limitation, any of the Trusts);
(b) documents relating to any warrant or option granted by any Borrower,
Kingsway America or any of their Subsidiaries if the effect of such
amendment, supplement or other modification is to impose or increase
any monetary obligation on any Borrower, Kingsway America or any of
their Subsidiaries;
(c) any constating documents of any Borrower, Kingsway America or any of
their Subsidiaries other than any such amendment, supplement or other
modification which is
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immaterial or which could not reasonably be expected to have a
Material Adverse Effect; or
(d) any documents relating to the Trusts including, without limitation,
the Debenture Indebtedness, the Debenture Offering, the Trust
Preferred Securities, the Debentures, the Trust Pool Securities, the
Trust Pool Debentures, the Second Round Trust Pool Securities, the
Second Round Trust Pool Debentures, the Third Round Trust Pool
Securities, the Third Round Trust Pool Debentures and any declarations
of trust, indemnities, indentures, guarantees and other documents,
agreements and instruments in connection therewith.
(8) No Speculative Transactions. Neither Borrower, nor Kingsway America nor any
of their Subsidiaries shall engage in any speculative transaction or any
transaction involving commodity options, futures contracts or interest rate
or currency hedging (other than currency and interest rate hedging in the
ordinary course of business consistent with prudent business management).
(9) Margin Stock. Neither Borrower, nor Kingsway America nor any of their
Subsidiaries shall use the proceeds of any Borrowing for the purpose of
purchasing or acquiring any stock on margin.
(10) Carry on Business. Neither Borrower, nor Kingsway America nor any of their
Subsidiaries shall carry on any business other than the Lines of Business.
(11) Margin Calls. Neither Borrower, nor Kingsway America nor any of their
Subsidiaries shall use the proceeds of any Borrowing to satisfy a margin
call.
(12) Announcements. Neither Borrower, nor Kingsway America nor any of their
Subsidiaries shall make or permit to be made by or on behalf of itself any
press release or other public announcement which mentions an Agent or a
Lender without such Agent's and such Lender's prior written consent and
approval of such press release or public announcement, which written
consent and approval shall not be unreasonably withheld or delayed, except
as required by Applicable Law.
(13) Transactions with Directors, etc. Neither Borrower, nor Kingsway America
nor any of their Subsidiaries shall enter into any transaction, agreement
or arrangement with any director, officer or shareholder of either
Borrower, Kingsway America or any of their Subsidiaries or any member of
the immediate family of any such director, officer or shareholder, except
in the ordinary course of business and on terms no more beneficial than
would be offered to arms-length Persons.
(14) Restricted Payments, etc.
(a) The Borrowers shall not, and shall not permit or cause Kingsway
America or any of their Subsidiaries to, directly or indirectly,
declare or make any dividend payment, or make any other distribution
of cash, property or assets, in respect of any of its capital stock or
any warrants, rights or options to acquire its capital stock, or
purchase, redeem, retire or otherwise acquire for value any shares of
its capital stock or any warrants, rights or options to acquire its
capital stock, or set aside funds for any of the foregoing, except
that:
(i) the Canadian Borrower may declare and make dividend payments or
other distributions to holders of its common stock, in cash or
in shares of its common stock, and may purchase, redeem, retire
or otherwise acquire shares of its capital stock, in cash or in
kind, in each case provided that no Default or Event of Default
shall have occurred and be continuing or would arise immediately
after giving effect thereto;
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(ii) the U.S. Borrower may declare and make dividend payments or
other distributions to the Canadian Borrower at any time; and
(iii) each wholly-owned Subsidiary of the U.S. Borrower may declare
and make dividend payments or other distributions to the U.S.
Borrower or any other wholly-owned direct or indirect Subsidiary
of the U.S. Borrower at any time.
(b) The Borrowers shall not, and shall not permit or cause Kingsway
America or any of their Subsidiaries (including, without limitation,
the Trusts) 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
Debentures, the Trust Preferred Securities, the Trust Pool
Debentures, the Trust Pool Securities, the Second Round Trust
Pool Debentures, the Second Round Trust Pool Securities, the
Third Round Trust Pool Debentures, the Third Round Trust Pool
Securities or any other securities issued by any Borrower,
Kingsway America or any of their Subsidiaries or any guarantees
or indemnities in respect thereof following the occurrence of a
Default or an Event of Default or make any such payment if the
making of such payment would result in the occurrence of a
Default or Event of Default.
(15) Disposition of Assets. Neither Borrower, nor Kingsway America nor any of
their Subsidiaries shall, from and including the May 28, 2002, sell,
assign, transfer, convey, lease (as lessor), contribute or otherwise
dispose of, or grant options, warrants or other rights with respect to, any
of their properties or assets, having a value in excess of U.S. $20,000,000
in the aggregate except for dispositions in the ordinary course of business
of equity investments held in the Canadian Borrower's investment portfolio.
(16) Capital Expenditures. Neither Borrower, nor Kingsway America nor any of
their Subsidiaries shall incur Capital Expenditures in any Financial Year
of the Canadian Borrower in excess of U.S. $5,000,000 in the aggregate,
save and except for Permitted Acquisitions.
(17) Currency and Interest Rate Speculation. Neither Borrower, nor Kingsway
America nor any of their Subsidiaries shall engage in currency trading or
convert loans from one currency to another currency for speculative
reasons, or engage in interest rate hedging transactions for speculative
reasons.
(18) Redemption of Preferred Securities. Without the prior written consent of
the Majority of the Lenders, neither Borrower, nor Kingsway America nor any
of their Subsidiaries shall redeem any of the Trust Preferred Securities,
Trust Pool Securities, Second Round Trust Pool Securities, Third Round
Trust Pool Securities or any other securities issued by any Borrower,
Kingsway America or any of their Subsidiaries.
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ARTICLE NINE
EVENTS OF DEFAULT
Section 9.01 Events of Default.
Notwithstanding anything to the contrary herein:
(a) the right of a Borrower to obtain a further Borrowing shall cease and
the Lenders shall have no obligation to honour any cheques or other
orders for payment,
(b) the Outstanding Obligations shall become immediately due and payable
to the Administrative Agent (on behalf of the Lenders), and
(c) the Lenders may without notice to the Borrowers apply any amounts
outstanding to the credit of the Borrowers to repayment of the
Outstanding Obligations
(provided in each case, other than in respect of Sections 9.01(8), (11), (12)
and (14) (which are automatic Events of Default), the prior consent or direction
of the Majority of the Lenders has been obtained by the Administrative Agent)
upon the occurrence of any of the following events:
(1) Failure to Pay Principal or Interest - if a Borrower fails to make punctual
payment when due of any principal amount or interest payable hereunder;
(2) Failure to Pay Other Amounts - if a Borrower fails to make punctual payment
when due of any amount payable hereunder other than principal or interest
and if such payment is not made within ten (10) Business Days of the day on
which such payment is due;
(3) False Representations, Etc. - if any representation or warranty made or
given herein, in any other Loan Document, in any certificate delivered
pursuant hereto, or in any financial statements delivered pursuant hereto
or thereto, as applicable, is false or erroneous in any material respect;
(4) Cross-Default - if: (i) a Borrower, Kingsway America or any of their
Subsidiaries defaults in its obligations to any Person in respect of any
Indebtedness in the principal amount of U.S. $5,000,000 or greater or under
any agreement, document or other instrument relating to any such
Indebtedness and such default has not been waived within the applicable
cure period, or (ii) notwithstanding Section 9.01(4)(i) above, there is a
default or an event of default by a Borrower, Kingsway America or any of
their Subsidiaries under any agreement, document or other instrument to
which any of the Trusts is a party, whether or not such a default or event
of default has been waived within the applicable cure period or results in
demand, acceleration or any enforcement action;
(5) Default in Certain Covenants - if there is any default or failure in the
observance or performance of any covenant contained in Section 8.02;
(6) Default in Other Covenants - if, other than in respect of covenants
contained in Section 8.02, or any covenant to pay, there is any default or
failure in the observance or performance of any other act hereby, or
pursuant to any other Loan Document, required to be done or any other
covenant or condition hereby, or pursuant to any other Loan Document,
required to be observed or performed, and the default or failure continues
for fifteen (15) Business Days after notice by the Administrative Agent to
either Borrower, Kingsway America or any of their Subsidiaries, as
applicable, specifying such default or failure;
(7) Change in Ownership or Control - if
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(a) there is a Change of Voting Control of the Canadian Borrower following
the Closing Date,
(b) the Canadian Borrower ceases to
(i) be a general partner of the U.S. Borrower or
(ii) own directly or indirectly 100% of the issued and outstanding
voting shares in the capital stock of Kingsway America or any
Subsidiary of the Canadian Borrower,
(c) the Canadian Borrower and Metro Claim Services Inc. cease to be the
sole partners of the U.S. Borrower,
(d) the Canadian Borrower ceases to be a public company or ceases to be
widely held, or
(e) the U.S. Borrower is dissolved;
(8) Insolvency - if a Borrower, Kingsway America or any Material Subsidiary is
unable to pay debts as such debts become due, or is, or is adjudged or
declared to be, or admits to being, bankrupt or insolvent;
(9) ERISA Prohibited Transactions -
(a) if any Person engages in any "prohibited transaction" (as defined in
Section 406 of ERISA or Section 4975 of the Code) involving any Plan,
(b) if any "accumulated funding deficiency" (as defined in Section 302 of
ERISA), whether or not waived, shall exist with respect to any Plan,
or any lien shall arise on the assets of a Borrower, Kingsway America
or any of their Subsidiaries in favour of the PBGC or a Plan,
(c) if a Reportable Event shall occur with respect to, or proceedings
shall commence to have a trustee appointed, to administer or to
terminate, any Single Employer Plan, which Reportable Event or
commencement of proceedings or appointment of a trustee is, in the
reasonable opinion of the Administrative Agent, likely to result in
the termination of such Plan for purposes of Title IV of ERISA,
(d) if any Single Employer Plan shall terminate for purposes of Title IV
of ERISA;
(e) if a Borrower, Kingsway America or any of their Subsidiaries shall, or
in the reasonable opinion of the Administrative Agent is likely to,
incur any liability in connection with a withdrawal from, or the
insolvency or Reorganization of, a Multiemployer Plan; or
(f) if any other event or condition shall occur or exist, with respect to
a Plan;
and in each case in clauses 0 through (f) above, such event or condition,
together with all other such events or conditions, if any, could reasonably
be expected to have a Material Adverse Effect.
(10) Pension Liability - with respect to any Guaranteed Pension Plan, a
Reportable Event shall have occurred and a Majority of the Lenders shall
have determined that such event reasonably could be expected to result in
liability of a Borrower, Kingsway America or any of their Subsidiaries to
the PBGC or such Guaranteed Pension Plan in an aggregate amount exceeding
$1,000,000 and such event in the circumstances occurring could reasonably
constitute grounds for the termination of such Guaranteed Pension Plan by
the PBGC or for the appointment by the appropriate United States District
Court of a trustee to administer such Guaranteed Pension Plan; or a trustee
shall have been appointed by the United States District Court to administer
such
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Plan; or the PBGC shall have institituted proceedings to terminate such
Guaranteed Pension Plan.
(11) Voluntary Proceedings - if a Borrower, Kingsway America or any of their
Subsidiaries makes a general assignment for the benefit of creditors; or
any proceeding or filing is instituted or made by a Borrower, Kingsway
America or any of their Subsidiaries seeking relief on its behalf as
debtor, or to adjudicate it a bankrupt or insolvent, or seeking
liquidation, winding-up, reorganization, arrangement, adjustment or
composition of it or its debts under any similar law relating to
bankruptcy, insolvency, reorganization or relief of debtors, or seeking
appointment of a receiver, trustee, custodian or other similar official for
it or for any substantial part of its properties or assets; or a Borrower,
Kingsway America or any of their Subsidiaries takes any corporate action to
authorize any of the actions set forth in this Section 9.01(11);
(12) Involuntary Proceedings - if any notice of intention is filed or any
proceeding or filing is instituted or made against a Borrower, Kingsway
America or any of their Subsidiaries in any jurisdiction seeking to have an
order for relief entered against it as debtor or to adjudicate it a
bankrupt or insolvent, or seeking liquidation, winding-up, reorganization,
arrangement, adjustment or composition of it or its debts under any law
relating to bankruptcy, insolvency, reorganization or relief of debtors, or
seeking appointment of a receiver, trustee, custodian or other similar
official for it or for any substantial part of its properties or assets or
seeking possession, foreclosure or retention, or sale or other disposition
of, or other proceedings to enforce security over, all or a substantial
part of the assets of a Borrower, Kingsway America or any of their
Subsidiaries unless the same is being contested actively and diligently in
good faith by appropriate and timely proceedings and is dismissed, vacated
or stayed within 30 days of institution thereof;
(13) Adverse Judgments and Claims - if: (a) any claim or action is brought in
respect of any of the Trusts against any Borrower, Kingsway America or any
of their Subsidiaries (including, without limitation, any Trust) which
could result in a judgment against any of the Borrowers, Kingsway America
or any of their Subsidiaries in an amount in excess of U.S. $5,000,000, or
(b) one or more judgments for the payment of money aggregating in excess of
U.S. $5,000,000 (whether or not covered by insurance) shall be rendered
against any Borrower, Kingsway America or any of their Subsidiaries
(including, without limitation, any of the Trusts);
(14) Receiver, etc. - if a receiver, liquidator, trustee, sequestrator or other
officer with like powers is appointed with respect to, or an encumbrancer
pursuant to a Security Interest or otherwise takes possession of, or
forecloses or retains, or sells or otherwise disposes of, or otherwise
proceeds to enforce security over any of the properties or assets of either
Borrower, Kingsway America or any Material Subsidiary or gives notice of
its intention to do so;
(15) Execution, Distress - if any writ, attachment, execution, sequestration,
extent, distress or any other similar process in an amount not greater than
U.S. $5,000,000 in the aggregate becomes enforceable against either
Borrower, Kingsway America or any of their Subsidiaries or if a distress or
any analogous process is levied against any of the properties or assets of
either Borrower, Kingsway America or any Material Subsidiary, except where
the same is being contested actively and diligently in good faith by
appropriate and timely proceedings and the enforcement or levy has been
stayed;
(16) Suspension of Business - if a Borrower, Kingsway America or any Material
Subsidiary suspends or ceases or threatens to suspend or cease its
business;
(17) Sale - if a Borrower, Kingsway America or any Material Subsidiary sells or
otherwise disposes of, or threatens to sell or otherwise dispose of, all or
a substantial part of its undertaking and property and assets whether in
one transaction or a series of related transactions save as permitted in
this Agreement;
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(18) Regulatory Action - if any action is taken by any regulatory body with
authority over a Borrower, Kingsway America or any Material Subsidiary to
materially limit the business activities of such Borrower, Kingsway America
or such Material Subsidiary; or
(19) Impairment of Kingsway America Guarantee, etc. - if: (a) any Loan Document
(including, without limitation, the Kingsway America Guarantee) shall
(except in accordance with its terms), in whole or in part, terminate,
cease to be effective or cease to be a legally valid, binding and
enforceable obligation of any obligated party thereto; or (b) any Borrower,
Kingsway America or any other party obligated under any Loan Document
shall, directly or indirectly, contest in any manner the effectiveness,
validity, binding nature or enforceability of any Loan Document.
Section 9.02 Lenders May Waive.
The Majority of the Lenders may at any time waive any Default or Event of
Default which may have occurred, provided that no such waiver shall extend to or
be taken in any manner whatsoever to affect any subsequent Default or Event of
Default or the rights or remedies resulting therefrom. No such waiver shall be
effective unless given by the Administrative Agent in writing with the consent
of the Majority of the Lenders.
Section 9.03 Remedies are Cumulative.
For greater certainty, the rights and remedies of the Lenders and the Agents
under this Agreement are cumulative and are in addition to and not in
substitution for any rights or remedies provided by law; and any single or
partial exercise by the Lenders or the Agents of any right or remedy for a
Default or Event of Default or breach of any term, covenant, condition or
agreement herein contained shall not be deemed to be a waiver of or to alter,
affect or prejudice any other right or remedy to which the Lenders or the Agents
may be lawfully entitled for the same default or breach, and any waiver by the
Lenders or the Agents of the strict observance, performance or compliance with
any term, covenant, condition or agreement herein contained and any indulgence
granted by the Lenders or the Agents shall be deemed not to be a waiver of that
or any subsequent default.
Section 9.04 Set-Off.
Each of the Lenders shall be entitled at any time or from time to time after
demand or the occurrence of an Event of Default which is continuing, without
notice to set-off, consolidate and to apply any or all deposits and any other
indebtedness at any time held or owing by such Lender to either Borrower against
and on account of the debts, liabilities or obligations of the Borrowers to such
Lender, whether or not due and payable and whether or not such Lender has made
demand therefor.
Section 9.05 Cash Collateral Accounts.
Following demand or upon the occurrence of an Event of Default which is
continuing and in addition to any other rights or remedies of the Agents and the
Lenders hereunder, the Administrative Agent as and by way of collateral security
shall be entitled to deposit and retain in an account to be maintained by the
Administrative Agent on behalf of the Lenders (bearing interest at the rates of
the Administrative Agent as may be applicable in respect of other deposits of
similar amounts for similar terms) amounts which are received by the
Administrative Agent from either Borrower, Kingsway America or any of their
Subsidiaries hereunder to the extent such amounts may be required to satisfy any
Outstanding Obligations.
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ARTICLE TEN
GENERAL
Section 10.01 Redistribution of Payments.
If at any time the proportion which any Lender has received or recovered in
respect of its portion of any payment to be made under this Agreement by the
Borrowers for the account of such Lender or one or more other Lenders (including
any moneys and/or property obtained by such Lender in the exercise of any right
of set-off, counterclaim or similar right of such Lender) is greater than such
Lender's Rateable Portion, then appropriate transfers shall be made among the
Lenders through the Administrative Agent, so as to ensure that each Lender
receives its Rateable Portion of such payment.
Section 10.02 Enforcement.
Each of the Lenders hereby covenants and agrees that it shall not be entitled to
take any action hereunder, including, without limitation, any demand or
declaration of a Default or an Event of Default hereunder but that such action
shall be taken only by the Administrative Agent with the prior written agreement
of the Majority of the Lenders. Each of the Lenders further covenants and agrees
that upon any such written agreement by the Majority of the Lenders, it shall
cooperate fully to the extent requested by the Administrative Agent or the
Majority of the Lenders. Each of the Lenders further covenants and agrees that
all amounts received following a Default or an Event of Default on account of
the Outstanding Obligations, are held for the benefit of all Lenders and shall
be shared among the Lenders rateably according to their Rateable Portions and
that all costs of such realization, to the extent not reimbursed, shall be
shared among the Lenders rateably in accordance with their Rateable Portions.
Each of the Lenders covenant and agree not to seek, accept or take security from
any Person in respect of the Outstanding Obligations, or any portion thereof
other than the Security.
Section 10.03 Readjustment of Obligations Among Lenders.
(1) If upon expiry of the Credit Facilities or, if sooner upon demand or the
occurrence of an Event of Default, the Lenders shall not recover the
Outstanding Obligations in full (the amount by which the recovered amount
falls short of the entire amount of the Outstanding Obligations
hereinafter called the "Shortfall"), the Shortfall shall be shared by the
Lenders rateably in accordance with their respective Rateable Portions,
and appropriate transfers and adjustments shall be made such that the
Shortfall is shared, as nearly as may be practicable, in accordance with
the respective Rateable Portions of each Lender. Such adjustments and
transfers shall be accomplished through the Administrative Agent and in a
manner satisfactory to the Lenders concerned, acting reasonably.
(2) Upon a permanent prepayment of a portion of the Canadian Facility pursuant
to Section 4.03, the Canadian Commitment of each Canadian Lender shall be
reduced rateably such that the Canadian Rateable Portion of each Canadian
Lender following such prepayment is equal to its Canadian Rateable Portion
immediately prior to such prepayment and the Total Commitment shall be
reduced in an amount equal to the prepayment.
(3) Upon a permanent prepayment of a portion of the U.S. Facility pursuant to
Section 4.03, the U.S. Commitment of each U.S. Lender shall be reduced
rateably such that the U.S. Rateable Portion of each U.S. Lender following
such prepayment is equal to its U.S. Rateable Portion immediately prior to
such prepayment and the Total Commitment shall be reduced in an amount
equal to the prepayment.
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Section 10.04 Notices.
Any notice, request or other communication hereunder to any of the parties
hereto shall be in writing and be well and sufficiently given if delivered
personally or sent by prepaid registered mail to its address or by telecopier to
the number and to the attention of the person set forth below:
(1) In the case of the Borrowers or Kingsway America:
c/o Kingsway Financial Services Inc.
5310 Explorer Drive
Mississauga, Ontario L4W 5H8
Attention: Shaun Jackson
Telecopier No.: (905) 629-5008
(2) with a copy to the U.S. Borrower:
c/o Kingsway America
1515 Woodfield Road
Suite 820
Schaumburg, Illinois 60172
Attention: James R. Zuhlke
Telecopier No.: (847) 619-5275
(3) In the case of the Administrative Agent and the Lenders:
c/o Canadian Imperial Bank of Commerce
BCE Place, P.O. Box 500
161 Bay Street, 8th Floor
Toronto, Ontario M5J 2S8
Attention: Manager of Administration
Telecopier No.: (416) 956-3830
Any such notice shall be deemed to be given and received, if delivered, when
delivered, and if mailed, on the third Business Day following the date on which
it was mailed, unless an interruption of postal services occurs or is continuing
on or within the three Business Days after the date of mailing in which case the
notice shall be deemed to have been received on the third Business Day after
postal service resumes and if sent by telecopier on the next Business Day after
the day on which the telecopy is sent. Either party may by notice to the other,
given as aforesaid, designate a changed address or telecopier number.
Section 10.05 Performance of Covenants by the Lenders.
If any of the covenants or obligations contained herein or in any Loan Document
shall not be performed by a Borrower, Kingsway America or any of their
Subsidiaries, the Administrative Agent or Lenders, upon reasonable notice to the
Borrowers, may perform such covenant or obligation and, if in so doing the
Administrative Agent or any Lender spends money or incurs liability, the amount
of money so spent or liability incurred shall be treated as an advance to the
Borrowers: (i) in the case of any money spent or liability incurred by any of
the Administrative Agent or the Canadian Lenders, by way of a Prime Rate Loan in
the case of money spent or liabilities incurred in Cdn $ and by way of a U.S.
Base Rate Loan in the case of money spent or liabilities incurred in U.S. $; and
(ii) in the case of any money spent or liability incurred by any of the U.S.
Lenders, by way of an Alternative Base Rate Loan.
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Section 10.06 Indemnity.
In addition to any other indemnity provided for herein, the Borrowers hereby
jointly and severally indemnify the Agents and the Lenders on demand against any
loss (other than loss of profit), expense or liability which the Agents or any
Lender may sustain or incur as a consequence of the action or inaction of a
Borrower, Kingsway America or any of their Subsidiaries in connection with:
(1) any default in payment of the principal amount of any Borrowing or any
part thereof or interest accrued thereon, as and when due and payable;
(2) the repayment or prepayment of any LIBOR Loan prior to the last day of its
term;
(3) any failure to fulfill on or before any Borrowing Date the conditions
precedent to any Borrowing as provided for in this Agreement if, as a
result of such failure, such Borrowing is not made on such date;
(4) the occurrence of any Default or Event of Default;
(5) any misrepresentation made by a Borrower, Kingsway America or any of their
Subsidiaries herein, in any other Loan Document or in any instrument in
writing delivered to the Agents or any Lender in connection with this
Agreement or any other Loan Document or in any instrument in writing
delivered to the Agents or any Lender;
(6) the costs of enforcement of the rights of the Agents and the Lenders under
this Agreement and the other Loan Documents; and
(7) any determination that a Lender or an Agent is a partner or a joint
venturer with any Borrower,
including but not limited to any loss or expense sustained or incurred in
liquidating or redeploying deposits or other funds contracted for or acquired or
used to effect or maintain such Borrowing or part thereof.
Section 10.07 The Canadian Borrower Liability for the U.S. Borrower
Obligations; Waivers, etc.
In addition to, and not in limitation of, any direct liability of the Canadian
Borrower arising hereunder (including, without limitation, in respect of any and
all Outstanding Obligations of the Canadian Borrower), the Canadian Borrower, by
virtue of its status as general partner of the U.S. Borrower, hereby expressly
affirms, acknowledges and agrees for the benefit of the Administrative Agent and
the Lenders that it is liable ("Partnership Liability") for all indebtedness and
other obligations of the U.S. Borrower (including, without limitation, in
respect of any and all Outstanding Obligations of the U.S. Borrower) under the
Delaware Revised Uniform Partnership Act, 6 Del. C. Sections 15-1.01 - 1210, as
the same may be amended or otherwise modified from time to time, and in
connection with such Partnership Liability hereby expressly waives: (a)
promptness, diligence, notice of acceptance and any other notice with respect to
any of the Outstanding Obligations, (b) any requirement that the Administrative
Agent or any Lender exhaust any right or take any action against the U.S.
Borrower or any other Person (including any guarantor) or entity or any
collateral, if any, securing the Outstanding Obligations, and (c) any
requirement of marshalling. In furtherance of (and without limiting) the
foregoing, the Canadian Borrower acknowledges and agrees that its Partnership
Liability shall exist in full force and effect regardless of any law, regulation
or order now or hereafter in effect in any jurisdiction affecting any
Outstanding Obligations of the U.S. Borrower or the rights of the Administrative
Agent or any of the Lenders with respect thereto. Moreover, the Canadian
Borrower's Partnership Liability shall be absolute, unconditional and
irrevocable irrespective of: (a) any lack of validity, legality or
enforceability of this Agreement, any Loan Document or any other agreement or
instrument relating to any matter thereof as to any Outstanding Obligations of
the U.S. Borrower; (b) any change in the time, manner or place of payment of, or
in any other term of, all or any of the Outstanding Obligations of the U.S.
Borrower, or any compromise, renewal, extension,
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acceleration or release with respect thereto, or any other amendment or waiver
of or any consent to departure from this Agreement or any Loan Document; (c) any
addition, exchange, release or non-perfection of collateral, if any, or any
release or amendment or waiver of or consent to departure from any guaranty, for
all or any of the Outstanding Obligations of the U.S. Borrower; (d) the failure
of the Administrative Agent or any Lender: (i) to assert any claim or demand or
to enforce any right or remedy against the U.S. Borrower or any other Person
(including any guarantor) under the provisions of this Agreement, any Loan
Document or otherwise, or (ii) to exercise any right or remedy against any
guarantor of, or collateral (if any) securing, any of the Outstanding
Obligations of the U.S. Borrower; (e) any amendment to, rescission, waiver, or
other modification of, or any consent to departure from, any of the terms hereof
or any Loan Document; (f) any defense, set-off or counterclaim which may at any
time be available to or be asserted by the U.S. Borrower against the
Administrative Agent or any Lender; (g) any limitation, impairment or
termination of the Outstanding Obligations of the U.S. Borrower for any reason,
including any claim of waiver, release, surrender, alteration or compromise, and
shall not be subject to (and the Canadian Borrower hereby expressly waives any
right to or claim of) any defense or set- off, counterclaim, recoupment or
termination whatsoever by reason of the invalidity, illegality, nongenuineness,
irregularity, compromise, unenforceability of, or any other event or occurrence
affecting, the Outstanding Obligations of the U.S. Borrower or otherwise; or (h)
any other circumstance which might otherwise constitute a defense available to,
or a legal or equitable discharge of, the U.S. Borrower, any surety or any
guarantor.
Section 10.08 No Set-Off or Counterclaim.
The obligations of the Borrowers and of Kingsway America to make payments
hereunder and under the Loan Documents shall be absolute and unconditional and
shall not be affected by any circumstance, including, without limitation, any
set-off, compensation, counterclaim, recoupment, defence or other right which a
Borrower or Kingsway America may have against the Agents or any of the Lenders.
Section 10.09 Severability.
Any provision of this Agreement which is prohibited or unenforceable in any
jurisdiction shall not invalidate the remaining provisions hereof and any such
prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.
Section 10.10 Time of Essence.
Time shall, in all respects, be of the essence of this Agreement.
Section 10.11 Assignment.
No Borrower may assign this Agreement or any part hereof without the prior
written consent of the Administrative Agent and each of the Lenders. Subject to
Section 10.18, a Lender shall be entitled to assign this Agreement with the
consent of the Administrative Agent not to be unreasonably withheld.
Section 10.12 Entire Agreement.
This Agreement, together with any other instrument contemplated hereby,
constitutes the entire agreement between the parties with respect to the matters
covered hereby and supersedes any other prior agreements or representations.
Section 10.13 Amendments.
No amendment, modification or waiver of any provision of this Agreement or
consent by the Lenders to any departure from any provision of this Agreement is
in any way effective unless it is in writing and signed by the Borrowers, in
respect of an amendment or modification, and the Majority of the Lenders, in
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which event the amendment, modification, waiver or consent is effective only in
the specific instance and for the specific purpose for which it is given.
Section 10.14 Law Governing.
This 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.
Section 10.15 Forum Selection and Consent to Jurisdiction.
Any litigation based hereon, or arising out of, under, or in connection with,
this Agreement or any other Loan Document, or any course of conduct, course of
dealing, statements (whether oral or written) or actions of the Administrative
Agent, the Lenders or either Borrower shall be brought and maintained
exclusively in either the Courts of Ontario, Canada, the Courts of the State of
Illinois or in the United States District Court for the Northern District of
Illinois. Each Borrower hereby expressly and irrevocably submits to the
jurisdiction of the Courts of Ontario, Canada, the Courts of the State of
Illinois and of the United States District Court for the Northern District of
Illinois for the purpose of any such litigation as set forth above and
irrevocably agrees to be bound by any judgment rendered thereby in connection
with such litigation subject to any rights of appeal. Each Borrower further
irrevocably consents to service of process by a nationally recognized overnight
delivery service, or by personal service within or without the State of
Illinois. Each Borrower hereby expressly and irrevocably waives, to the fullest
extent permitted by law, any objection which it may have or hereafter may have
to the laying of venue of any such litigation brought in any such Court referred
to above and any claim that any such litigation has been brought in an
inconvenient forum. To the extent that either Borrower has or hereafter may
acquire any immunity from jurisdiction of any Court or from any legal process
(whether through service or notice, attachment prior to judgment, attachment in
aid of execution or otherwise) with respect to itself or its property, each
Borrower hereby, to the fullest extent permitted by Applicable Law, irrevocably
waives such immunity in respect of its obligations under this Agreement and each
other Loan Document.
Section 10.16 Waiver of Jury Trial, etc.
The Agents, the Lenders and each Borrower hereby knowingly, voluntarily and
intentionally waive any rights they may have to a trial by jury in respect of
any litigation based hereon, or arising out of, under, or in connection with,
this Agreement or any other Loan Document, or any course of conduct, course of
dealing, statements (whether oral or written) or actions of the Agent, the
Lenders or the Borrowers. Each Borrower acknowledges and agrees that it has
received full and sufficient consideration for this provision (and each other
provision of each other Loan Document to which it is a party) and that this
provision is a material inducement for the Agents and the Lenders entering into
this Agreement and each such other Loan Document. In no event shall any Lender
or any Agent be liable for any consequential damages which may be alleged in
connection herewith or the transactions contemplated hereby.
Section 10.17 Conflict.
In the event that there is any conflict between the provisions contained in this
Agreement and the provisions contained in any document delivered pursuant hereto
or in connection herewith, the provisions of this Agreement shall have priority
over and shall override the provisions contained in such other document.
Section 10.18 Loan Syndication.
With the prior written consent of the Borrowers, not to be unreasonably
withheld, each Lender shall have the right to sell, assign, transfer or grant a
participation in its Commitment, in an amount of not less than Cdn $5,000,000
or, if less, the full amount of such Lender's Commitment in whole or in part, to
one or
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more Persons (the "Participants"). After the occurrence of an Event of Default,
any Lender shall be entitled to undertake any such sale, assignment, transfer or
grant of a participation without notice to, or the consent of, either Borrower
or Kingsway America. Notwithstanding the foregoing, any Lender may sell, assign,
transfer or grant a participation in its Commitment to any other Lender or to an
Affiliate of any Lender and without the consent of the Borrowers. For the
purpose of selling, assigning, transferring or granting a participation in its
Commitment, a Lender may disclose, on a confidential basis, to a potential
Participant such information concerning the Borrowers, Kingsway America and
their Subsidiaries as such Lender considers appropriate, including information
subject to any duty of confidentiality by such Lender to the Borrowers, Kingsway
America or any of their Subsidiaries. The Borrowers agree to execute and deliver
and to cause Kingsway America and any of their Subsidiaries to execute and
deliver such further documentation and take such further action as the
Administrative Agent or any Lender considers necessary or advisable to give
effect to such sale, assignment, transfer or grant of participation. In the case
of sale, assignment, transfer or grant of a participation, and upon payment by
the Participant to the Administrative Agent of an administrative fee in the
amount of U.S. $2,500, for the Administrative Agent's own account and not for
the account of the Lenders, the Participant shall have, to the extent of such
sale, assignment, transfer or grant of participation, the same rights and
obligations as it would have had if it had been a Lender on the Closing Date and
as such had executed this Agreement as required, and from the date of delivery
of the notice of participation and undertaking described in Section 10.19, the
Participant shall be a Lender hereunder. The selling, assigning, transferring or
granting Lender (the "Outgoing Lender") shall be relieved, to the extent of the
sale, assignment, transfer or grant of participation, of its obligations
hereunder with respect to its Commitment. The Borrowers hereby acknowledge and
agree that any sale, assignment, transfer or grant of a participation will give
rise to a direct obligation of the Borrowers to the Participant. Notwithstanding
the foregoing, it is understood and agreed by each Borrower that the rights of
any Outgoing Lender with respect to a Borrowing shall be transferred to the
applicable Participant pursuant to the terms of this Section 10.18 and such
Borrowing continues to be outstanding at all times without novation.
Section 10.19 Assignment and Acceptance.
A sale, assignment, transfer or grant of participation pursuant to Section 10.18
shall be effective upon the Borrowers and each other Lender having received an
assignment and acceptance substantially in the form of Schedule "L" and the
Administrative Agent receiving the fee from the Participant in the amount of
U.S. $2,500. Upon any such sale, assignment, transfer or grant of participation
becoming effective, Schedule "A" to this Agreement shall be automatically
amended to reflect the amended Commitments resulting from such sale, transfer,
assignment or grant of participation without further notice or other
requirement.
Section 10.20 Judgment Currency.
The obligations of the Borrowers pursuant to this Agreement to make payments in
a specific currency (the "Contractual Currency") shall not be discharged or
satisfied by any tender or recovery pursuant to any judgment expressed in or
converted into any other currency except to the extent to which such tender or
recovery shall result in the effective receipt by the Lenders and the
Administrative Agent of the full amount of the Contractual Currency payable or
expressed to be payable under this Agreement and accordingly the obligations of
the Borrowers shall be enforceable as an alternative or additional cause of
action for the purpose of recovering the other currency of the amount (if any)
by which such effective receipt shall fall short of the Contractual Currency
payable or expressed to be payable under this Agreement and shall not be
effected by judgment being offered for any other sum due under this Agreement.
Section 10.21 Successors and Assigns.
This Agreement shall be binding upon and enure to the benefit of the parties and
their respective successors and assigns.
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Section 10.22 Survival.
The obligations of the Borrowers under Section 4.06, Section 5.06 and Section
10.06 shall in each case survive any termination of this Agreement, the payment
in full of the Outstanding Obligations and the termination of the Commitments,
except to the extent otherwise expressly provided thereto.
Section 10.23 Non-U.S. Lenders.
Each U.S. Lender that is not a "United States person" (within the meaning of
Section 7701(a)(30) of the Code) (a "Foreign Lender") will submit to the U.S.
Borrower and the Administrative Agent, prior to receipt of any payment subject
to withholding under the Code (or upon accepting an assignment of an interest
herein), two duly completed and signed copies of either IRS Form W-8BEN or any
successor thereto (relating to such Foreign Lender and entitling it to an
exemption from, or reduction of, withholding tax on all payments to be made to
such Foreign Lender by the Borrowers pursuant to this Agreement) or IRS Form
W-8ECI or any successor thereto (relating to all payments to be made to such
Foreign Lender by the Borrowers pursuant to this Agreement) or such other
evidence satisfactory to the U.S. Borrower and the Administrative Agent that
such Foreign Lender is entitled to an exemption from, or reduction of, U.S.
withholding tax, including any exemption pursuant to Section 881(c) of the Code.
Each such Foreign Lender will, from time to time after submitting either such
form or such evidence, submit to the U.S. Borrower and the Administrative Agent
such additional duly completed and signed copies of one or the other such forms
(or such successor forms or other documents as will be adopted from time to time
by the relevant United States taxing authorities) as may be: (i) reasonably
requested in writing by the U.S. Borrower or the Administrative Agent; and (ii)
appropriate under then current United States law or regulations to avoid United
States withholding taxes on payments in respect of any amounts to be received by
such U.S. Lender pursuant to this Agreement. Upon the reasonable request of the
U.S. Borrower or the Administrative Agent, each Lender that has not provided the
forms or other documents, as provided above, on the basis of being a "United
States person" will submit to the U.S. Borrower and the Administrative Agent a
certificate to the effect that it is such a "United States person".
If any U.S. Lender which is not a "United States person" determines that it is
unable to submit to the U.S. Borrower and the Administrative Agent any form or
certificate that such U.S. Lender is requested to submit pursuant to the
preceding paragraph, or that it is required to withdraw or cancel any such form
or certificate, or that any such form or certificate previously submitted has
otherwise become ineffective or inaccurate, such U.S. Lender will promptly
notify the U.S. Borrower and the Administrative Agent of such fact.
ARTICLE ELEVEN
THE AGENTS
Section 11.01 Appointment and Authorization.
(1) Each Lender hereby irrevocably appoints and authorizes, and hereby agrees
that it will require any assignee or transferee of any of its interests
herein to appoint and authorize, each of the Agents to be its agent and
its attorney in its name and on its behalf, to take such actions and to
exercise such powers hereunder as are delegated to the Agents by the terms
hereof, together with such powers as are reasonably incidental thereto. No
Agent nor any of their directors, officers, employees or agents shall be
liable for any action taken or omitted to be taken by any of them
hereunder or in connection herewith, except for their own gross negligence
or wilful misconduct.
(2) The Agents shall have no duties or obligations other than as expressed
herein, and, without limitation, the Agents do not undertake, and the
Lenders relieve the Agents from, any implied duties, (including fiduciary
duties) and there shall not be construed against the Agents any implied
covenants or terms.
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Section 11.02 Interest Holders.
The Agents may treat each Lender or the Person designated in the last notice
filed with it under this Section, as the holder of all of the interests of such
Lender in respect of this Agreement, until written notice of a sale, assignment,
transfer or grant pursuant to Section 10.18, signed by such Lender (or the
person designated in the last notice filed with the Agent) and the Person
designated in such written notice has been filed with the Administrative Agent.
Section 11.03 Documents.
The Agents are not, and shall not be, under any duty to examine, enquire into or
pass upon the validity, effectiveness or genuineness of any instrument, document
or communication furnished pursuant hereto or in connection herewith, and the
Agents are entitled to assume that the same are valid, effective and genuine,
have been signed or sent by the proper parties and are what they purport to be.
Section 11.04 Agents, Affiliates and Subsidiaries.
With respect to its Commitment and the advances made by it as a Lender
hereunder, the Agents have the same rights and powers hereunder as any other
Lender and may exercise the same as though they were not the Agents, and the
Agents and their Affiliates and Subsidiaries may accept deposits from, lend
money to and generally engage in any kind of business with any Borrower and/or
any of its Affiliates and/or Subsidiaries and Persons doing business with the
Borrowers and/or any of its Affiliates and/or Subsidiaries as if it were not an
Agent and without any obligation to account therefor.
Section 11.05 Responsibility of Agents.
The duties and obligations of the Agents hereunder are only those expressly set
forth herein or therein. The Administrative Agent has no duty to investigate
whether a Default or an Event of Default has occurred. The Administrative Agent
is entitled to assume that no Default or Event of Default has occurred and is
continuing, unless the Administrative Agent has actual knowledge or has been
notified in writing by a Borrower of such fact or has been notified in writing
by a Lender that such Lender considers that a Default or an Event of Default has
occurred and is continuing, such notification to specify in detail the nature
thereof.
Section 11.06 Action by Administrative Agent.
(1) The Administrative Agent is entitled to use its discretion with respect
to:
(a) exercising or refraining from exercising any rights which may be
vested in it by this Agreement, the Kingsway America Guarantee or any
other Loan Document, and
(b) taking or refraining from taking any action or acts which it may be
able to take under or in respect of this Agreement, the Kingsway
America Guarantee or any other Loan Document,
unless the Administrative Agent has been instructed by the Majority of the
Lenders to exercise or refrain from exercising such rights or to take or
refrain from taking such actions; provided, however, that the
Administrative Agent may not exercise any rights under this Agreement, the
Kingsway America Guarantee or any other Loan Document or commence any
action for the collection of amounts owing hereunder without the request
of the Majority of the Lenders. Upon receiving the indemnities required
hereunder, the Administrative Agent shall, at the request of the Majority
of the Lenders, exercise any or all such rights and/or commence such
action. The Administrative Agent shall incur no liability under or in
respect of this Agreement, the Kingsway America Guarantee or any other
Loan Document with respect to anything which it may do or
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refrain from doing in the reasonable exercise of its judgment or which may
seem to it to be necessary or desirable in the circumstances, except for
its gross negligence or wilful misconduct;
(2) the Agents shall in all cases be fully protected in acting or refraining
from acting under this Agreement, the Kingsway America Guarantee or any
other Loan Document in accordance with the instructions of the Majority of
the Lenders and any action taken or failure to act pursuant to such
instructions shall be binding on all Lenders.
Section 11.07 Notice of Events of Default.
If the Administrative Agent acquires actual knowledge or is notified in writing
of any Default or Event of Default, the Administrative Agent shall promptly
notify the Lenders and shall take such action and assert such rights under this
Agreement, the Kingsway America Guarantee or any other Loan Document as the
Majority of the Lenders shall request in writing, and the Administrative Agent
is not subject to any liability by reason of its acting pursuant to any such
request. If the Majority of the Lenders fail, for ten (10) Business Days after
receipt of the notice of any Default or Event of Default, to request the
Administrative Agent to take action or to assert rights under this Agreement,
the Kingsway America Guarantee or any other Loan Document in respect of such
Default or Event of Default, the Administrative Agent may, but shall not be
required to, subject to subsequent specific instructions from the Majority of
the Lenders, take such action or assert such rights as it deems in its
discretion advisable for the protection of the interests of the Lenders except
that, if the Majority of the Lenders have instructed the Administrative Agent
not to take such action or assert such rights, in no event shall the
Administrative Agent act contrary to such instructions.
Section 11.08 Responsibility Disclaimed.
The Agents shall be under no liability or responsibility whatsoever as Agents:
(1) to the Borrowers, Kingsway America or any other Person as a consequence of
any failure or delay in the performance by, or any breach by, any Lender
or Lenders of any of its or their obligations under this Agreement, the
Kingsway America Guarantee or any other Loan Document;
(2) to any Lender or Lenders, as a consequence of any failure or delay in
performance by, or any breach by, any Borrower, Kingsway America of any of
their respective obligations under this Agreement, the Kingsway America
Guarantee or any other Loan Document; or
(3) to any Lender or Lenders for
(a) any statements, representations or warranties in this Agreement, the
Kingsway America Guarantee or any other Loan Document or in any other
information provided pursuant to this Agreement, the Kingsway America
Guarantee or any other Loan Document;
(b) the accuracy or completeness of the data made available to the
Lenders in connection with the negotiation of this Agreement, the
Kingsway America Guarantee or any other Loan Document; or
(c) the due execution, legality, validity, enforceability, genuineness,
sufficiency or value of Agreement, the Kingsway America Guarantee or
any other Loan Document or any instrument or document furnished
pursuant hereto or thereto.
Section 11.09 Indemnification.
The Lenders agree to indemnify the Agents (to the extent not reimbursed by the
Borrowers) rateably according to their Rateable Portion of the Credit Facilities
from and against any and all liabilities,
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obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements of any kind or nature whatsoever which may be imposed
on, incurred by or asserted against an Agent in any way relating to or arising
out of its actions as Agent relating to this Agreement, the Kingsway America
Guarantee or any other Loan Document or any other document contemplated hereby
or thereby, except that no Lender shall be liable to an Agent for any portion of
such liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses or disbursements resulting from the gross negligence or
wilful misconduct of such Agent.
Section 11.10 Credit Decision.
Each Lender represents and warrants to the Agents that:
(1) in making its decision to enter into this Agreement and to make its
Commitment available to the Borrowers, it is independently taking whatever
steps it considers necessary to evaluate the financial condition and
affairs of the Borrowers, Kingsway America and their Subsidiaries and that
it has made an independent credit judgment without reliance upon any
information furnished by the Agents; and
(2) so long as any portion of the Credit Facilities is being utilized by
either Borrower, it will continue to make its own independent evaluation
of the financial condition and affairs of the Borrowers, Kingsway America
and their Subsidiaries.
Section 11.11 Successor Agents.
Subject to the appointment and acceptance of a successor Agent as provided
below: (i) an Agent may resign by giving ten (10) Business Days prior written
notice to the Lenders, or (ii) a Majority of the Lenders may terminate an Agent,
at any time by giving 30 days written notice thereof to the Lenders, the
Borrowers and the Agents. Upon any such resignation or termination, the Majority
of the Lenders and the Borrowers shall have the right to appoint a successor
Agent who shall be one of the Lenders. If no successor Agent shall have been so
appointed and shall have accepted such appointment by the time of such
resignation or termination, then the retiring or terminated Agent may, on behalf
of the Lenders, appoint a successor Agent from among the Lenders; the Borrowers
hereby approving each of the Lenders as a successor agent for purposes of this
Section 11.11. Upon the acceptance of any appointment as Agent hereunder by a
successor Agent, such successor Agent shall thereupon succeed to and become
vested with all the rights, powers, privileges, duties and obligations of the
retiring Agent and the retiring Agent shall be discharged from its duties and
obligations hereunder. After any retiring Agent's resignation or termination
hereunder as Agent, the provisions of this Article Eleven shall continue in
effect for its benefit in respect of any actions taken or omitted to be taken by
it while it was acting as Agent.
Section 11.12 Delegation by Agents.
With the prior approval of the Majority of the Lenders, such approval not to be
unreasonably withheld, the Agents shall have the right to delegate any of their
duties or obligations as Agent under this Agreement, the Kingsway America
Guarantee or any other Loan Document to any Affiliate of such Agent so long as
such Agent shall not thereby by relieved of such duties or obligations.
Section 11.13 Determinations by Agents.
Any determination to be made by an Agent under this Agreement shall be made by
such Agent in good faith and, if required hereby, acting reasonably, and, if so
made, shall be prima facie evidence of the matters so determined, absent
manifest error.
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Section 11.14 Reliance Upon Agents.
The Borrowers shall be entitled to rely upon any certificate, notice or other
document or other advice, statement or instrument provided to it by the
Administrative Agent pursuant to this Agreement, and the Borrowers shall
generally be entitled to deal with the Administrative Agent with respect to
matters under this Agreement with which the Administrative Agent is authorized
to deal (whether alone or on behalf of the Lenders or the Majority of the
Lenders) without any obligation whatsoever to satisfy itself as to the authority
of the Administrative Agent to act on behalf of the Lenders or the Majority of
the Lenders, as the case may be, and without any liability whatsoever to the
Lenders for relying upon any certificate, notice or other document or other
advice, statement or instruction provided to it by the Administrative Agent,
notwithstanding any lack of authority of the Administrative Agent to provide the
same.
Section 11.15 Payment Protection.
Unless upon the date of receipt by a Lender of any notice of Borrowing the
Administrative Agent has been notified by such Lender that such Lender will not
make available to the Administrative Agent its Rateable Portion of such
Borrowing, the Administrative Agent shall be entitled to assume that such Lender
has made such Rateable Portion of such Borrowing available to the Administrative
Agent on the Borrowing Date in accordance with the provisions hereof and the
Administrative Agent may, in reliance upon such assumption, make available to
the Borrowers on such Borrowing Date a corresponding amount. If and to the
extent such Lender shall not have so made its Rateable Portion of such Borrowing
available to the Administrative Agent, such Lender and the Borrowers agree to
pay or repay, as the case may be, to the Administrative Agent forthwith on
demand such Lender's Rateable Portion of such Borrowing together with interest
thereon at the rate provided herein in respect of such Borrowing for each day
from such Borrowing Date until the date such Lender's Rateable Portion of such
Borrowing is paid or prepaid to the Administrative Agent. The amount payable to
the Administrative Agent pursuant hereto shall be as set forth in a certificate
delivered by the Administrative Agent to such Lender and the Borrowers and shall
be prima facie evidence of the amount payable, for all purposes, absent manifest
error. If such Lender makes the payment of the amount payable to the
Administrative Agent as required herein, the amount so paid shall constitute
such Lender's Rateable Portion of the Borrowing for purposes of this Agreement.
The failure of any Lender to make available its Rateable Portion of any
Borrowing shall not relieve any other Lender of its obligation, if any,
hereunder to make available its Rateable Portion of such Borrowing on the
Borrowing Date but no Lender shall be responsible for the failure of any other
Lender to make its Rateable Portion of such Borrowing available on such
Borrowing Date. Nothing herein shall affect or limit any right of action a
Borrower may have under Applicable Law against the defaulting Lender.
Section 11.16 Remittance of Payments.
Forthwith after receipt of any repayment pursuant to this Agreement or payment
of interest or fees hereunder, the Administrative Agent shall remit to each
Lender its Rateable Portion of such payment in accordance with the advances made
by such Lender hereunder; provided that if the Administrative Agent, on the
assumption that it will receive a payment hereunder on the due date thereof,
remits to each Lender such Lender's Rateable Portion of such payment and the
Borrowers fail to make such payment, each of the Lenders agree to repay to the
Administrative Agent forthwith on demand each such Lender's Rateable Portion of
the payment made pursuant hereto together with all reasonable costs and expenses
incurred by the Administrative Agent in connection therewith and interest
thereon (at a rate of interest reasonably determined by the Administrative
Agent) for each day from the date such amount is remitted by the Administrative
Agent to the Lenders and the exact amount of the repayment required to be made
by each of the Lenders pursuant hereto is to be as set forth in a certificate
delivered by the Administrative Agent to each Lender, which certificate shall be
prima facie evidence of each such required repayment for all purposes absent
manifest error.
Section 11.17 Prompt Notice to the Lenders.
Notwithstanding any other provision herein, the Administrative Agent agrees to
provide to the Lenders, with copies where appropriate, all information, notices
and reports required to be given to the
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Administrative Agent by the Borrowers including, without limitation, all
information relating to the Credit Facilities, promptly upon receipt of same,
excepting therefrom information and notices relating solely to the role of
Administrative Agent hereunder.
Section 11.18 Counterparts.
This Agreement may be executed by facsimile and by one or more of the parties to
this Agreement on any number of separate counterparts, and all of the said
counterparts taken together shall be deemed to constitute one and the same
instrument. A set of copies of this Agreement signed by all the parties shall be
lodged with the Borrowers and the Administrative Agent.
IN WITNESS WHEREOF the parties have executed this Agreement as of the day
and year first above written.
KINGSWAY FINANCIAL SERVICES INC.
By: /s/ W. Shaun Jackson
-------------------------------------
W. Shaun Jackson
Executive Vice President & CFO
By: /s/ Shelly Gobin
-------------------------------------
Shelly Gobin
Assistant Vice President & Treasurer
KINGSWAY U.S. FINANCE PARTNERSHIP
by its Partners
KINGSWAY FINANCIAL SERVICES INC.
By: /s/ W. Shaun Jackson
-------------------------------------
W. Shaun Jackson
Executive Vice President & CFO
By: /s/ Shelly Gobin
-------------------------------------
Shelly Gobin
Assistant Vice President & Treasurer
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METRO CLAIM SERVICES INC.
By: /s/ W. Shaun Jackson
-------------------------------------
W. Shaun Jackson
Director
CANADIAN IMPERIAL BANK OF COMMERCE, AS
CANADIAN LENDER
By: /s/ Ralph Sehgal
-------------------------------------
Ralph Sehgal
Executive Director
By: /s/ Patti Perras Shugart
-------------------------------------
Patti Perras Shugart
Managing Director
HSBC BANK CANADA, AS CANADIAN LENDER
By: /s/ Martin J. Haythorne
-------------------------------------
Martin J. Haythorne
Assistant Vice President,
Corporate Investment Banking
& Markets
By: /s/
-------------------------------------
Name:
Title:
LASALLE BANK NATIONAL ASSOCIATION,
AS U.S. LENDER
By: /s/ Brad Kronland
-------------------------------------
Brad Kronland
Assistant Vice President
By: /s/ Peter Bulandr
-------------------------------------
Peter Bulandr
Senior Vice President
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CANADIAN IMPERIAL BANK OF COMMERCE,
NEW YORK AGENCY, AS U.S. LENDER
By: /s/ Geraldine Kerr
-------------------------------------
Geraldine Kerr
Executive Director, CIBC World
Markets Corp. As Agent
By: /s/
-------------------------------------
Name:
Title:
CANADIAN IMPERIAL BANK OF COMMERCE,
AS ADMINISTRATIVE AGENT
By: /s/ Ralph Sehgal
-------------------------------------
Ralph Sehgal
Executive Director
By: /s/ Warren Lobo
-------------------------------------
Warren Lobo
Director
LASALLE BANK NATIONAL ASSOCIATION, AS
SYNDICATION AGENT
By: /s/ Brad Kronland
-------------------------------------
Brad Kronland
Assistant Vice President
By: /s/ Peter Bulandr
-------------------------------------
Peter Bulandr
Senior Vice President