Item 1.01 Entry into a Material Definitive Agreement.
The information set forth in Item 2.01 of this Current Report on Form 8-K
regarding the Agreement (as defined below) is incorporated herein by reference.
The description of the Agreement does not purport to be complete, and is
qualified in their entirety by reference to the text of the Agreement, which
will be filed as an exhibit to the Company’s Quarterly Report on Form 10-Q for
the quarter ended June 30, 2022.
Item 2.01 Completion of Acquisition or Disposition of Assets.
On July 29, 2022, Professional Warranty Services LLC (“PWS Parent”), a
subsidiary of Kingsway Financial Services Inc. (the “Company”) entered into an
Equity Purchase Agreement (the “Agreement”) with Professional Warranty Service
Corporation (“PWSC”), a majority-owned, indirect subsidiary of the Company,
Tyler Gordy, the current president of PWSC (“Gordy”) and PCF Insurance Services
of the West, LLC (“Buyer”), pursuant to which PWS Parent and Gordy sold PWSC to
The purchase price paid by Buyer to PWS Parent and Gordy consisted of $51.2
million in base purchase price, subject to customary adjustments for net working
capital and transaction expenses. In addition, Gordy elected to roll over a
portion of his ownership in PWSC for equity interests in an affiliate of Buyer.
To the extent the EBITDA of PWSC (as defined in the Agreement) for the one-year
period following the sale transaction exceeds 103% of the EBITDA at the closing
of the sale transaction (the “Closing EBITDA), PWS Parent and Gordy will also be
entitled to receive an earn out payment in an amount equal to 5 times the EBITDA
in excess of 103% of Closing EBITDA.
The Agreement contains customary representations and warranties of PWS Parent,
PWSC and Buyer, including, among others, with respect to corporate organization,
capitalization, financial statements, title to assets, intellectual property,
material agreements and compliance with laws. The representations and warranties
of each party set forth in the Agreement were made solely for the benefit of the
other parties to the Agreement, and investors are not third-party beneficiaries
of the Agreement. In addition, such representations and warranties (a) are
subject to materiality and other qualifications contained in the Agreement,
which may differ from what may be viewed as material by investors; (b) were made
only as of the date of the Agreement or such other date as is specified in the
Agreement; and (c) may have been included in the Agreement for the purpose of
allocating risk between the parties rather than establishing matters as facts.
The Agreement also provides for customary indemnification, including with
respect to breaches of representations, warranties and covenants. Buyer has
obtained a representation and warranty insurance policy which will be Buyer’s
sole recourse for losses related to breaches of representations and warranties
by PWS Parent or PWSC in excess of the Indemnity Cap (as defined in the
Agreement), subject to customary exceptions.
ITEM 2.02 Results of Operations and Financial Condition.
On August 4, 2022, the “Company” issued a press release regarding its financial
results for the three and six-month period ended June 30, 2022. A copy of the
press release is furnished as Exhibit 99.1 to this Current Report on Form 8-K.
The information in this Current Report on Form 8-K provided under this Item 2.02
and Exhibit 99.1 attached hereto shall not be deemed to be “filed” for purposes
of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange
Act”), or otherwise subject to the liabilities of that section, nor shall such
information be deemed incorporated by reference in any filing under the
Securities Act of 1933, as amended (the “Securities Act”), or the Exchange Act,
except as expressly set forth by specific reference in such filing.
Item 7.01 Regulation FD Disclosure.
On August 4, 2022, the Company issued a press release announcing the sale of
PWSC pursuant to the Agreement. A copy of the press release is attached as
Exhibit 99.1 to this Current Report on Form 8-K and incorporated herein by
The information contained in Item 7.01 and Exhibit 99.1 to this Current Report
on Form 8-K shall not be deemed to be “filed” for purposes of Section 18 of the
Exchange Act, or otherwise subject to the liabilities of that section, nor shall
such information be deemed incorporated by reference in any filing under the
Securities Act, or the Exchange Act, except as expressly set forth by specific
reference in such filing.
ITEM 9.01 Financial Statements and Exhibits.
Exhibit No. Exhibit Description 99.1 Kingsway Financial Service Inc. Press Release dated August 4, 2022 99.2 Unaudited Pro Forma Financial Information 104 Cover Page Interactive Data File (embedded within the Inline XBRL document)
© Edgar Online, source Glimpses