Item 1.02. Termination of a Material Definitive Agreement
On November 2, 2022, FedNat Underwriters, Inc. ("FNU"), a wholly owned
subsidiary of FedNat Holding Company (the "Company"), received notice of
termination from Monarch National Insurance Company ("Monarch") of that certain
Amended and Restated Managing General Agency and Claims Administration Agreement
dated as of March 2, 2019, as amended by Addendum Number 1 on August 21, 2018,
Addendum Number 2 on October 9, 2018, Addendum Number 3 dated December 7, 2020
and Addendum Number 4 dated July 1, 2022, between Monarch and FNU (the "MGA
Agreement"). The termination of the MGA Agreement is to be effective January 1,
2023. The MGA Agreement was entered into in connection with the organization of
Monarch and Addendum Number 4 was entered into in connection with the previously
reported transactions pursuant to which a group of investors managed by Hale
Partnership Capital Management LLC acquired 70% of Monarch's outstanding common
stock (please see the Company's Form 8-Ks filed on July 6, 2022 and September
12, 2022 for more information). The Company is currently exploring its options
in connection with such termination.
Item 2.04. Triggering Events that Accelerate or Increase a Direct Financial Obligation
or an Obligation under an Off-Balance Sheet Arrangement
As previously reported, the appointment of the Florida Department of Financial
Services, Division of Rehabilitation and Liquidation, as receiver for FedNat
Insurance Company, the Company's wholly owned insurance subsidiary that has been
in runoff, was an event of default under the indentures for the Company's Senior
Unsecured Notes due 2029 in the aggregate principal amount of $100,000,000 and
Convertible Senior Unsecured Notes due 2026 in the aggregate principal amount of
$21,000,000 (collectively, the "Notes"). The Company has also failed to timely
pay the September 15, 2022 interest payments due on the Notes (please see the
Company's Form 8-Ks filed on September 21, 2022 and September 22, 2022 for more
information). The Company has been advised that The Bank of New York Mellon, the
trustee for the Notes (the "Trustee"), has provided notice of such events of
default to the holders of the Notes. The Company is in the process of engaging
with the holders of the Notes and with the Trustee.
Item 5.02. Departure of Directors or Certain Officers; Election of Directors;
Appointment of Certain Officers; Compensatory Arrangements of Certain
Officers
(a) On November 2, 2022, the Company received the resignation of J. Gordon
Jennings III, the Company's interim Chief Financial Officer. Mr. Jennings' last
day will be November 18, 2022.
(b) On November 3, 2022, the Company's Board of Directors appointed Richard B.
Gaudet to serve as interim Chief Financial Officer effective November 18, 2022.
Mr. Gaudet, age 62, currently serves as the Company's Head of Finance and
Accounting, a role he undertook on September 30, 2022 in connection with the
Company's engagement of GGG Partners, LLC ("GGG Partners") to provide financial
advisory and restructuring services to the Company (please see Item 8.01 below
for more information). Mr. Gaudet, a partner of GGG Partners since 2020, has
more than 18 years' experience in corporate restructurings and financial
advisory services. Prior to that, Mr. Gaudet served in various roles with World
Fiber Technologies, LLC, a private-equity-sponsored general utilities and
electrical contractor, including Chief Restructuring Officer from November 2019
to April 2020, President from February 2019 to November 2019, and Chief
Financial Officer from July 2018 to February 2019. From 2013 to 2020, Mr. Gaudet
also served as Managing Director of HDH Advisors, LLC, a financial advisory
practice focused on distressed asset resolution and corporate turnaround
services, and from 2004 to 2013, Mr. Gaudet was a principal of GlassRatner
Advisory & Capital Group, a broad-based financial advisory firm. From 1982
through 2004 Mr. Gaudet was employed by various national banks specializing in
commercial loan restructuring.
Item 8.01. Other Events
As discussed in Item 5.02(b) above, on September 30, 2022, the Company engaged
GGG Partners to provide financial advisory and restructuring services to the
Company. Katie S. Goodman, Managing Partner of GGG Partners, has more than 20
years' experience in turnarounds and restructurings and is serving as the
Company's Chief Restructuring Officer. Mr. Gaudet has been serving as Head of
Finance and Accounting and will assume the role of Chief Financial Officer.
Item 9.01. Financial Statements and Exhibits.
(d) Exhibits.
Cover Page Interactive File (the cover page tags are embedded within the Inline
104 XBRL document).
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