exhibit101capitalreturns






                        COOPERATION AGREEMENT         This  Cooperation  Agreement (this  “Agreement”) dated August 9,  2019  (the  “Effective  Date”) is between Capital Returns Management, LLC (“CRM” and, collectively with its Affiliates  (as  defined  below), “Capital  Returns  Management”)  and FedNat  Holding  Company  (the  “Company”).                                     RECITALS         WHEREAS,  the  Company  and  Capital  Returns  Management  have  engaged  in  various  discussions and communications concerning the Company’s business and other matters.         WHEREAS, Capital Returns Management has informed the Company that it Beneficially  Owns (as defined below) shares of common stock of the Company, par value $0.01 (the “Common  Stock”), totaling, in the aggregate, 839,651 shares, or approximately 6.5%, of the Common Stock  issued and outstanding as of August 1, 2019 as reported in the Company’s Quarterly Report on  Form 10-Q for the quarterly period ended June 30, 2019 filed with the Securities and Exchange  Commission (the “SEC”).         WHEREAS, on April 10, 2019, Capital  Returns Master,  Ltd.  and MAP  41 Segregated  Portfolio, a segregated portfolio of LMA SPC, each, an Affiliate of CRM, delivered a letter to the  Company (the “Notice Letter”) providing notice of intent to (a) nominate Ronald D. Bobman for  election to the Company’s board of directors (the “Board”) and (b) propose the declassification of  the Board at the Company’s 2019 annual meeting of shareholders (the “2019 Annual Meeting”).         WHEREAS, the Company and  CRM  desire to enter into this Agreement regarding the  appointment and election of two (2) directors to the Board and certain other matters, in each case,  on the terms and subject to the conditions set forth herein.         NOW, THEREFORE, in consideration of and reliance upon the promises, representations,  mutual covenants and agreements contained herein, and for other good and valuable consideration,  the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:   1.    Board Representation and Board Matters.   (a)   The Company and CRM agree as follows:          (i)   as  promptly  as  practicable (but  in  no  event  later  than  two (2) business  days)              following  the  execution  of  this  Agreement, the  Board  shall  (A)  appoint David              Patterson, a director candidate identified by the Company and consented to by CRM              (the “2020 Candidate”), as a director in the class up for election in 2020 and David              Warner Michelson, a director candidate identified by Capital Returns Management              and consented to by the Company (the “2019 Candidate,” together with the 2020              Candidate, and including any Replacement Director, as such term is defined below              and as applicable, the “New Independent Directors”), as a director in the class up              for  election  in  2019, (B) increase  the  size  of  the  Board  from  seven  (7) to nine              (9) directors, expanding each of the class up for election in 2019 and the class up              for  election  in  2020 from two (2) to three (3) seats,  (C) appoint  the New  





 






      Independent Directors to the Board to fill the newly created vacancies and (D) take        any other action necessary to appoint the New Independent Directors to the Board        to fill such vacancies; provided, however, that any such appointments shall be (x)        subject  to the Company  providing  any  required  notice  of  such  appointment        (together  with  any  required  supporting  materials)  to both the  Florida  Office  of        Insurance  Regulation (the  “Florida  OIR”) and  the  Louisiana  Department  of        Insurance  (the  “LDI”)  and (y)  effective  upon the  earliest  of  (I) written  notice        delivered by CRM to the Company of the receipt by CRM of approval or non-       disapproval by  the LDI of  the  disclaimer  of  control  filed  by CRM (the        “Disclaimer”), (II) the date on which the Company is lawfully able to appoint the        New Independent Directors to the Board under applicable Florida and Louisiana        insurance laws, regulations or orders (“Applicable Laws”) and (III) 75 days after        the Effective Date if the LDI has not taken any action with respect to the Disclaimer        by such 75th day; provided, further, and for the avoidance of doubt, any delay in        the  effectiveness of  any  such  appointment  that  exceeds  two  (2) business  days        following  the  execution  of  this  Agreement  due  to  a  failure  by  Capital  Returns        Management to receive approval by the LDI of the Disclaimer shall not violate the        terms of this Agreement;   (ii)  if during the Standstill Period (as defined below), the 2019 Candidate resigns from        or refuses to serve or is unable to serve on the Board for any reason (including under        Applicable Laws (except if the LDI has disapproved the Disclaimer, which shall be        governed by Section 1(i)), CRM shall be entitled to recommend a replacement New        Independent Director who qualifies as an independent director under Rule 5605 of        the Nasdaq Listing Rules (the “Applicable Criteria”) (any such director appointed        to the Board in connection with such replacement right, a “Replacement Director”)        who  shall  be  interviewed by  and  be  reasonably  acceptable  to the  Nominating        Committee of the Board and the full Board (acting in good faith in accordance with        their  customary  and  generally  applicable  procedures  for  evaluating  director        candidates,  and  subject  to  providing  the  items  and  information  set  forth  in        Section 1(b) of this Agreement), and such Replacement Director shall be appointed        to  the  Board  as  set  forth  in  Section 1(a)(i);  provided  that  Capital  Returns        Management  and the  Capital  Returns Management Associates,  collectively,        continue to Beneficially Own an aggregate Net Long Position (as defined below)        of at least 385,093 shares of Common Stock (as adjusted for stock splits, stock        dividends,  reverse  stock  splits  and  similar  events, the  “CRM Ownership        Threshold”) (it  being  understood,  for  the  avoidance  of  doubt,  that  such        Replacement Director shall thereafter be deemed a “New Independent Director” for        the purposes of this Agreement and be entitled to the same rights and subject to the        same requirements under this Agreement applicable to the replaced director prior        to his or her ceasing to be a director, and such person shall be appointed to the        Board to serve the unexpired term, if any, of such replaced director).  The term “Net        Long  Position” shall  mean  such  shares  of  Common  Stock  beneficially  owned,        directly or indirectly, that constitute such person’s net long position as defined in        Rule 14e-4 under the Securities Exchange Act of 1934, as amended (together with        all  rules  and  regulations  promulgated  thereunder,  the  “Exchange  Act”) mutatis        mutandis, but the “long position” of such person for this purpose shall not include                                   2  





 






            any shares as to which such person does not have the right to vote or direct the vote              or  as  to  which  such  person  has  entered into  a  derivative  or  other  agreement,              arrangement or understanding that hedges or transfers, in whole or in part, directly              or indirectly, any of the economic consequences of ownership of such shares;         (iii) if during the Standstill Period, the 2020 Candidate resigns from or refuses to serve              or is unable to serve on the Board for any reason (including under Applicable Laws              (except if the LDI has disapproved the Disclaimer, which shall be governed by              Section 1(i))), a Replacement Director shall be identified by the Company subject              to (A) the review of such candidate’s résumé by CRM and, at the option of CRM,              the opportunity for CRM to interview such candidate; and (B) the consent of CRM,              which consent shall not be unreasonably withheld;         (iv)  concurrently with the appointment of each New Independent Director to the Board,              the Board shall take the necessary steps to appoint such New Independent Director              to each of the Audit Committee, the Compensation Committee and the Nominating              Committee of the Board;         (v)   the Company agrees that, until the end of the Standstill Period, it shall not increase              the size of the Board to more than nine (9) directors;          (vi)  following the effective time of the appointment of any New Independent Director              to the Board, the Company will include such New Independent Director in its slate              of nominees for election as a director of the Company at the Company’s annual              meeting of shareholders following such effective time and the Company will use              its reasonable best efforts to cause the election of such New Independent Director              at such annual meeting (including soliciting on behalf of such New Independent              Director and recommending that the Company’s shareholders vote in favor of the              election  of such New  Independent  Directors)  and  otherwise  support such  New              Independent Director for election in a manner no less rigorous and favorable than              the manner in which the Company supports its other nominees in the aggregate;              and         (vii) the  Company  agrees  to  nominate  the 2020  Candidate for  election  at  the  2020              meeting and will use its reasonable best efforts to cause the election of the 2020              Candidate at  the Company’s  2020  annual  meeting  of  shareholders  (the  “2020              Annual Meeting”) (including soliciting on his behalf and recommending that the              Company’s shareholders vote in favor of the election of the 2020 Candidate) and              otherwise support him for election in a manner no less rigorous and favorable than              the manner in which the Company supports its other nominees in the aggregate.   (b)   As a condition to  each New Independent Director’s appointment to the Board and any  subsequent nomination for election as a director of the Company at the 2019 Annual Meeting, each  such New Independent Director shall meet the Applicable Criteria and shall have provided to the  Company a fully completed and executed copy of a D&O questionnaire (substantially in the form  completed by the Company’s incumbent non-management directors and in the form provided to  CRM  by  the  Company  prior  to  the  execution  of  this  Agreement)  and  other  reasonable  and                                         3  





 






customary  director  onboarding  documentation (substantially  in  the  form completed by  the  Company’s incumbent non-management directors).  As a further condition to the New Independent  Directors’ nomination for election as directors of the Company at the 2019 Annual Meeting, each  New Independent Director shall, as promptly as practicable upon request of the Company, provide  (i) an executed consent, in the form attached hereto as Exhibit A to be named as a nominee in the  Company’s proxy statement for the 2019 Annual Meeting as a candidate for election at the 2019  Annual Meeting and, in the case of the 2020 Candidate, as a candidate for election at the 2020  Annual Meeting, and to  serve as  a director for the full term if so elected, (ii) any information  required to be or customarily disclosed for all applicable directors and candidates for directors in  a proxy statement or other filings under applicable law or stock exchange rules or listing standards,  (iii) information  in  connection  with  assessing  eligibility,  independence  and  other  criteria  applicable to all directors or satisfying compliance and legal obligations applicable to all directors,  (iv) consent to any background checks required by an applicable regulatory entity and appropriate  background  checks  comparable  to  those  undergone  by  other  non-management  directors  of  the  Company and (v) such other information as reasonably requested by the Company from time to  time with respect to Capital Returns Management or the New Independent Directors as required  to be provided under the Company’s Second Amended and Restated Bylaws (as may be further  amended from time to time, the “Company Bylaws”).   (c)   Each  party  acknowledges  that  the  New  Independent  Directors  will,  at  all  times  while  serving as a member of the Board, comply with all policies, procedures, processes, codes, rules,  standards  and  guidelines  applicable  to  all  Board  members,  including  the  Company’s  Code  of  Conduct,  Corporate  Governance Guidelines,  securities  trading  policies,  anti-hedging  policies,  Regulation FD-related policies and director confidentiality policies and any other policies on stock  ownership, public disclosures and confidentiality (each, a “Policy”).  The Company agrees that it  will not  amend any Policy for the purpose of disqualifying a New  Independent  Director from  service on the Board or any committee thereof.  The Company agrees to indemnify, compensate  and  reimburse  the  New  Independent  Directors  in  the  same  manner  as other  non-management  directors are indemnified, compensated and reimbursed in connection with their service on the  Board or any committee thereof.   (d)   Notwithstanding  anything  to  the  contrary  contained  in  this  Agreement,  the  Company’s  obligations  under  this  Agreement  (including  Section 4)  shall  terminate  immediately,  and  the  Company shall have no further obligation with respect to the New Independent Directors under  this  Section 1,  if there  is  a  material  breach  by Capital  Returns  Management of  any  of  its  obligations under this Agreement which (if capable of being cured) is not cured within fifteen  (15) days  after  receipt  by CRM of  written  notice  from  the  Company  specifying  such  material  breach. For the avoidance of doubt, except as expressly set forth in this Agreement, Capital Returns  Management’s  obligations  under  this  Agreement  continue  notwithstanding,  and  shall  be  unaffected by, any failure of Capital Returns Management to own an amount of shares of Common  Stock equal to or exceeding at least the CRM Ownership Threshold.     (e)   CRM shall exercise its good faith reasonable best efforts to assist the Company in obtaining  the biographical affidavit, fingerprints and any other materials of the 2019 Candidate required to  be submitted to the Florida OIR or the LDI as a result of the 2019 Candidate’s appointment to the  Board, and the Company agrees to take all steps reasonably necessary under Applicable Laws to  qualify the 2019 Candidate to serve as a director on the Board, including providing any required                                         4  





 






notice of appointment (together with any required supporting materials) to both the Florida OIR  and the LDI as promptly as practicable following the execution of this Agreement.   (f)   The Company shall obtain from the 2020 Candidate the biographical affidavit, fingerprints  and any other materials of the 2020 Candidate required to be submitted to the Florida OIR or the  LDI as a result of the Company’s Candidate’s appointment to the Board, and the Company agrees  to take all steps reasonably necessary under Applicable Laws to qualify the 2020 Candidate to  serve as a director on the Board, including providing any required notice of appointment (together  with  any  required  supporting  materials)  to  both  the Florida  OIR  and  the  LDI  as  promptly  as  practicable following the execution of this Agreement.   (g)   Each of CRM  and the  Company, as  promptly as  practicable  following the date of this  Agreement, shall use  its  good  faith  reasonable  best  efforts  to  obtain  the  approval  or  non- disapproval of the Disclaimer, including challenging any determination by the LDI that Capital  Returns Management is a controlling person of the Company.    (h)   The Company agrees that, immediately following the execution of this Agreement, each of  the 2020 Candidate and the 2019 Candidate shall be appointed as a board observer (each, a “Board  Observer”) and shall each serve as such until his appointment as a director is effective. No Board  Observer shall have the right to vote on any matter presented to the Board or any committee thereof  but shall have the right to (i) receive the same materials distributed to members of the Board at the  same time and in the same manner such materials are distributed to members of the Board, (ii)  receive notice of all meetings of the Board and any committee thereof at the same time and in the  same manner such notice is provided to members of the Board, (iii) otherwise fully participate in  meetings  and  discussions  of  the  Board and  each  of  its  committees (whether  in  person  or  by  telephone),  except  for the  right  to  vote,  as  if  he  or  she  were  a  member  of  the  Board or  such  committees, (iv) receive from the Company reimbursement of reasonable out-of-pocket expenses,  costs and fees  in  connection  with  the  Board  Observer’s  attendance  at  meetings  of  the  Board,  committees thereof or otherwise and (v) receive compensation from the Company equivalent in  amount and timing to the compensation provided to the director most recently appointed to the  Board; provided, however, that each Board  Observer  shall  adhere  and  be  subject  to  and  act  consistent with the Policies.   (i)   If the LDI disallows the Disclaimer, CRM shall have the right, at its sole option, to seek  all applicable administrative and judicial remedies with regard to such determination.  In the event  that Capital Returns Management is unsuccessful in its efforts to obtain sufficient remedies with  regard to such determination, the 2020 Candidate shall be entitled to serve as a Board Observer  until the Company’s 2021 annual meeting of shareholders (the “2021 Annual Meeting”) and the  2019 Candidate shall be entitled to serve as a Board Observer until the Company’s 2022 annual  meeting of shareholders.  In the event that the 2020 Candidate or the 2019 Candidate resigns from  or refuses to serve or is unable to serve as a Board Observer for any reason, a replacement shall be  determined in accordance with Section 1(a)(ii) or (iii) above, as applicable.   2.    No Litigation.     (a)   Within two (2) days of the Effective Date, CRM shall file, pursuant to Florida Rule of Civil  Procedure 1.420(a)(1)(A), a notice of dismissal without prejudice of the action filed against the                                         5  





 






Company in the Circuit Court for Broward County, Florida, at Case No. CACE-19-015428 (the  “Lawsuit”), and within two (2) days of the completion of the 2019 Annual Meeting, CRM shall  file, pursuant  to  Florida  Rule  of  Civil  Procedure  1.420(a)(1)(A),  a  notice  of  dismissal  with  prejudice of the Lawsuit.   (b)   Capital Returns Management covenants and agrees that, during the Standstill Period, it  shall not, and shall not permit any of its Representatives acting on its behalf to, alone or in concert  with others, knowingly encourage or pursue, or knowingly assist any other person to threaten,  initiate  or  pursue,  any  lawsuit,  claim  or  proceeding  before  any  court  or  governmental,  administrative  or  regulatory  body  concerning  the  subject  matter  of  the  Lawsuit (collectively,  “Legal Proceeding”) against the Company or any of its Representatives; provided, however, that  in the event of a breach of this Agreement by the Company or any of its Representatives, Capital  Returns Management may refile the Lawsuit; and provided further, that the foregoing shall not  prevent  Capital  Returns  Management  or  any  of  its  Representatives  from  responding to  oral  questions, interrogatories, requests for information or documents, subpoenas, civil investigative  demands or similar processes (a “Legal Requirement”) in connection with any Legal Proceeding  if (i) such Legal Proceeding has not been initiated by, or on behalf of, or with the knowing material  assistance of, Capital Returns Management or any of its Representatives or (ii) the Company has  breached this Agreement; provided, further, that in the event that Capital Returns Management or  any of its Representatives receives such Legal Requirement, Capital Returns Management shall,  unless prohibited by applicable law, give prompt written notice of such Legal Requirement to the  Company.   (c)   The Company covenants and agrees that, during the Standstill Period, it shall not, and shall  not  permit  any  of  its  Representatives  acting  on  its  behalf  to, alone  or  in  concert  with  others,  knowingly  encourage  or  pursue,  or  knowingly support  or assist  any  other  person  to  threaten,  initiate  or  pursue,  any  Legal  Proceedings  against  Capital  Returns  Management  or  any  of  its  Representatives; provided, however, that the foregoing shall not prevent the Company or any of  its  Representatives  from  responding  to  a  Legal  Requirement  in  connection  with  any  Legal  Proceeding if (i) such Legal Proceeding has not been initiated by, or on behalf of, or with the  knowing  material  assistance  of, the  Company  or  any  of  its  Representatives or  (ii) CRM has  breached  this  Agreement; provided, further,  that  in  the  event that the  Company  or  any  of  its  Representatives  receives  such  Legal  Requirement,  the  Company  shall,  unless  prohibited  by  applicable  law,  give  prompt  written  notice  of  such  Legal  Requirement  to  Capital  Returns  Management.   (d)   Effective upon the completion of the 2019 Annual Meeting, Capital Returns Management  and each of its Associates release and forever discharge, and covenant not to sue or take any steps  to pursue or further any legal proceeding against, the Company and the Company’s subsidiaries,  joint  ventures  and  partnerships,  successors, assigns,  officers,  directors, partners,  members,  managers, principals, predecessor entities, agents, employees, shareholders, advisors, consultants,  attorneys, insurers, heirs, executors, administrators, successors and assigns of any such person  or  entity (in each case, in their capacities as such) from and solely in respect of either (i) the Lawsuit  or  (ii)  any  demands  by  Capital  Returns  Management  to  inspect  the  books  and records  of  the  Company made upon the Company prior to the date of this Agreement, whether based on any  federal, state or foreign law or right of action, direct, indirect or representative in nature, foreseen  or unforeseen, matured or unmatured, known or unknown, that Capital Returns Management or                                         6  





 






any of its Associates have, had or may have against the Company of any kind, nature or type  whatsoever, prior to the date of this Agreement; provided, however, that the foregoing release shall  not release any rights or duties under this Agreement or any claims or causes of action that Capital  Returns Management or any of its Associates may have for the breach or enforcement of any  provision of this Agreement.    (e)   Effective upon the completion of the 2019 Annual Meeting, the Company and each of its  Associates and Affiliates release and forever discharge, and covenant not to sue or take any steps  to pursue or further any legal proceeding against, Capital Returns Management and each of its  Associates, subsidiaries, joint ventures and partnerships, successors, assigns, officers, directors,  partners, members, managers, principals, predecessor entities, agents, employees, shareholders,  advisors, consultants, attorneys, insurers, heirs, executors, administrators, successors and assigns  of any such person or entity (in each case, in their capacities as such) from and solely in respect of  either (i) the Lawsuit or (ii) any demands by Capital Returns Management to inspect the books  and records of the Company made upon the Company prior to the date of this Agreement, whether  based on any federal, state or foreign law or right of action, direct, indirect or representative in  nature, foreseen or unforeseen, matured or unmatured, known or unknown, that the Company has,  had or may have against Capital Returns Management or any of its Associates of any kind, nature  or type whatsoever, prior to the date of this Agreement; provided, however, that the foregoing  release shall not release any rights or duties under this Agreement or any claims or causes of action  that the Company may have for the breach or enforcement of any provision of this Agreement.   3.    Standstill.   (a)   For purposes of this Agreement, the “Standstill Period” shall mean the period commencing  on the date of this Agreement and ending on the date that is the earliest of (i) July 31, 2020, (ii)  the date that is fifteen (15) days prior to the beginning of the Company’s advance notice period for  the nomination of directors at the 2020 Annual Meeting and (iii) a material breach by the Company  of its obligations under this Agreement which (if capable of being cured) is not cured within fifteen  (15) days after receipt by the Company of written notice from CRM specifying the material breach.   The  Company  agrees  that during  the  term  of  this  Agreement, if  the 2019  Candidate or  a  Replacement Director for the 2019 Candidate is on the Board, the Board shall promptly notify  CRM in writing of any decision not to nominate the 2019 Candidate or applicable Replacement  Director, if any, for re-election (which written notice, if any, shall be delivered no later than sixty  (60) days prior to the advance notice deadline for the nomination of directors at the meeting at  which the 2019 Candidate’s term expires).   (b)   CRM agrees that, during the Standstill Period, it shall not, directly or indirectly, and agrees  to cause CRM’s Affiliates and Associates to not, directly or indirectly, in any manner:         (i)   make,  engage  in,  or  in  any  way  participate  in,  directly  or  indirectly,  any              “solicitation”  of “proxies”  (as  such  terms  are  defined  in  Rule 14a-1  under  the              Exchange Act but without regard to the exclusion set forth in Rule 14a-1(l)(2)(iv)              of the Exchange Act) or consents to vote or advise, encourage or influence any              person  other  than  any CRM Affiliate  with  respect  to  the  voting  of  any  Voting              Securities for the election of individuals to the Board or to approve shareholder              proposals (including by initiating, encouraging or participating in any “withhold”                                         7  





 






      or similar campaign), conduct any type of binding or nonbinding referendum with        respect to any Voting Securities of the Company, or become a “participant” in any        contested “solicitation” for the election of directors with respect to the Company        (as such terms are defined in the Exchange Act), other than a “solicitation” or acting        as a “participant” in support of all of the nominees of the Board at any Shareholders        Meeting (as defined below);   (ii)  form, join, encourage, influence, advise or in any way participate in any “group”        (as such term is defined in Section 13(d)(3) of the Exchange Act) with any persons        (excluding,  for  the  avoidance  of  doubt,  any  group  composed  solely  of Capital        Returns Management and its Associates) with respect to any Voting Securities or        otherwise in  any manner agree, attempt, seek or propose to  deposit  any  Voting        Securities  in  any  voting  trust  or  similar  arrangement,  or  subject  any  Voting        Securities  to  any  arrangement  or  agreement  with  respect  to  the  voting  thereof        (including by granting any proxy, consent or other authority to vote), except as        expressly permitted by this Agreement;   (iii) acquire,  offer  or  propose  to  acquire,  or  agree  to  acquire,  directly  or  indirectly,        whether by purchase, tender or exchange offer, through the acquisition of control        of another person, by joining a partnership, limited partnership, syndicate or other        group, through swap or  hedging transactions  or  otherwise, any securities of the        Company, any direct or indirect rights or options to acquire any such securities, any        derivative securities or contracts or instruments with a value derived from the price        of shares of Common Stock or any assets or liabilities of the Company or any rights        decoupled  from  the  underlying  securities  of  the  Company  that  would  result  in        Capital  Returns  Management (together  with the  Capital  Returns  Management        Associates) owning, controlling or otherwise having any Beneficial Ownership or        other ownership interest in 9.9% or more of Common Stock outstanding at such        time; provided, however, that, nothing herein will require Common Stock to be sold        to  the  extent  that Capital  Returns  Management and the  Capital  Returns        Management Associates,  collectively,  exceed  the  ownership  limit  under  this        clause (iii) as the result of a share repurchase or other Company action that reduces        the number of outstanding shares of Common Stock;   (iv)  other than in Rule 144 open market broker sale transactions where the identity of        the purchaser is not known and in underwritten widely dispersed public offerings,        sell,  offer  or  agree  to  sell  directly  or  indirectly,  through  swap or  hedging        transactions or otherwise, the securities of the Company or any rights decoupled        from  the  underlying  securities  of  the  Company  held  by  Capital  Returns        Management to any person or entity not a party to this Agreement (a “Third Party”)        that, to Capital Returns Management’s knowledge (after due inquiry in connection        with  a  private,  non-open  market  transaction,  it  being  understood  that  such        knowledge  shall  be  deemed  to  exist  with  respect  to  any  publicly  available        information, including information in documents filed with the SEC), would result        in such Third Party, together with its Associates, owning, controlling or otherwise        having any Beneficial Ownership or other ownership interest in the aggregate of        more than 4.9% of the shares of Common Stock outstanding at such time or would                                   8  





 






      increase the Beneficial Ownership or other ownership interest of any Third Party        who, together with  its  Affiliates  and Associates,  has  a Beneficial Ownership or        other  ownership  interest  in  the  aggregate  of  more  than  4.9%  of  the  shares  of        Common Stock outstanding at such time, it being understood that Section 3(b)(vi)        and  not  this  Section  3(b)(iv)  shall  govern  with  respect  to  any  Extraordinary        Transaction;   (v)   arrange, or in any way participate in, any financing for the purchase by any Third        Party of securities of the Company or assets or businesses of the Company or any        of its Affiliates without the prior written consent of the Company or its Affiliates,        as applicable;   (vi)  effect or seek to effect, offer or propose to effect, cause or participate in, or in any        way assist or facilitate any other person to effect or seek, offer or propose to effect        or participate in, any tender or exchange offer, merger, consolidation, acquisition,        sale  of  all  or  substantially  all  assets  or  sale,  spinoff,  split  off,  or  other  similar        separation  of  one  or  more  business  units,  scheme  of  arrangement,  plan  of        arrangement  or  other  business  combination,  recapitalization, restructuring,        reorganization,  sale  or  acquisition  of  material  assets,  liquidation,  dissolution  or        other extraordinary transaction involving the Company or any of its subsidiaries or        joint ventures or any of their respective securities or a material amount of any of        their  respective  assets  or  businesses  (each,  an  “Extraordinary  Transaction”),  or        encourage, initiate or support any other Third Party in any such activity; provided,        however, that nothing in this Section 3 shall preclude the tender (or action not to        tender) by Capital Returns Management or any of its Associates of any securities        of  the  Company  into  any  tender  or  exchange  offer  or  vote  for  or  against  any        transaction  by  Capital  Returns  Management or  any  of  its  Associates of  any        securities of the Company with respect to any Extraordinary Transaction, in each        case provided such offer or transaction was not made or initiated by Capital Returns        Management;   (vii) engage  in  any  short  sale  or  any  purchase,  sale  or  grant  of  any  option,  warrant,        convertible security, stock appreciation right or other similar right (including any        put or call option or “swap” transaction with respect to any security (other than a        broad-based  market  basket  or  index))  that  includes,  relates  to  or  derives  any        significant  part  of  its  value  from  a  decline  in  the  market  price  or  value  of  the        securities of the Company;   (viii)  (A) call or request the calling of any meeting of shareholders, including by written        consent,  (B) publicly  seek  representation  on,  or  nominate  any  candidate  to,  the        Board,  except  as  expressly  set  forth  in  this  Agreement,  (C) publicly  seek  the        removal of any member of the Board, (D) solicit consents from shareholders or        otherwise  act  or  seek  to  act  by  written  consent,  (E) conduct  a  referendum  of        shareholders or (F) present at any annual meeting or any special meeting of the        Company’s shareholders;                                    9  





 






(ix)  take any public action in support of or make any public formal proposal or public        formal request that constitutes:  (i) advising, controlling, changing or influencing        any director or the Board or management of the Company, including any plans or        proposals to change the number or term of directors or to fill any vacancies on the        Board, except as expressly set forth in this Agreement; (ii) any material change in        the  capitalization,  stock  repurchase  programs  and  practices,  capital  allocation        programs and practices or dividend policy of the Company; (iii) any other material        change in the Company’s management, business or corporate structure; (iv) seeking        to  have  the  Company  waive  or  make  amendments  or  modifications  to  the        Company’s Second Restated Articles of Incorporation (as may be further amended        from  time  to  time,  the  “Company  Charter”) or  the  Company  Bylaws,  or  other        actions, that may impede or facilitate the acquisition of control of the Company by        any person; (v) causing a class of securities of the Company to be delisted from, or        to cease to be authorized to be quoted on, any securities exchange; or (vi) causing        a  class  of  securities  of  the  Company  to  become  eligible  for  termination  of        registration pursuant to Section 12(g)(4) of the Exchange Act;    (x)   make  any  public  disclosure,  announcement  or  statement  regarding  any  intent,        purpose, plan or proposal with respect to any director, the Board, the Company, its        management, policies, strategy, operations, financial results or affairs, any of its        securities or assets or this Agreement that is inconsistent with the provisions of this        Agreement;   (xi)  call or seek to call, or request the call of any meeting of shareholders, whether or        not such a meeting is permitted by the Company Bylaws, including a “town hall        meeting”;   (xii) deposit any shares of Common Stock in any voting trust or subject any shares of        Common Stock to any arrangement or agreement with respect to the voting of any        shares  of  Common  Stock  (other  than  any  such  voting  trust, arrangement  or        agreement  solely  among  Capital  Returns  Management  that  is  otherwise  in        accordance with this Agreement);   (xiii) seek, or encourage or advise any person, to submit nominations in furtherance of a        “contested solicitation” for the election or removal of directors with respect to the        Company or seek, encourage or take any other action with respect to the election        or removal of any directors;   (xiv) demand a copy of the Company’s list of shareholders or its other books and records        or make any request pursuant to Rule 14a-7 under the Exchange Act or under any        statutory or regulatory provisions of Florida providing for shareholder access to        books and records (including lists of shareholders) of the Company;   (xv)  engage any private investigations  firm  or other person to investigate any  of the        Company’s directors or officers;                                    10  





 






      (xvi) institute, solicit or assist any litigation, arbitration or other proceedings against or              involving  the  Company  or  any  of  its  current  or  former  directors  or  officers              (including derivative actions or actions seeking to compel the Company to hold an              annual meeting of shareholders), other than an action to enforce the provisions of              this Agreement instituted in accordance with the terms hereof;         (xvii) enter into any discussions,  negotiations,  agreements  or understandings  with  any              Third Party to take or otherwise participate with any Third Party in any action with              respect  to  any  of  the  foregoing,  or  advise,  assist,  facilitate,  finance,  knowingly              encourage,  seek  to  persuade  any  Third  Party  to  take  any  action  or  make any              statement with respect to any of the foregoing, or otherwise take or cause any action              or make any statement inconsistent with any of the foregoing; or         (xviii) make  any  request  or  submit  any  proposal  to  amend  or  waive  the  terms  of  this              Section 3 other than through non-public communications with the Company that              would not be reasonably likely to trigger public disclosure obligations for any party.   The foregoing subclauses (i)-(xviii) of this Section 3(b) shall not be deemed to prohibit Capital  Returns Management or its Representatives (as defined below) from (x) communicating privately  regarding  or  privately  advocating  in  favor  of  or  against  any  of  the  matters  described  in  subclauses (i)-(xviii)  of  this  Section 3(b)  with, (y) privately  requesting  a  waiver  of  any of  the  foregoing provisions of subclauses (i)-(xviii) of this Section 3(b) from, the Company’s directors  or officers, so long as such communications, advocacy or requests described in clauses (x) or (y)  are not intended to, and would not reasonably be expected to, require any public disclosure of such  communications, advocacy or requests or (z) taking any action with respect to the Florida OIR or  the  LDI  in  anticipation  of  the  expiration  of  the  Standstill  Period  so  long  as  Capital  Returns  Management uses its commercially reasonable efforts to take such action on a confidential basis  and  would  not  reasonably  be  expected  to  require any public  disclosure by  Capital  Returns  Management.   (c)   The provisions of this Section 3 shall not limit in any respect the actions of any director of  the Company in his or her capacity as such, recognizing that such actions are subject to adherence  by  each  director  to  the  Policies  and such  director’s  fiduciary  duties  to  the  Company  and  its  shareholders (it being understood and agreed that Capital Returns Management shall not seek to  do indirectly through the New Independent Directors anything that would be prohibited if done by  Capital Returns Management). Notwithstanding anything to the contrary contained elsewhere in  this Section 3, the provisions of this Section 3 also shall not prevent Capital Returns Management  or its Associates from freely voting its shares of Common Stock (except as otherwise provided in  Section 3(d) below).   (d)   Until the end of the Standstill Period, Capital Returns Management shall cause all Common  Stock owned, directly or indirectly, by it, whether owned of record or Beneficially Owned, as of  the  record  date  for  any  annual  or  special  meeting  of  shareholders  or  in  connection  with  any  solicitation of shareholder action by written consent (each a “Shareholders Meeting”), in each case  that are entitled to vote at any such Shareholders Meeting, to be present for quorum purposes and  to be voted, at all such Shareholders Meetings or at any adjournments or postponements thereof,  in  accordance  with  the  recommendation  of  the  Board  with  respect  to  each  of  the  election  of                                         11  





 






directors and any removal of directors at such Shareholders Meeting, and in accordance with the  recommendation of the Board on any other proposals or other business that comes before any  Shareholders Meeting; provided, however, that notwithstanding anything herein to the contrary,  with respect to (i) a proposal relating to an Extraordinary Transaction, (ii) matters related to the  implementation of takeover defenses, (iii) amendments to the Company Charter or the Company  Bylaws  that diminish  shareholder  rights, (iv) new  or  amended  incentive  compensation  plans  submitted for shareholder approval, (v) matters on which Institutional Shareholder Services, Inc.  or Glass Lewis & Co., LLC has made a recommendation that differs from the recommendation of  the Board with respect to any non-director proposal or (vi) the election of directors other than any  directors  serving  on  the  Board as  of July  31,  2019 and  the  New  Independent  Directors,  if  applicable, Capital Returns Management and its Associates may vote their shares of Common  Stock,  Beneficially  Owned,  directly  or  indirectly,  in  the  sole  discretion  of  Capital  Returns  Management or its Associates, as applicable.   (e)   During the Standstill Period, Capital Returns Management shall provide to the Company  true,  accurate  and  complete  copies  of  any  new  contract,  agreement or commitment  (whether  written or oral) between Capital Returns Management, on the one hand, and any New Independent  Director, on the other hand, relating to ownership of Common Stock or his or her service as a New  Independent Director (an “Investor Agreement”) and any amendment, modification, extension or  termination  of  any  Investor  Agreements,  in  each  case,  within  five  (5)  business  days  of  the  execution or termination, as applicable, thereof.   (f)   During  the  Standstill  Period, CRM agrees  not  to,  and  to  cause  its Affiliates  and  Representatives  not  to,  comment  publicly  about  any  director  or  the  Company’s  management,  policies, strategy, operations, financial results or affairs or any transactions involving the Company  or any of subsidiaries, except as expressly permitted by this Agreement (including Section 4(b)  below).   (g)   During the Standstill Period, at any time Capital Returns Management ceases to have a  Schedule 13G  or  Schedule  13D  filed  with  the  SEC,  upon  reasonable  written  notice  from  the  Company to CRM pursuant to Section 12 hereof, CRM shall promptly provide the Company with  such information as would be required to be disclosed in a Schedule 13G; provided, that, CRM  shall notify the Company if Capital Returns Management and its Associates, collectively, cease to  Beneficially Own an aggregate Net Long Position equal to or greater than the CRM Ownership  Threshold within two (2) business days of Capital Returns Management and its Associates ceasing  to Beneficially Own an aggregate Net Long Position equal to or greater than the CRM Ownership  Threshold.  This ownership information provided to the Company will be kept strictly confidential  unless required to be disclosed pursuant to applicable laws and regulations, any subpoena, legal  process or other legal requirement or in connection with any litigation or similar proceedings in  connection with this Agreement.   (h)   Notwithstanding  anything  to  the  contrary  contained  in  this  Agreement,  nothing  in  this  Section  3  shall  prohibit  Capital  Returns  Management  or  its  Associates  from  (i)  commenting  publicly about any publicly disclosed Third Party proposal to acquire the Company so long as  CRM has shared its views privately with the Company prior to making such public comments or  (ii) having reasonable access to and participating in the Company’s earnings calls, investor calls                                          12  





 






or  investor  meetings,  in the  case  of each of  clause  (i)  and  (ii),  so  long  as  Capital  Returns  Management does not violate Section 4(b).    4.    Mutual Non-Disparagement.     (a)   During the Standstill Period, neither the Company nor any of its Affiliates or Associates  shall in any manner, directly or indirectly, in any capacity or manner, make or cause to be made,  or in any way encourage any other person to make or cause to be made, any public statement or  public announcement, including in any document or report filed with or furnished to the SEC or  through the press, media, analysts or other persons, that constitutes an ad hominem attack on or  otherwise  disparages,  defames  or  slanders  the  New  Independent  Directors,  Capital  Returns  Management or any Capital Returns Management Associate or any of their respective successors  or current or former members, partners, officers, directors or employees (it being understood and  agreed  that  the  restrictions  in  this  Section 4(a) shall  not  apply  to  any  member  of  the  Board’s  discussions  solely  among  other  members  of  the  Board  and/or  management  of  the  Company);  provided that the limitations set forth in this Section 4(a) shall not prevent the Company or any of  its Affiliates or Associates from (i) responding to any public statement or announcement made by  Capital Returns Management or any Capital Returns Management Associate that was made in  breach of Section 4(b) below or (ii) making objective statements that reflect the Company’s view  with  respect  to  factual  matters  concerning  specific  acts  or  determinations  of  Capital  Returns  Management and/or any Capital Returns Management Associates (or their respective current or  former Representatives) occurring after the date of this Agreement.  For the avoidance of doubt, a  public statement or announcement shall only be deemed to be made by the Company if such public  statement or announcement is made by (A) an executive officer or a member of the Board (other  than the 2019 Candidate or his Replacement Director) or (B) an employee or Representative of the  Company authorized to make such statement or announcement on behalf of the Company.   (b)   During the Standstill Period, neither Capital Returns Management nor any of its Associates  shall in any manner, directly or indirectly, in any capacity or manner, make or cause to be made,  or in any way encourage any other person to make or cause to be made, any public statement or  public announcement, including in any document or report filed with or furnished to the SEC or  through the press, media, analysts or other persons, that constitutes an ad hominem attack on or  otherwise disparages, defames or slanders the Company, any of its Affiliates or Associates or any  of  their  respective successors  or current  or  former members,  partners, officers,  directors  or  employees; provided that (i) the limitations set forth in this Section 4(b) shall not prevent Capital  Returns  Management  or  any Capital  Returns  Management Associates  from  responding  to any  statement made by the Company or any of its Affiliates, Associates or Representatives that was  made in breach of Section 4(a) above and (ii) Capital Returns Management will be permitted to  make objective statements that reflect Capital Returns Management’s view with respect to factual  matters  concerning  specific  acts  or  determinations  of  the  Company,  any  of  its  Affiliates or  Associates or any current or former Representative of the Company or any of its Affiliates or  Associates occurring  after  the  date  of  this  Agreement.  For  the  avoidance  of  doubt,  a  public  statement or announcement shall only be deemed to be made by Capital Returns Management or  an Associate thereof if such public statement or announcement is made by (x) a Capital Returns  Management partner or executive officer or (y) an employee or Representative of Capital Returns  Management authorized to make such statement or announcement on behalf of Capital Returns  Management.                                         13  





 






5.    Public Announcements.     (a)   Promptly  following  the  execution  of  this  Agreement,  the  Company  shall  issue  a  press  release (the “Press Release”) substantially in the form attached hereto as Exhibit B. Prior to the  issuance of the Press Release, neither the Company nor CRM shall issue any press release or make  any public announcement regarding this Agreement or take any action that would require public  disclosure thereof without the prior written consent of the other party.   (b)    Promptly following the execution of this Agreement, and, no later than two (2) business  days following the date of this Agreement, the Company shall file a Current Report on Form 8-K  reporting entry into this Agreement and appending or incorporating by reference this Agreement  (the “Public Filings”).  The Company shall provide CRM with a reasonable opportunity to review  and comment on the Public Filings prior to them being filed with the SEC and consider in good  faith any comments of CRM.  Prior to the issuance of the Public Filings, neither the Company nor  CRM nor any of their respective Affiliates or Associates shall issue any press release or public  announcement regarding this Agreement other than the Press Release or take any action that would  require public disclosure thereof without the prior written consent of the other party.  Neither the  Company nor CRM nor any of their respective Affiliates or Associates shall make or cause to be  made any public announcement or statement that is inconsistent with or contrary to the statements  made in the Public Filings or the Press Release, except as required by law or the rules of any stock  exchange  or  with  the  prior  written  consent  of  the  other  party; provided, however,  that  unless  prohibited under applicable law, such party must provide written notice to the other party at least  two (2) business days prior to making any such statement or disclosure required under the federal  securities laws or other applicable laws or stock exchange regulations that would otherwise be  prohibited by the provisions of this Section 5, and reasonably consider any comments of such other  party.   (c)   No later than two (2) business days following the date of this Agreement, CRM shall file  with the SEC an amendment to that certain Schedule 13D, dated July 23, 2019 and as amended on  July 30, 2019, reporting entry into this Agreement and appending or incorporating by reference  this  Agreement  the  (“Schedule  13D  Amendment”).  CRM  shall  provide  the  Company  with  a  reasonable opportunity to review and comment on the Schedule 13D Amendment prior to it being  filed with the SEC and consider in good faith any comments from the Company.   6.    Confidential  Information.   Notwithstanding  anything  to  the  contrary  contained  in  this  Agreement  or  any  Policy,  neither  Capital  Returns  Management  nor  any  Capital  Returns  Management Associate will request to receive, or knowingly and willingly accept, any material  non-public information concerning the Company, its subsidiaries or their respective businesses,  including discussions or matters considered in meetings of the Board or Board committees (such  confidential  information,  “Company  Confidential  Information”)  from  the  New  Independent  Directors or any Replacement Director (unless otherwise agreed to in writing with the Company  before (a) Capital Returns Management or (b) any Capital Returns Management Associate requests  to  receive,  or  knowingly  and  willingly  accepts, such Company Confidential  Information);  provided, however,  that  Capital  Returns  Management  and  the  Capital  Returns  Management  Associates shall not be prohibited or restricted from taking any action necessary to comply with  any law, rule or regulation or any action required by any governmental or regulatory authority or  stock  exchange  that  has,  or  may  have,  jurisdiction  over  Capital  Returns  Management  or  any                                         14  





 






Capital Returns Management Associate, provided that a breach by Capital Returns Management  of this Agreement is not the cause of the applicable requirement.   7.    Representations and Warranties of All Parties.     (a)   Each of the parties represents and warrants to the other party that:  (a) such party has all  requisite corporate or limited liability company power and authority to execute and deliver this  Agreement and to perform its obligations hereunder; (b) this Agreement has been duly and validly  authorized,  executed  and  delivered  by  it  and  is  a  valid  and  binding  obligation  of  such  party,  enforceable against such party in accordance with its terms; and (c) this Agreement will not result  in a violation of or conflict with (i) any law, rule, regulation, order, judgment or decree applicable  to it, or (ii) any terms or conditions of any agreements to which such person is a party or by which  such party may otherwise be bound or of any law, rule, license, regulation, judgment, order or  decree governing or affecting such party.   (b)   CRM represents and warrants that, as of the date of this Agreement, except as specifically  disclosed herein, (i) Capital Returns Management does not own of record or Beneficially Own any  Voting  Securities  of  the Company  or  any  securities  convertible  into,  or  exchangeable  or  exercisable for, any Voting Securities of the Company and (ii) Capital Returns Management has  not entered into, directly or indirectly, any agreements or understandings with any person (other  than its Representatives) with respect to any potential transaction involving the Company or the  voting or disposition of any securities of the Company. CRM further represents that it does not  consider the New Independent Directors to be shareholder designees or shareholder representatives  of Capital Returns Management.   8.    Remedy.  The parties hereto recognize and agree that if for any reason any of the provisions  of  this  Agreement  are  not  performed  in  accordance  with  their  specific  terms  or  are  otherwise  breached or threatened to be breached, immediate and irreparable harm or injury would be caused  for which money damages would not be an adequate remedy.  Accordingly, each party agrees that,  without prejudice to any other rights and remedies otherwise available to the parties under this  Agreement, the other party shall be entitled to an injunction or injunctions to prevent breaches or  threatened breaches of this Agreement and to enforce specifically the terms and provisions of this  Agreement without the necessity of posting a bond or other security.  Such remedy shall not be  deemed to be the exclusive remedy for a breach of this Agreement, but shall be in addition to all  other remedies available at law or equity to the non-breaching party.   9.    Governing Law; Jurisdiction.  The parties agree that any action to enforce the terms and  provisions of this Agreement or relating to the transactions contemplated by this Agreement shall  be brought exclusively in the state courts of the State of Florida or, if such courts shall not have  jurisdiction, any federal court sitting in the State of Florida.  In the event that any action shall be  brought in equity to enforce the provisions of this Agreement, no party shall allege, and each party  hereby waives the defense, that there is an adequate remedy at law.  Furthermore, each of the  parties hereto (a) consents to submit itself to the personal jurisdiction of the federal or state courts  sitting  in  the  State  of  Florida  in  the  event  any  dispute  arises  out  of  this  Agreement  or  the  transactions contemplated by this Agreement, (b) agrees that it shall not attempt to deny or defeat  such personal jurisdiction by motion or other request for leave from any such court, (c) agrees that  it shall not bring any action relating to this Agreement or the transactions contemplated by this                                         15  





 






Agreement in any court other than the federal or state courts sitting in the State of Florida, and  EACH  OF  THE PARTIES  IRREVOCABLY  WAIVES  THE  RIGHT  TO  TRIAL  BY  JURY,  (d) agrees to waive any bonding requirement if such a waiver is enforceable under any applicable  law,  in  the  case  any  other  party  seeks  to  enforce  the  terms  by  way  of  equitable  relief  and  (e) irrevocably consents to service of process by certified mail, signature required, to the address  of such party’s principal place of business or as otherwise provided by applicable law.  THIS  AGREEMENT  SHALL  BE  GOVERNED  IN  ALL  RESPECTS,  INCLUDING  VALIDITY,  INTERPRETATION  AND  EFFECT,  BY  THE  LAWS  OF  THE  STATE  OF  FLORIDA  APPLICABLE  TO  CONTRACTS  EXECUTED  AND  TO  BE  PERFORMED  WHOLLY  WITHIN  SUCH  STATE  WITHOUT  GIVING  EFFECT  TO  THE  CHOICE  OF  LAW  PRINCIPLES OF SUCH STATE.   10.   No Waiver.  No waiver by any party of any of the provisions hereof shall be effective  unless explicitly set forth in writing and signed by the party so waiving. Any waiver by any party  of a breach of any provision of this Agreement shall not operate as or be construed to be a waiver  of any other breach of such provision or of any breach of any other provision of this Agreement.   The failure of a party to insist upon strict adherence to any term of this Agreement on one or more  occasions shall not be considered a waiver or deprive that party of the right thereafter to insist  upon strict adherence to that term or any other term of this Agreement.   11.   Entire  Agreement.   This  Agreement  contains  the sole  and entire  understanding  of  the  parties with respect to the subject matter hereof and supersedes all prior and contemporaneous  understandings, agreements, representations and warranties, both written and oral, with respect to  the subject matter. This Agreement may be amended only by an agreement in writing executed by  the parties hereto.   12.   Notices.  All notices, consents, requests, instructions, approvals and other communications  provided for herein shall be in writing and shall be deemed validly given, if (a) given by email, on  the date sent by email (with email or telephonic confirmation of receipt) if sent during normal  business hours of the Company, or on the next business day if sent after normal business hours of  the Company, or (b) if given by any other means, when actually received during normal business  hours at the address specified in this subsection:               If to the Company: FedNat Holding Company                                14050 NW 14th Street Suite 180                                Sunrise, FL 33323                                Email:  mbraun@fednat.com                                Attention:  Michael Braun                                                                With a copy to (which shall not constitute notice):                                                                Nelson Mullins Riley & Scarborough LLP                                2 South Biscayne Blvd.                                21st Floor                                Miami, FL 33131                                Email:  Nina.Gordon@nelsonmullins.com,                                George.Mahfood@nelsonmullins.com                                         16  





 






                              Attention: Nina Gordon, George Mahfood                                                                Vinson & Elkins L.L.P.                                666 Fifth Avenue, 26th Floor                                New York, NY 10103                                Email:  lelbaum@velaw.com, pgadson@velaw.com                                Attention:  Lawrence S. Elbaum, C. Patrick Gadson                            If to Capital Returns: Capital Returns Management, LLC                                641 Lexington Avenue, 18th Floor                                New York, NY 10022                                Email:  ron@capreturns.com                                Attention:  Ronald D. Bobman                                                                With a copy to (which shall not constitute notice):                                                                Sidley Austin LLP                                1 South Dearborn Street                                Chicago, IL 60603                                Email:  bberg@sidley.com                                Attention:  Beth E. Berg   13.   Severability.  If at any time subsequent to the date hereof, any provision of this Agreement  shall be held by any court of competent jurisdiction to be illegal, void or unenforceable, such  provision shall be of no force and effect, but the illegality or unenforceability of such provision  shall have no effect upon the legality or enforceability of any other provision of this Agreement.   14.   Counterparts.  This Agreement may be executed in two (2) or more counterparts either  manually or by electronic or digital signature (including by facsimile or email transmission), each  of which shall be deemed an original and all of which together shall constitute a single agreement.   15.   Successors and Assigns.  This Agreement shall not be assignable by any of the parties to  this Agreement without prior written consent of the other parties, provided that each party may  assign any of its rights and delegate any of its obligations hereunder to any person or entity that  acquires  substantially  all  of  that  party’s  assets,  whether  by  stock  sale,  merger,  asset  sale  or  otherwise.  This Agreement, however, shall be binding on and inure to the benefit of successors  and permitted assignees of the parties hereto.   16.   No Third-Party Beneficiaries.  This Agreement is solely for the benefit of the parties hereto  and their respective successors and permitted assigns and is not enforceable by any other persons.   17.   Fees and Expenses.  Each party shall be responsible for its own fees and expenses incurred  in  connection  with  the  negotiation,  execution  and  effectuation  of  this  Agreement  and  the  transactions contemplated hereby; provided, however, that the Company shall reimburse CRM for  all reasonable,  documented  out-of-pocket  fees  and  expenses  incurred by  Capital  Returns  Management in  the  preparation  and  execution  of  this  Cooperation  Agreement  and  the  related  matters preceding or reasonably following its execution (including preparation and filing of the                                         17  





 






Disclaimer and all actions taken pursuant to Sections 1(g) and 1(i) above), provided that such  reimbursement  shall  not  exceed four hundred  and fifty thousand  dollars  ($450,000) in  the  aggregate.   18.   Certain Definitions.  For purposes of this Agreement, the terms:   (a)   “Affiliate” and “Associate” shall have the meanings set forth in Rule 12b-2 promulgated  by the SEC under the Exchange Act, provided, that any references to “Associate” herein shall be  deemed to be preceded by the word “controlled.”   (b)   “Beneficial  Ownership”  and  “Beneficially  Own”  shall  have  the  meaning  set  forth  in  Section 13(d) of the Exchange Act.   (c)   “person” or “persons” shall mean any individual, corporation (including not-for-profit),  general or limited partnership, limited liability or unlimited liability company, joint venture, estate,  trust, association, organization or other entity of any kind or nature.   (d)   “Representatives”  of  a  person  shall  mean  such  person’s  directors,  officers,  partners,  employees, members or agents (acting in such capacity).   (e)   “Voting  Securities”  shall  mean  the  Common  Stock,  and  any  other  securities  of  the  Company entitled to vote in the election of directors, or securities convertible into, or exercisable  or exchangeable for Common Stock or other securities, whether or not subject to the passage of  time or other contingencies.   19.   Interpretation and Construction.  Each of the parties hereto acknowledges that it has been  represented by counsel of its choice throughout all negotiations that have preceded the execution  of this Agreement, and that it has executed the same with the advice of said independent counsel.   Each  party  and  its  counsel  cooperated  and  participated  in  the  drafting  and  preparation  of  this  Agreement and the documents referred to herein, and any and all drafts relating thereto exchanged  between  the  parties  shall  be  deemed  the  work  product  of  both  of  the  parties  and  may  not  be  construed against any party by reason of its drafting or preparation.  Accordingly, any rule of law  or any legal decision that would require interpretation of any ambiguities in this Agreement against  any party that drafted or prepared it is of no application and is hereby expressly waived by each of  the parties hereto, and any controversy over interpretations of this Agreement shall be decided  without  regard  to  events  of  drafting  or  preparation.   The  section  headings  contained  in  this  Agreement  are  for  reference  purposes  only  and  shall  not  affect  in  any  way  the  meaning  or  interpretation  of  this  Agreement.   The  term  “including”  shall  be  deemed  to  mean  “including  without limitation” in all instances.                                 [Signature Page Follows]                                         18  





 






         IN  WITNESS  WHEREOF,  each  of  the  parties  hereto  has  executed  this  Agreement,  or  caused the same to be executed by its duly authorized representative, as of the Effective Date.                                       FEDNAT HOLDING COMPANY                                       By: /s/ Michael Braun                                                        Name:    Michael Braun                                      Title:   Chief Executive Officer and President                                       CAPITAL RETURNS MANAGEMENT, LLC                                       By: /s/ Ronald D. Bobman                                                     Name:    Ronald D. Bobman                                      Title:   President                               [Signature Page to Cooperation Agreement]  4837-3962-5631v.1 141191/00001  





 






                                                                      EXHIBIT A                           FORM OF NOMINEE CONSENT   [●], 2019   FedNat Holding Company  14050 NW 14th Street, Suite 180  Sunrise, FL  33323  Attention:  Board of Directors   Re:  Nominee Consent   Ladies and Gentlemen:   I irrevocably consent to be named by FedNat Holding Company (the “Company”) as a nominee  for election to the board of directors of the Company in any proxy statement, proxy card or other  solicitation materials  of the  Company  with  respect  to  the Company’s  2019  annual  meeting  of  shareholders, agree to act in the capacity of a director of the Company if elected and agree to serve  the full term as a director if elected. [For the 2020 Candidate only:  I also irrevocably consent to  be named by the Company as a nominee for election to the board of directors of the Company in  any proxy statement, proxy card or other solicitation materials of the Company with respect to the  Company’s 2020 annual meeting of shareholders, agree to act in the capacity of a director of the  Company if elected and agree to serve the full term as a director if elected.]    By:                                   Name:                                 





 






                                                     EXHIBIT B   PRESS RELEASE