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nonfloridaquotasharereda

                           Non-Florida Property Quota Share                                   Reinsurance Contract                                  Effective:  July 1, 2020                                                                             FedNat Insurance Company                                      Sunrise, Florida                                                                            _______________________    Certain identified information has been omitted from this exhibit because it is not material and  would be competitively harmful if publicly disclosed.  Redactions are indicated by [***].                                                                                                                                

 

                                   Table of Contents                                                                                            Article                                                                           Page      1   Classes of Business Reinsured                                               1      2   Term                                                                        1      3   Special Termination or Participation Reduction                              2      4   Territory                                                                   3      5   Retention and Limit                                                         3      6   Definitions                                                                 3      7   Loss in Excess of Policy Limits/ Extra Contractual Obligations              5      8   Other Reinsurance                                                           5      9   Losses and Loss Adjustment Expense                                          6     10   Salvage and Subrogation                                                     6     11   Original Conditions                                                         7     12   Commission (BRMA 10A)                                                       7     13   Reinsurer Allowance                                                         7     14   Funds Withheld                                                              7     15   Commutation                                                                 8     16   Reports and Remittances                                                     8     17   Sanctions                                                                   9     18   Late Payments                                                               9     19   Offset (BRMA 36C)                                                          10     20   Access to Records                                                          10     21   Confidentiality                                                            10     22   Errors and Omissions (BRMA 14F)                                            12     23   Currency                                                                   12     24   Federal Excise Tax                                                         12     25   Reserves                                                                   12     26   Insolvency                                                                 14     27   Arbitration                                                                15     28   Service of Suit                                                            16     29   Governing Law (BRMA 71B)                                                   16     30   Non-Waiver                                                                 17     31   Severability                                                               17     32   Notices and Contract Execution                                             17                                                                                       

 

                              Non-Florida Property Quota Share                                      Reinsurance Contract                                     Effective:  July 1, 2020                                                                                   entered into by and between                                                                                   FedNat Insurance Company                                         Sunrise, Florida                              (hereinafter referred to as the "Company")                                                                                              and                                                                                           Anchor Re                            The Subscribing Reinsurer(s) Executing the                               Interests and Liabilities Agreement(s)                                         Attached Hereto                   (hereinafter referred to individually as the "Subscribing Reinsurer"                                and collectively as the "Reinsurer")        Article 1 - Classes of Business Reinsured   A.  By this Contract the Company obligates itself to cede to the Reinsurer and the Reinsurer      obligates itself to accept quota share reinsurance of the Company's Ultimate Net Liability under      its policies in force at the effective date hereof or issued or renewed on or after that date, subject      to the terms, conditions and limitations set forth herein.    B.  The liability of the Reinsurer with respect to each cession hereunder shall commence obligatorily      and simultaneously with that of the Company, subject to the terms, conditions and limitations      hereinafter set forth.    C.  The classes of business ceded to the Reinsurer will be limited to Homeowners & Dwelling Fire      products. It will also be limited to only those acquired through the Company’s partnership with the      program administrator SageSure Insurance Managers, LLC. This Contract shall not apply to any      other policies in force acquired though alternative means or through any other affiliation of the      Company.       Article 2 - Term   A.  This Contract shall become effective July 1, 2020, with respect to losses occurring at or after that      time and date, and shall remain in force until terminated by either party.     B.  30 days prior to the beginning of any new Contract Year, the parties will review and agree, via an      Addendum, if necessary, on the inuring reinsurance limit, Reinsurance Allowance percentage      and Ceding Commission percentage.  In addition, both parties will review and agree that the      reinsurance collateral is adequate for the upcoming Contract Year.    C.  Either party may terminate this Contract at any June 30 by giving the other party not less      than 90 days’ prior written notice.           D.  If a loss occurrence covered hereunder is in progress at the end of any Contract Year, the      Reinsurer's liability hereunder shall, subject to the other terms and conditions of this Contract, be   Page 1                                                                         

 

    determined as if the entire loss occurrence had occurred prior to the end of that Contract Year,      provided that no part of such loss occurrence is claimed against any other Contract Year or any      renewal.     E.  Upon termination of this Contract,             1.  All reinsurance hereunder shall be automatically cancelled as of the date of termination and          the Reinsurer shall be released of all liability as respects losses occurring after the date of          termination.   The  Reinsurer  shall  return  to  the  Company  the  unearned  premiums  on  the          business in force hereunder at the date of termination, less the reinsurance and commission          allowances thereon.                2.  Company and Reinsurer may mutually agree to terminate this Contract on a "Run-Off" basis,          as defined in Article 6.J.  Prior to, and in order to effect such termination, the Company and the          Reinsurer will execute an Addendum to this Contract detailing the specific terms and conditions          of the termination on a “Run-Off” basis.       Article 3 - Special Termination or Participation Reduction   A.  Notwithstanding the provisions of paragraph A of the Term Article, the Company may reduce or      terminate a Subscribing Reinsurer's percentage share in this Contract at any time by giving      written notice to the Subscribing Reinsurer in the event any of the following circumstances occur:        1.   The Subscribing Reinsurer has become, or has announced its intention to become, merged          with, acquired by or controlled by any other entity or individual(s) not controlling the          Subscribing Reinsurer's operations previously; or        2.   A State Insurance Department or other legal authority has ordered the Subscribing          Reinsurer to cease writing business; or        3.   The Subscribing Reinsurer has become insolvent or has been placed into liquidation,          receivership, supervision or administration (whether voluntary or involuntary), or proceedings          have been instituted against the Subscribing Reinsurer for the appointment of a receiver,          liquidator, rehabilitator, supervisor, administrator, conservator or trustee in bankruptcy, or          other agent known by whatever name, to take possession of its assets or control of its          operations; or        4.   The Subscribing Reinsurer has become involved in a scheme of arrangement or similar          proceeding (whether voluntary or involuntary) which enables the Subscribing Reinsurer to          settle its claims liabilities, including but not limited to any estimated or undetermined claims          liabilities under this Contract, on an accelerated basis; or        5.   The Subscribing Reinsurer has reinsured its entire liability under this Contract with an          unaffiliated entity or entities without the Company's prior written consent; or        6.   The Subscribing Reinsurer has transferred or delegated its claims-paying authority, as          respects business subject to this Contract, to an unaffiliated entity; or        7.   The Subscribing Reinsurer has failed to comply with the funding requirements set forth in the          Reserves Article.      Page 2                                                                         

 

B.  In the event any of the circumstances set forth in paragraph A above occur, it is solely at the      Company's option to reduce, terminate or allow a Subscribing Reinsurer to continue to participate      on this Contract.    C.  The Subscribing Reinsurer shall notify the Company immediately of the occurrence of any of the      events set forth in paragraph A above.  If the Subscribing Reinsurer fails to provide the Company      with such notification, the Company may terminate the Subscribing Reinsurer based on a public      announcement or discovery of the occurrence of such event.      Article 4 - Territory   The territorial limits of this Contract shall be identical with those of the Company's policies, excluding  risks located in the State of Florida.      Article 5 - Retention and Limit   As respects business subject to this Contract, the Company shall cede to the Reinsurer and the   Reinsurer agrees to accept 100% of the Company's Ultimate Net Liability.  However, in no event will  the Reinsurer's liability hereunder for Ultimate Net Liability for Contract Year exceed the greater of  $[***] or [***] of the Premium Earned.    Article 6 - Definitions   A.  "Premium Earned" as used herein shall mean ceded unearned premiums at the beginning of this      Contract, plus ceded Net Written Premiums the Term of this Contract, less ceded unearned      premiums at the end of this Contract.    B.   "Loss Adjustment Expense" as used in this Contract is defined as all costs and expenses      allocable to a specific claim, regardless of how such expenses are classified for statutory      reporting purposes, that are incurred by the Company in the investigation, appraisal, adjustment,      settlement, litigation, defense or appeal of a specific claim, including court costs and costs of      supersedeas and appeal bonds, and including:             1.   pre-judgment interest, unless included as part of the award or judgment             2.   post-judgment interest              3.   legal expenses and costs incurred in connection with coverage questions and legal               actions connected thereto including declaratory judgment expense             4.  pro rata shares of salaries and expenses of the Company field employees, and               expenses of other Company employees who have been temporarily diverted from their               normal and customary duties and assigned to the field adjustment of losses covered by               this Contract         However, Loss Adjustment Expense does not include unallocated loss adjustment expense      (“ULAE”). Unallocated loss adjustment expense includes, but is not limited to, salaries and      expenses of the employees, other than in (d) above, and office and other overhead expenses.    C.  "Ultimate Net Liability" as used in this Contract shall mean the Company's gross liability under      this Contract after deducting recoveries from all other reinsurance, whether specific or general      and whether collectible or not.    Page 3                                                                         

 

  D.  "Net Written Premium" as used in this Contract shall mean the Company's gross written premium      for the classes of business reinsured hereunder, less cancellations and return premiums.      E.  "Policy" as used in this Contract shall mean policies, binders, contracts, endorsements, or      agreements of insurance or reinsurance.    F.  "Runoff Subscribing Reinsurer" as used in this Contract shall mean a Subscribing Reinsurer that      experiences one or more of the following circumstances:         1.  A State Insurance Department or other legal authority has ordered the Subscribing           Reinsurer to cease writing business; or         2.  The Subscribing Reinsurer has become insolvent or has been placed into liquidation,           receivership, supervision or administration (whether voluntary or involuntary), or           proceedings have been instituted against the Subscribing Reinsurer for the appointment of a           receiver, liquidator, rehabilitator, supervisor, administrator, conservator or trustee in           bankruptcy, or other agent known by whatever name, to take possession of its assets or           control of its operations; or         3.  The Subscribing Reinsurer has become involved in a scheme of arrangement or similar           proceeding (whether voluntary or involuntary) which enables the Subscribing Reinsurer to           settle its claims liabilities, including but not limited to any estimated or undetermined claims           liabilities under this Contract, on an accelerated basis; or         4.  The Subscribing Reinsurer has reinsured its entire liability under this Contract with an           unaffiliated entity or entities without the Company's prior written consent; or         5.  The Subscribing Reinsurer has ceased assuming new or renewal property or casualty treaty           reinsurance business; or         6.  The Subscribing Reinsurer has transferred or delegated its claims-paying authority, as           respects business subject to this Contract, to an unaffiliated entity.    G.  "Term of this Contract" as used in this Contract, and as defined in Article 2, shall mean July 1,      2020, with respect to losses occurring at or after that time and date, and shall remain in force until      terminated by either party. However, if this Contract expires on a "cutoff" basis, or a Subscribing      Reinsurer's share is terminated in accordance with the Special Termination or Participation      Reduction Article, "Term of this Contract" as used herein shall mean the period from July 1, 2020      to the effective date of termination or expiration, both days inclusive.    H.  "Contract Year" as used in this Contract shall mean the period from July 1 to June 30, both days      inclusive, and each respective 12-month period thereafter that this Contract continues in force.      However, in the event this Contract or a Subscribing Reinsurer's share in this Contract is      terminated, the final contract year as respects the terminated share(s) shall be the period from      the beginning of the then current contract year to the effective time and date of termination.    I.  “Corporate Core Reinsurance Program” shall be defined as the shared reinsurance catastrophe      excess of loss placement applying to both policies subject to and not subject to this Contract. The      Corporate Core Reinsurance Program shall inure to the benefit of this Contract subject to the      mutually agreed limits, attachments and exhaustion amounts for both first and second events      noted in Article 8 - Other Reinsurance. Provisions for payment for Corporate Core Reinsurance      Program are contained in Article 13 – Reinsurance Allowance.          Page 4                                                                         

 

J.  “Run-Off” shall be defined as means of termination for this Contract in which the Reinsurer shall      be liable for losses occurring on or after the date of termination for all policies covered hereunder      and in force at the date of termination of this Agreement until their natural expiry, cancellation or      next anniversary of such business, whichever first occurs; but in no case shall the Reinsurer be      liable for losses occurring more than 12 months after the termination date unless the Company is      required by statute or regulation to continue coverage on a policy. In such case, the Reinsurer      shall continue to be liable for losses occurring subsequent to the date of termination until the      earliest date on which the Company may cancel such Policy      Article 7 - Loss in Excess of Policy Limits/ Extra Contractual Obligations   A.  In the event the Company pays or is held liable to pay an amount of loss in excess of its policy      limit, but otherwise within the terms of its policy (hereinafter called "Loss in Excess of Policy      Limits") or any punitive, exemplary, compensatory or consequential damages, other than loss in      excess of policy limits (hereinafter called "Extra Contractual Obligations") because of, but not      limited to, failure by the Company to settle within the policy limits, failure to settle within a timely      manner, or by reason of the Company's alleged or actual negligence, fraud or bad faith in      rejecting an offer of settlement or in the preparation of the defense or in the trial of an action      against its insured or reinsured or in the preparation or prosecution of an appeal consequent      upon such an action, or in otherwise handling a claim under a policy subject to this Contract, the      loss in excess of policy limits and/or the Extra Contractual Obligations shall be added to the      Company's loss, if any, under the policy involved, and the sum thereof shall be subject to the      provisions of the Retention and Limit Article.    B.  An Extra Contractual Obligation shall be deemed to have occurred on the same date as the loss      covered or alleged to be covered under the policy.    C.  However, coverage hereunder as respects Extra Contractual Obligations shall not apply where      the loss has been incurred due to the fraud of a member of the Board of Directors or a corporate      officer of the Company acting individually or collectively or in collusion with any individual or      corporation or any other organization or party involved in the presentation, defense or settlement      of any claim covered hereunder.      D.  A Runoff Subscribing Reinsurer shall be precluded from asserting that a claim otherwise payable      hereunder is loss in excess of policy limits and/or Extra Contractual Obligations.        E.  Recoveries from any form of insurance which protects the Company against claims the subject      matter of this Article shall inure to the benefit of this Contract.    F.  Savings Clause (Applicable only if the Subscribing Reinsurer is domiciled in the State of New      York):  In no event shall coverage be provided to the extent that such coverage is not permitted      under New York law.      Article 8 - Other Reinsurance   A.  The Company shall maintain in force catastrophe and per risk excess of loss reinsurance,      recoveries under which shall inure to the benefit of this Contract.     B.    The Company and Reinsurer shall mutually agree on the limits, attachments and exhaustion      amounts for both first and second events of the in-force catastrophe excess of loss reinsurance      inuring to the benefit of this Contract.      Page 5                                                                         

 

C.   The Company and Reinsurer agree that the exhaustion point of the in-force catastrophe excess      of loss program will not meaningfully deviate from the 130-year PML event to be calculated net of      inuring limit to Corporate Core Reinsurance Program for the subject business of this Contract.      The 130-year PML event loss amount will be calculated, with actual in force portfolio data at      September 30, of the current Contract Year, and as the average AIR & RMS event based on      historical rates including demand surge, excluding storm surge, and including secondary      uncertainty. The inuring limit to Corporate Core Reinsurance Program will be based on inuring      loss paid by this Contract and other inuring reinsurance as purchased in accordance with Article      13 - Reinsurance Allowance. The inuring limit is agreed at $[***] for the Contract Year incepting in      2020.     D.   The Company shall be permitted to carry other reinsurance, recoveries under which shall inure      solely to the benefit of the Company and be entirely disregarded in applying all the provisions of      this Contract.    Article 9 - Losses and Loss Adjustment Expense   A.  Losses shall be reported by the Company in summary form as hereinafter provided.    B.  All loss settlements made by the Company, whether under strict policy conditions or by way of      compromise, shall be binding upon the Reinsurer, and the Reinsurer agrees to pay or allow, as      the case may be, its proportion of each such settlement in accordance with the Reports and      Remittances Article.    C.  In the event of a claim under a policy subject hereto, the Reinsurer shall be liable for its      proportionate share of Loss Adjustment Expense incurred by the Company in connection      therewith and shall be credited with its proportionate share of any recoveries of such expense.    D.  If a Runoff Subscribing Reinsurer does not raise a query concerning a claim it has not paid within      30 days of billing, it shall be estopped from denying such claim and must pay immediately.    E.  The Company shall be the sole judge as to:         1.  What constitutes a claim or loss covered under any policy;         2.  The Company's liability thereunder;         3.  The amount or amounts the Company shall pay thereunder.        The Reinsurer shall be bound by the judgment of the Company as to the obligation(s) and      liability(ies) of the Company under any policy.      Article 10 - Salvage and Subrogation   The Reinsurer shall be credited with its proportionate share of salvage (i.e., reimbursement obtained  or recovery made by the Company, less the actual cost, excluding salaries of officials and employees  of the Company and sums paid to attorneys as retainer, of obtaining such reimbursement or making  such recovery) on account of claims and settlements involving reinsurance hereunder.  The Company  hereby agrees to enforce its rights to salvage or subrogation relating to any loss, a part of which loss  was sustained by the Reinsurer, and to prosecute all claims arising out of such rights if, in the  Company's opinion, it is economically reasonable to do so.       Page 6                                                                         

 

Article 11 - Original Conditions   A.  All reinsurance under this Contract shall be subject to the same rates, terms, conditions, waivers      and interpretations and to the same modifications and alterations, including judicial interpretation,      policy reformation and regulatory changes, as the respective policies of the Company.  The      Reinsurer shall be credited with its exact proportion of the Company's Net Written Premium.  The      Reinsurer's share in the Company's Net Written Premium shall be credited to the Funds Withheld      Account.    B.  Nothing herein shall in any manner create any obligations or establish any rights against the      Reinsurer in favor of any third party or any persons not parties to this Contract.      Article 12 - Commission (BRMA 10A)   A.  The Reinsurer shall allow the Company a [***] commission (“Ceding Commission”) on Net Written      Premium ceded to the Reinsurer hereunder. The Company shall allow the Reinsurer return      commission on return premiums at the same rate. [***] shall be agreed by Company and      Reinsurer as the sole compensation allowed for ULAE under this Contract.    B.  It is expressly agreed that the Ceding Commission allowed the Company includes provision for      all dividends, commissions, taxes, assessments, ULAE charges, and other related acquisition      expenses, except Loss Adjustment Expense. However, this excludes any passthrough taxes or      assessment made directly to the policyholder and remitted to the Company.       Article 13 - Reinsurance Allowance   A.  The Reinsurer shall allow the Company a [***] provisional allowance (“Reinsurance Allowance”)      on all premiums ceded for the inuring reinsurance in Article 8. The Company shall allow the      Reinsurer return commission on return premiums at the same rate. At the expiration or termination      of this Contract, the provisional allowance percentage shall be adjusted to equal the final cost      percentage of all inuring reinsurance on an earned premium basis.      Article 14 - Funds Withheld   A.  The Company shall establish and maintain a notional account on a cumulative paid basis from      the inception of this Contract (the "Funds Withheld Account"), and the balance of the Funds      Withheld Account as of any date shall be calculated in accordance with the following:                 1.  Ceded unearned premium applicable to subject business in force at the effective date of this           Contract plus ceded Net Written Premiums; minus               2.   Ceding Commission thereon; minus               3.  Reinsurance Allowance on (1) above; minus               4.   Losses and Loss Adjustment Expenses paid    B.   The amounts in subparagraphs 1 through 4 in paragraph A shall be deemed to have been paid in      accordance with Article 16 - Reports and Remittances.      Page 7                                                                         

 

Article 15 - Commutation   A.  The Company has the unilateral right to commute this Contract if the balance of the Funds      Withheld Account is positive after the termination or expiration of this Contract.    B.  If the Company unilaterally commutes this Contract, in accordance with the provisions of      paragraph A above, the Reinsurer shall receive 100% of the Funds Withheld Account balance      and all parties shall be released from any and all past, current or future liabilities, rights and      obligations under this Contract.  Upon commutation, prior to any payout of the Funds Withheld      Account, the Funds Withheld Account balance will be adjusted to reflect the impact of:        1.   Recapture  of  the  ending  unearned  premium  applicable  to  subject  business  in  force  at           commutation, net of Reinsurance Allowance and Ceding Commission thereon;            2.   Any adjustment to the cost of inuring reinsurance pursuant to Article 13;               3.   Provision for incurred but not reported claim reserves in accordance with reserves as recorded           by the Company for accounting purposes;               4.   Contingent commissions paid by the Company to Reinsurer or its affiliates related to the Term           of this Contract.    C.  Mutual consent is required to commute this Contract if the balance of the Funds Withheld      Account is negative.        Article 16 - Reports and Remittances   A.  As promptly as possible after the effective date of this Contract, the Company shall remit the      Reinsurer's share of the ceded unearned premium (less commission and allowance thereon)      applicable to subject business in force at the effective date of this Contract.    B.  Within 60 days after the end of each quarter, the Company shall report to the Reinsurer:        1.   Ceded Net Written Premium for the quarter;        2.   Ceding Commission thereon;        3.   Reinsurance Allowance on (1) above;        4.   Losses and Loss Adjustment Expenses Paid for the quarter;        5.   The balance of the Funds Withheld Account for the previous quarter;        6.   The balance of the Funds Withheld Account for the quarter.        Any balance shown to be due the Company shall be remitted by the Reinsurer within 30 days      after receipt and verification of the Company's report. Payment by the Reinsurer to the Company      shall first be made from the Funds Withheld Account and then out of other funds of the Reinsurer.    C   Within 60 days after the end of each calendar quarter, the Company shall report to the Reinsurer      the ceded unearned premiums and ceded outstanding loss reserves as of the end of the calendar      quarter.     Page 8                                                                         

 

  Article 17 - Sanctions   Neither the Company nor any Subscribing Reinsurer shall be liable for premium or loss under this  Contract if it would result in a violation of any mandatory sanction, prohibition or restriction under  United Nations resolutions or the trade or economic sanctions, laws or regulations of the European  Union, United Kingdom or United States of America that are applicable to either party.      Article 18 - Late Payments   A.  The provisions of this Article shall not be implemented unless specifically invoked, in writing, by      one of the parties to this Contract.  However, any Subscribing Reinsurer that has experienced      any of the circumstances set forth in paragraph A of the Special Termination or Participation      Reduction Article shall not be allowed to implement the provisions of this Article against the      Company.    B.  In the event any premium, loss or other payment due either party is not received by the      intermediary named in the Intermediary Article (hereinafter referred to as the "Intermediary") by      the payment due date, the party to whom payment is due may, by notifying the Intermediary in      writing, require the debtor party to pay, and the debtor party shall pay, any and all costs and      expenses, including reasonable attorneys' fees, incurred in connection with the collection or      enforcement of any payment obligations of the debtor party, except those costs and expenses      the parties are required to share equally pursuant to the Arbitration Article, plus an interest      charge on the amount past due calculated for each such payment on the last business day of      each month as follows:        1.   The number of full days which have expired since the due date or the last monthly          calculation, whichever the lesser; times        2.   1/365th of the sum of 4.0% and the U.S. prime rate as quoted in The Wall Street Journal on          the first business day of the month for which the calculation is made; times        3.   The amount past due, including accrued interest.        Interest shall accumulate until payment of the original amount due plus interest charges have      been received by the Intermediary.        Notwithstanding the provisions of subparagraph B(2) above and the immediately preceding      sentence, the interest rate for a Runoff Subscribing Reinsurer shall increase by 1.0% for every      month that payment of the claim is past due, subject to a maximum annual interest rate of 12.0%.    C.  If the interest rate provided under this Article exceeds the maximum interest rate allowed by any      applicable law, such interest rate shall be modified to the highest rate permitted by the applicable      law, and all remaining provisions of this Article and Contract shall remain in full force and effect      without being impaired or invalidated in any way.    D.  The establishment of the due date shall, for purposes of this Article, be determined as follows:        1.   As respects any routine payment, adjustment or return due either party, the due date shall          be as provided for in the applicable section of this Contract.  In the event a due date is not          specifically stated for a given payment, it shall be deemed due 30 days after the date of          transmittal by the Intermediary of the initial billing for each such payment.     Page 9                                                                         

 

    2.   As respects a "cash call", payment shall be deemed due 30 days after the proof of loss or           demand for payment is transmitted to the Reinsurer.  If such loss or claim payment is not           received within the 30 days, interest shall accrue on the payment or amount overdue in           accordance with paragraph B above, from the date the proof of loss or demand for payment           was transmitted to the Reinsurer.        3.   As respects any payment, adjustment or return due either party not otherwise provided for in           subparagraphs D(1) and D(2) above, the due date shall be deemed as 30 days following           transmittal of written notification that the provisions of this Article have been invoked.        For purposes of interest calculations only, amounts due hereunder shall be deemed paid upon      receipt by the Intermediary.    E.  Nothing herein shall be construed as limiting or prohibiting a Subscribing Reinsurer from      contesting the validity of any claim, or from participating in the defense of any claim or suit, or      prohibiting either party from contesting the validity of any payment or from initiating any      arbitration or other proceeding in accordance with the provisions of this Contract.  If the debtor      party prevails in an arbitration or other proceeding, then any interest charges due hereunder on      the amount in dispute shall be null and void.  If the debtor party loses in such proceeding, then      the interest charge on the amount determined to be due hereunder shall be calculated in      accordance with the provisions set forth above unless otherwise determined by such      proceedings.  If a debtor party advances payment of any amount it is contesting, and proves to      be correct in its contestation, either in whole or in part, the other party shall reimburse the debtor      party for any such excess payment made plus interest on the excess amount calculated in      accordance with this Article.    F.  Interest charges arising out of the application of this Article that are $100 or less from any party      shall be waived unless there is a pattern of late payments consisting of three or more items over      the course of any 12-month period.      Article 19 - Offset (BRMA 36C)   The Company and the Reinsurer shall have the right to offset any balance or amounts due from one  party to the other under the terms of this Contract.  The party asserting the right of offset may exercise  such right any time whether the balances due are on account of premiums or losses or otherwise.      Article 20 - Access to Records   By giving the Company 30 days of prior notice, the Reinsurer or its designated representatives shall  have access at any reasonable time to underwriting, claims and accounting files of the Company  which pertain in any way to this Contract.  However, a Subscribing Reinsurer or its designated  representatives shall not have any right of access to the records of the Company if it is not current in  all undisputed payments due the Company.  "Undisputed" as used herein shall mean any amount that  the Subscribing Reinsurer has not contested in writing to the Company specifying the reason(s) why  the payments are disputed.      Article 21 - Confidentiality   A.  The Reinsurer hereby acknowledges that the documents, information and data provided to it by      the Company, whether directly or through an authorized agent, in connection with the placement      and execution of this Contract, including all information obtained through any audits and any    Page 10                                                                        

 

    claims information between the Company and the Reinsurer, and any submission or other      materials relating to any renewal (hereinafter referred to as "confidential information") are      proprietary and confidential to the Company.    B.  Except as provided for in paragraph C below, the Reinsurer shall not disclose any confidential      information to any third parties, including but not limited to the Reinsurer's subsidiaries and      affiliates, other insurance companies and their subsidiaries and affiliates, underwriting agencies,      research organizations, any unaffiliated entity engaged in modeling insurance or reinsurance      data, and statistical rating organizations.    C.  Confidential information may be used by the Reinsurer only in connection with the performance of      its obligations or enforcement of its rights under this Contract and shall only be disclosed when      required by (1) retrocessionaires subject to the business ceded to this Contract, (2) regulators      performing an audit of the Reinsurer's records and/or financial condition, (3) external auditors      performing an audit of the Reinsurer's records in the normal course of business, (4) the      Reinsurer's legal counsel, or (5) subsidiaries or affiliates of the Reinsurer that assist in      underwriting or administrative obligations directly related to this Contract (however, this      subparagraph 5 shall not include subsidiaries or affiliates in competition with the Company);      provided that the Reinsurer advises such parties of the confidential nature of the confidential      information and their obligation to maintain its confidentiality.  The Company may require that any      third-party representatives of the Reinsurer agree, in writing, to be bound by this Confidentiality      Article or by a separate written confidentiality agreement, containing terms no less stringent than      those set forth in this Article.  If a third-party representative of the Reinsurer is not bound, in      writing, by this Confidentiality Article or by a separate written confidentiality agreement, the      Reinsurer shall be responsible for any breach of this provision by such third-party representative      of the Reinsurer.    D.  Notwithstanding the above, in the event that the Reinsurer is required by court order, other legal      process or any regulatory authority to release or disclose any or all of the confidential information,      the Reinsurer agrees to provide the Company with written notice of same at least 10 days prior to      such release or disclosure, to the extent legally permissible, and to use its best efforts to assist      the Company in maintaining the confidentiality provided for in this Article.    E.  Any disclosure of non-public personally identifiable information shall comply with all state and      federal statutes and regulations governing the disclosure of non-public personally identifiable      information.  "Non-public personally identifiable information" shall be defined as this term or a      similar term is defined in any applicable state, provincial, territory, or federal law.  Disclosing or      using this information for any purpose not authorized by applicable law is expressly forbidden      without the prior consent of the Company.    F.  The parties agree that any information subject to privilege, including the attorney-client privilege      or attorney work product doctrine (collectively "privilege") shall not be disclosed to the Reinsurer      until, in the Company's opinion, such privilege is deemed to be waived or otherwise compromised      by virtue of its disclosure pursuant to this Contract.  Furthermore, the Reinsurer shall not assert      that any privilege otherwise applicable to the confidential information has been waived or      otherwise compromised by virtue of its disclosure pursuant to this Contract.    G.  The provisions of this Article shall extend to the officers, directors and employees of the      Reinsurer and its affiliates, and shall be binding upon their successors and assigns.         Page 11                                                                        

 

Article 22 - Errors and Omissions (BRMA 14F)   Inadvertent delays, errors or omissions made in connection with this Contract or any transaction  hereunder shall not relieve either party from any liability which would have attached had such delay,  error or omission not occurred, provided always that such error or omission is rectified as soon as  possible after discovery.      Article 23 - Currency   A.  Whenever the word "Dollars" or the "$" sign appears in this Contract, it shall be construed to      mean United States Dollars, and all transactions under this Contract shall be in United States      Dollars.    B.  Amounts paid or received by the Company in any other currency shall be converted to United      States Dollars at the rate of exchange at the date such transaction is entered on the books of the      Company.        Article 24 - Federal Excise Tax   A.  The Reinsurer has agreed to allow for the purpose of paying the Federal Excise Tax the      applicable percentage of the premium payable hereon (as imposed under Section 4371 of the      Internal Revenue Code) to the extent such premium is subject to the Federal Excise Tax.    B.  In the event of any return of premium becoming due hereunder the Reinsurer shall deduct the      applicable percentage from the return premium payable hereon and the Company or its agent      should take steps to recover the tax from the United States Government.      Article 25 - Reserves   A.  The Subscribing Reinsurer agrees to fund 100% of its share of the Company's ceded unearned      premium, if any, and/or outstanding loss and loss adjustment expense reserves (including      incurred but not reported loss reserves) (hereinafter the "Subscribing Reinsurer's Obligations") in      excess of the Funds Withheld balance by:         1.  Clean, irrevocable and unconditional letters of credit issued and confirmed, if confirmation is           required by the insurance regulatory authorities involved, by a bank or banks meeting the           NAIC Securities Valuation Office credit standards for issuers of letters of credit and           acceptable to said insurance regulatory authorities; and/or         2.  Trust accounts established solely for the benefit of the Company; and/or         3.  Cash advances;        if the Subscribing Reinsurer:         1.  As of the inception of this Contract (irrespective of any certification date that may be           backdated) or during the Term of the Contract or thereafter, is unauthorized in any state of           the United States of America, any of its territories or possessions, or the District of Columbia           having jurisdiction over the Company's reserves; or      Page 12                                                                        

 

     2.  Is not domiciled in the United States of America or its territories or possessions, and has           become certified, authorized, trusteed, accepted, approved or qualified in any state of the           United States of America, any of its territories or possessions, or the District of Columbia           having jurisdiction over the Company's reserves; or         3.  Is a Runoff Subscribing Reinsurer; or         4.  Has its A.M. Best's and/or Standard & Poor's rating assigned or downgraded below A-.        Notwithstanding the provisions above, if the Subscribing Reinsurer became authorized, trusteed,      accepted, approved or qualified in any state of the United States of America, any of its territories      or possessions, or the District of Columbia having jurisdiction over the Company's reserves      before January 1, 2010, then the Subscribing Reinsurer may provide funding via a multi-     beneficiary trust amounting to 100% of the Subscribing Reinsurer's obligations, and such funding      shall be deemed to satisfy the funding requirements under this Article.  Any funding in a multi-     beneficiary trust shall include an amount of incurred but not reported loss reserves as calculated      by the Company.        Notwithstanding the provisions of the Arbitration Article, if a Runoff Subscribing Reinsurer fails to      fund its share of the Subscribing Reinsurer's obligations under this Contract as set forth above,      the Company retains its right to apply to a court of competent jurisdiction for equitable or interim      relief.    B.  As respects reinsurers that have become certified in any state of the United States of America,      any of its territories or possessions, or the District of Columbia having jurisdiction over the      Company's reserves, any deferred funding as permitted by certain states in the event of a      catastrophe shall not apply to the Subscribing Reinsurer.        The Subscribing Reinsurer, at its sole option, may fund in other than cash if its method and form      of funding are acceptable to the Company and the insurance regulatory authorities involved.    C.  With regard to funding in whole or in part by letters of credit, each letter of credit shall be in a form      acceptable to insurance regulatory authorities involved, shall be issued for a term of at least one      year and shall include an "evergreen clause," which automatically extends the term for at least      one additional year at each expiration date unless written notice of non-renewal is given to the      Company not less than 30 days prior to said expiration date.  Notwithstanding anything to the      contrary in this Contract, said letters of credit may be drawn upon by the Company or its      successors in interest at any time, without diminution because of the insolvency of the Company      or the Subscribing Reinsurer, but only for one or more of the following purposes:         1.  To reimburse the Company for the Subscribing Reinsurer's share of unearned premiums, if           any, returned to insureds on account of policy cancellations, unless paid in cash by the           Subscribing Reinsurer;         2.  To reimburse the Company for the Subscribing Reinsurer's share of losses and/or Loss           Adjustment Expense paid under the terms of policies reinsured hereunder, unless paid in           cash by the Subscribing Reinsurer;         3.  To reimburse the Company for the Subscribing Reinsurer's share of any other amounts           claimed to be due hereunder, unless paid in cash by the Subscribing Reinsurer;         4.  To fund a cash account in an amount equal to the Subscribing Reinsurer's obligations           funded by means of a letter of credit which is under non-renewal notice, if said letter of credit    Page 13                                                                        

 

         has not been renewed or replaced by the Subscribing Reinsurer 10 days prior to its           expiration date;         5.  To refund to the Subscribing Reinsurer any sum in excess of the actual amount required to           fund the Subscribing Reinsurer's obligations, if so requested by the Subscribing Reinsurer.        In the event the amount drawn by the Company on any letter of credit is in excess of the actual      amount required for C(1), C(2) or C(4) above, or in the case of C(3) above, the actual amount      determined to be due, the Company shall promptly return to the Subscribing Reinsurer the      excess amount so drawn.    D.  At annual intervals, or more frequently as agreed but never more frequently than quarterly, the      Company shall prepare a specific statement, for the sole purpose of amending the respective      letters of credit, of the Subscribing Reinsurer's obligations.  Amendments shall be made to said      letters of credit in accordance with the following:         1.  If the statement shows that the Subscribing Reinsurer's obligations exceed the balance of           credit applicable thereto as of the statement date, the Subscribing Reinsurer shall, within           30 days after receipt of notice of such excess, secure delivery to the Company of an           amendment or amendments of the respective letters of credit increasing the amount of           credit by the amount of the applicable difference.         2.  If, however, the statement shows that the Subscribing Reinsurer's obligations are less than           the balance of credit applicable thereto as of the statement date, the Company shall, within           30 days after receipt of written request from the Subscribing Reinsurer, release such excess           credit by agreeing to secure an amendment or amendments to the respective letters of           credit reducing the amount of credit available by the amount of the applicable excess credit.      Article 26 - Insolvency   A.  This Article shall apply severally to each reinsured company referenced within the definition of      "Company" in this Contract.  Further, this Article and the laws of the domiciliary jurisdiction shall      apply in the event of the insolvency of any company intended to be covered hereunder.  In the      event of a conflict between any provision of this Article and the laws of the domiciliary jurisdiction      of any company intended to be covered hereunder, that domiciliary jurisdiction's laws shall      prevail.    B.  In the event of the insolvency of the Company, the reinsurance under this Contract shall be      payable directly to the Company or to its liquidator, receiver, conservator or statutory successor      on the basis of the liability of the Company without diminution because of the insolvency of the      Company or because the liquidator, receiver, conservator or statutory successor of the Company      has failed to pay all or a portion of any claim.  However, the liquidator, receiver, conservator or      statutory successor of the Company shall give written notice to the Reinsurer of the pendency of      a claim against the Company indicating the policy or bond reinsured which claim would involve a      possible liability on the part of the Reinsurer within a reasonable time after such claim is filed in      the conservation or liquidation proceeding or in the receivership, and during the pendency of such      claim, the Reinsurer may investigate such claim and interpose, at its own expense, in the      proceeding where such claim is to be adjudicated, any defense or defenses that it may deem      available to the Company or its liquidator, receiver, conservator or statutory successor.  The      expense thus incurred by the Reinsurer shall be chargeable, subject to the approval of the Court,      against the Company as part of the expense of conservation or liquidation to the extent of a pro      rata share of the benefit which may accrue to the Company solely as a result of the defense      undertaken by the Reinsurer.   Page 14                                                                        

 

  C.  Where two or more Subscribing Reinsurers are involved in the same claim and a majority in      interest elect to interpose defense to such claim, the expense shall be apportioned in accordance      with the terms of this Contract as though such expense had been incurred by the Company.    D.  In the event of the insolvency of the Company, the reinsurance under this Contract shall be      payable directly by the Reinsurer to the Company or to its liquidator, receiver or statutory      successor, except as provided by Section 4118(a) of the New York Insurance Law or except      (1) where this Contract specifically provides another payee of such reinsurance in the event of the      insolvency of the Company or (2) where the Reinsurer with the consent of the direct insured or      insureds has assumed such policy obligations of the Company as direct obligations of the      Reinsurer to the payees under such policies and in substitution for the obligations of the      Company to such payees.      Article 27 - Arbitration   A.  As a condition precedent to any right of action hereunder, in the event of any dispute or difference      of opinion hereafter arising with respect to this Contract, such dispute or difference of opinion      shall be submitted to arbitration.  One arbiter shall be chosen by the Company, the other by the      Reinsurer, and an umpire shall be chosen by the two arbiters before they enter upon arbitration,      all of whom shall be disinterested active or former officials or experienced individuals who have      operated in, or been involved in, business placed in the United States insurance or reinsurance      industry for at least 10 years.  In the event that either party should fail to choose an arbiter within      30 days following a written request by the other party to do so, the requesting party may choose      two arbiters who shall in turn choose an umpire before entering upon arbitration.  If the two      arbiters fail to agree upon the selection of an umpire within 30 days following their appointment,      the two arbiters shall request the American Arbitration Association to appoint the umpire.  If the      American Arbitration Association fails to appoint the umpire within 30 days after it has been      requested to do so, either party may request a justice of a Court of general jurisdiction of the state      in which the arbitration is to be held to appoint the umpire.  Notwithstanding the above, in the      event the dispute or difference of opinion involves a Runoff Subscribing Reinsurer, the Company      may, at its option, choose to forgo arbitration and may bring an action in any court of competent      jurisdiction.  Such court shall award costs and expenses, including reasonable attorneys' fees      and other expenses, if the Company prevails in such action.    B.  Each party shall present its case to the arbiters within 30 days following the date of appointment      of the umpire.  The arbiters shall consider this Contract as an honorable engagement rather than      merely as a legal obligation and they are relieved of all judicial formalities and may abstain from      following the strict rules of law.  The decision of the arbiters shall be final and binding on both      parties; but failing to agree, they shall call in the umpire and the decision of the majority shall be      final and binding upon both parties.  Judgment upon the final decision of the arbiters may be      entered in any court of competent jurisdiction.  The arbiters may award costs and expenses,      including reasonable attorneys' fees and other expenses.    C.  If more than one Subscribing Reinsurer is involved in the same dispute, all such Subscribing      Reinsurers shall, at the option of the Company, constitute and act as one party for purposes of      this Article and communications shall be made by the Company to each of the Subscribing      Reinsurers constituting one party, provided, however, that nothing herein shall impair the rights of      such Subscribing Reinsurers to assert several, rather than joint, defenses or claims, nor be      construed as changing the liability of the Subscribing Reinsurers participating under the terms of      this Contract from several to joint.      Page 15                                                                        

 

D.  Each party shall bear the expense of its own arbiter, and shall jointly and equally bear with the      other the expense of the umpire and of the arbitration.  In the event that the two arbiters are      chosen by one party, as above provided, the expense of the arbiters, the umpire and the      arbitration shall be equally divided between the two parties.    E.  Any arbitration proceedings shall take place at a location mutually agreed upon by the parties to      this Contract, but notwithstanding the location of the arbitration, all proceedings pursuant hereto      shall be governed by the law of the State of Florida.    F.  In the event the dispute or difference of opinion involves a Runoff Subscribing Reinsurer and the      Company prevails in the arbitration, the arbiters shall conduct a bad-faith assessment in      accordance with applicable law as soon as practicable after their decision.  The arbiters shall      award any necessary and legally permissible punitive damages to the Company.      Article 28 - Service of Suit   (Applicable if the Subscribing Reinsurer is not domiciled in the United States of America, and/or is not  authorized in any state, territory or district of the United States where authorization is required by  insurance regulatory authorities)    A.  This Article shall not be read to conflict with or override the obligations of the parties to arbitrate      their disputes as provided for in the Arbitration Article.  This Article is intended as an aid to      compelling arbitration or enforcing such arbitration or arbitral award, not as an alternative to the      Arbitration Article for resolving disputes arising out of this Contract.    B.  In the event the Subscribing Reinsurer fails to perform its obligations hereunder, the Subscribing      Reinsurer, at the request of the Company, shall submit to the jurisdiction of a court of competent      jurisdiction within the United States.  Nothing in this Article constitutes or should be understood to      constitute a waiver of the Subscribing Reinsurer's rights to commence an action in any court of      competent jurisdiction in the United States, to remove an action to a United States District Court,      or to seek a transfer of a case to another court as permitted by the laws of the United States or of      any state in the United States.  The Subscribing Reinsurer, once the appropriate Court is      accepted by the Subscribing Reinsurer or is determined by removal, transfer or otherwise, as      provided for above, shall comply with all requirements necessary to give said Court jurisdiction      and, in any suit instituted against any of the Subscribing Reinsurers upon this Contract, shall      abide by the final decision of such Court or of any Appellate Court in the event of an appeal.    C.  Further, pursuant to any statute of any state, territory or district of the United States which makes      provision therefor, the Subscribing Reinsurer hereby designates the party named in its Interests      and Liabilities Agreement, or if no party is named therein, the Superintendent, Commissioner or      Director of Insurance or other officer specified for that purpose in the statute, or his or her      successor or successors in office, as its true and lawful attorney upon whom may be served any      lawful process in any action, suit or proceeding instituted by or on behalf of the Company or any      beneficiary hereunder arising out of this Contract.      Article 29 - Governing Law (BRMA 71B)   This Contract shall be governed by and construed in accordance with the laws of the State of Florida.         Page 16                                                                        

 

Article 30 - Non-Waiver   The failure of the Company to insist on compliance with this Contract or to exercise any right, remedy  or option hereunder shall not:  (1) constitute a waiver of any rights contained in this Contract, (2)  prevent the Company from thereafter demanding full and complete compliance, (3) prevent the  Company from exercising such remedy in the future, nor (4) affect the validity of this Contract or any  part thereof.      Article 31 - Severability   If any provision of this Contract shall be rendered illegal or unenforceable by the laws, regulations or  public policy of any jurisdiction, regulatory body or court, such provision shall be considered void in  such jurisdiction, but this shall not affect the validity or enforceability of any other provision of this  Contract or the enforceability of such provision in any other jurisdiction.      Article 32 - Notices and Contract Execution   A.  Whenever a notice, statement, report or any other written communication is required by this      Contract, unless otherwise specified, such notice, statement, report or other written      communication may be transmitted by certified or registered mail, nationally or internationally      recognized express delivery service, personal delivery, electronic mail, or facsimile.  With the      exception of notices of termination, first class mail is also acceptable.    B.  The use of any of the following shall constitute a valid execution of this Contract or any      amendments thereto:         1.  Paper documents with an original ink signature;         2.  Facsimile or electronic copies of paper documents showing an original ink signature; and/or         3.  Electronic records with an electronic signature made via an electronic agent.  For the           purposes of this Contract, the terms "electronic record," "electronic signature" and           "electronic agent" shall have the meanings set forth in the Electronic Signatures in Global           and National Commerce Act of 2000 or any amendments thereto.    C.  This Contract may be executed in one or more counterparts, each of which, when duly executed,      shall be deemed an original.      In Witness Whereof, the Company by its duly authorized representative has executed this Contract  as of the date specified below:    This   26th                day of       June                in the year   2020         .    FedNat Insurance Company           /s/ Michael Braun                 Page 17                                                                        

 

The Interests and Liabilities Agreement, constituting 1 page in total, has been omitted from this exhibit  because such agreement is not material and would be competitively harmful if publicly disclosed.             Page 18mcahillagreementredacted

                                            EMPLOYMENT AGREEMENT                THIS EMPLOYMENT AGREEMENT (the “Agreement”), made and entered into as of the            _22_day of _August_, 2020 (the “Effective Date”), by and between:                    (i)   PATRICK MCCAHILL, an individual currently residing at the address set forth                        in  Section 10 below (the “Executive”) and                    (ii)  FEDNAT HOLDING COMPANY, a Florida corporation with offices and place                        of business at the address set forth in Section 10 below (the “Company”).              All capitalized terms used but not defined herein shall have the meanings as set forth in Appendix            A hereto, which is incorporated by reference herein.                                  P R E L I M I N A R Y   S T A T E M E N T              WHEREAS,  the Company is engaged in the insurance business and desires to employ Executive            and  to  secure  for  the  Company  the  benefit  of  Executive’s  experience,  efforts  and  abilities  in            connection with the business of the Company, all as provided herein; and              WHEREAS, the Company has and will continue to expend substantial resources in connection            with the aforementioned endeavors; and              WHEREAS, Executive and Company desire to set forth the terms and conditions of Executive's           service  to  the  Company  as  its  Chief  Operating  Officer,  among  other  services,  and  the           Company's  compensation of Executive in connection therewith.              NOW, THEREFORE, in consideration of the premises and mutual covenants herein contained           and for other good and valuable consideration, the receipt and sufficiency of which are hereby           acknowledged, the parties hereto hereby agree as follows:              1.    Employment. The Company desires to continue the Executive’s employment as, and the            Executive agrees to continue his employment as, the Company’s Chief Operating Officer.              2.    Term of Employment.  Executive shall serve as the Company's Chief Operating Officer            and  be employed under this Agreement for a period of two (2) years beginning on the Effective            Date  (the “Term”).              3.    Duties  of  Executive.  So  long  as  employed  hereunder,  Executive  agrees  to  devote            Executive’s full business time and energy (except during periods of vacation or personal time off            as described in Section 4 or disability as described in Section 5) to the business and affairs of the            Company,  to  perform  Executive’s  duties  hereunder  effectively,  diligently  and  to  the  best  of            Executive’s ability and to use Executive’s best efforts, skill and abilities to promote the Company’s            interests.  Executive  shall  report  to  the  Chief  Executive  Officer  of  the  Company.  Executive’s            duties shall include, but are not limited to, serving as the Company’s Chief Operating Officer,            together with such other executive management functions for the Company as may be determined                                               Page 1 of 11               

 

                    by the Chief Executive Officer.  Notwithstanding the foregoing, Executive may serve on a non-            profit or other board as the Company’s Chief Executive Officer may approve.              4.    Compensation.  For all services to be rendered by Executive to the Company during the            Term of this Agreement, the Company agrees to compensate Executive and Executive agrees to            accept from Employer, the following compensation:                    (a)   Base  Salary;  Additional  Incentive  Compensation.  The  Company  agrees  to  pay            Executive  (i)  an  annual base  salary  as determined  by  the  Compensation  Committee  of  the            Company’s  Board  from  time  to  time,  payable  biweekly,  subject  to  applicable  withholding  and            other taxes and (ii) such additional incentive compensation, as determined by the Compensation            Committee  in  its  sole  discretion. In  addition,  Executive  shall be  entitled  to  participate  in  any            annual incentive compensation plan, program and/or arrangements applicable to the Company’s            executive officers as established and modified from time to time by the Compensation Committee           in its sole discretion.                    (b)   Medical  Insurance.  So  long  as  Executive  is  employed  by  the  Company,  the            Company  agrees  to  provide  medical  insurance  coverage  for  Executive  and  his  family            commensurate with the coverage provided by the Company for other similarly situated employees.                    (c)   Other  Benefits.  Executive  shall  be  entitled  to  receive  such  other  benefits  as  are            provided by the Company for other similarly situated employees.                    (d)   Vacation/Personal Time.  Executive shall be entitled to reasonable vacations and/or            personal time off during each year of the Term of this Agreement.              5.    Termination of Employment.                    (a)   Termination  by  the  Company  for  Cause.  If  Executive’s  employment  with  the            Company is terminated for Cause, Executive shall be entitled only to Executive’s base salary (as           provided in Section 4(a) above) prorated through the date of the termination of employment and            Executive shall forfeit all rights to any bonus or other incentive compensation or other benefits            that may be owed to Executive but have not been paid as of the date of termination, except as may            be otherwise provided under the applicable plan, program or arrangement.                    (b)   Termination by the Company without Cause prior to a Change of Control.  If during            the Term of this Agreement Executive’s employment is terminated by the Company without Cause            prior to a Change of Control, then in addition to any bonus or other incentive compensation or            other benefits that may be owed to Executive but have not been paid as of the date of termination            (the  amount  of  any  such  bonus,  incentive  compensation  or  other benefits  that  may  be  due  to            Executive at the time of termination is hereinafter referred to as the “Accrued Obligations”), the            Company will make a lump sum payment, no later than ten (10) days following such termination,            to  Executive  in  an  amount  equal  to  Executive’s  annual  base  salary  as  in  effect            immediately  prior  to  such  termination  of  employment  (the  "Termination  Severance").            Additionally, the Company will accelerate all unvested equity awards held by Executive at the            time of such termination and Executive shall have no less than ninety (90) days to exercise any            outstanding stock options; provided, however, in no event shall an option be exercisable beyond            its stated term.                                               Page 2 of 11               

 

                  (c)   Death.  In  the  event  of  Executive’s  death,  this  Agreement  shall automatically            terminate as of the date of such death without notice to either party.  In addition to the Accrued           Obligations, the Company will make a lump sum payment to Executive’s estate in an amount equal           to  the  Termination  Severance. Additionally,  the  Company  will  accelerate  all  unvested  equity           awards held by Executive at the time of such death and the personal representative of Executive’s           estate shall have no less than ninety (90) days to exercise any outstanding stock options; provided,           however, in no event shall an option be exercisable beyond its stated term.  Executive shall also            be  entitled  to  any benefits  that  become  due  and payable  pursuant  to  any plan,  program  and/or            arrangements providing life insurance or other death benefits for the Company’s executive officers            as  established  and  modified  from  time  to  time  by  the  Compensation  Committee  in  its  sole            discretion.                     (d)   Disability. In the event that Executive shall be unable to substantially perform his            essential  duties  and  responsibilities  under  this  Agreement,  with  or  without  reasonable           accommodation, by virtue of illness or physical or mental disability (from any cause or causes           whatsoever) in substantially the manner and to the extent required of him hereunder prior to the           commencement of such disability and Executive shall fail to perform such duties for a period of           ninety (90) or more days, whether or not continuous, in any continuous one hundred and eighty           (180)  day  period,  then  the  Company  shall have  the  right to terminate  this Agreement  and           Executive’s  employment  with  the  Company  as  of  the  end  of  any  calendar  month  during  the           continuance of such disability upon at least fifteen (15) days' prior written notice to Executive.           Such determination shall be made by a licensed physician mutually selected by the Company and           Executive.  If the parties cannot agree on a licensed physician, each party shall select a licensed           physician and the two licensed physicians shall select a third licensed physician, who shall make           such determination for this purpose.  Notwithstanding the foregoing, in the event that the Company           maintains a long-term disability policy for the benefit of Executive (regardless of who pays the           premium) the Company shall have the right to terminate this Agreement pursuant to this Section            5(d) only if Executive is determined to be disabled for purposes of collecting disability benefits            under  such  long-term  disability policy.  Upon  termination  of  this  Agreement  for  disability,  the            Company  will  make  payments  to  Executive  in  an  aggregate  amount equal  to  the  Termination           Severance  less  any  amounts  paid  to  Executive  under  Executive’s long-term  disability  policy,            payable biweekly or otherwise in accordance with the Company’s payroll practices.  In addition            to  the  Accrued  Obligations,  the  Company  will  accelerate  all  unvested  equity  awards  held  by            Executive at the time of such termination of Executive’s employment for disability and Executive            shall  have  no  less  than  ninety  (90)  days  to  exercise  any  outstanding  stock  options;  provided,            however, in no event shall an option be exercisable beyond its stated term.                     (e)   Termination  by  the  Company  without  Cause  or  by  Executive  for  Good  Reason            Following a Change of Control.  If Executive is employed with the Company on the date on which            a Change of Control occurs (the “Change of Control Date”) and if, during the remaining Term of            this Agreement after the Change of Control Date, Executive’s employment is terminated by the            Company (or any successor or subsidiary) without Cause or by Executive for Good Reason, then            in addition to the Accrued Obligations, the Company will make a lump sum payment to Executive            in  an  amount  equal  to  (i)  Executive’s  annual  base  salary  in  effect  immediately prior to the            date of the definitive agreement for the transaction resulting in the Change  of Control, plus (ii) the            average  of  Executive’s  incentive  bonus  (annual  and  long-term)  awarded  for the two (2) fiscal            years  immediately  preceding  such  termination  of  employment  (the  "Change  of  Control            Severance").  This  payment  shall be  made  to  Executive  within  five  (5)  days  following  such            termination  of  employment.  Additionally,  the  Company  will  accelerate  all  unvested  equity            awards held by Executive at the time of such termination and Executive shall have no less than            ninety (90) days to exercise any outstanding stock options; provided, however, in no event shall           an option be exercisable beyond its stated term.  All obligations  of the Company pursuant to this                                             Page 3 of 11               

 

            Agreement following a Change of Control shall be assumed by  the acquirer or successor entity            of the Company.                    (f)   Termination Within Six Months Prior to a Change of Control.  In the event that            Executive is terminated by the Company without Cause prior to a Change of Control and a Change            of  Control  occurs  within  six  (6)  months  following  such  termination,  then  in  addition  to  the            Termination Severance made to Executive pursuant to Section 5(b) of this Agreement, Executive            shall be entitled to an additional lump sum payment in an amount equal to (i) the Change of Control            Severance,  less (ii) the  Termination  Severance.  Such  additional payment shall be made by the            acquirer or successor entity of the Company within five (5) days following the Change of Control.            In addition to the Accrued Obligations, the Company will accelerate all unvested equity awards            held by Executive at the time of such termination and Executive shall have no less than ninety (90)            days to exercise any outstanding stock options; provided, however, in no event shall an option be            exercisable  beyond  its  stated  term.  All obligations of the Company  pursuant to this Agreement            following  a  Change  of  Control  shall  be  assumed  by  the  acquirer or  successor  entity  of  the            Company.                    (g)   Resignation.  If Executive voluntarily resigns his employment with the Company            other than for Good Reason following a Change of Control and provides the Board with less than            sixty (60) days’ advance  written notice of such  resignation, Executive’s  compensation shall  be            reduced one (1) day for each day the advance notice is less than sixty (60) days. Such reduction            shall be offset against any amounts due to Executive from the Company; provided, however, if the                                               Page 4 of 11               

 

                    amount due to Executive is less than the amount of such reduction, Executive agrees to reimburse            the Company for the difference.  In addition, Executive shall forfeit all rights to any bonus or other            incentive compensation or other benefits that may be owed to Executive but have not been paid as            of the date of resignation, except as may be otherwise provided under the applicable plan, program            or arrangement.              6.    Restrictive Covenants.  Executive recognizes, acknowledges and agrees his covenants and            obligations  contained  in  his  Confidential  Information,  Non-Solicitation  and  Non-Competition            Agreement  with  the  Company  dated  as  of  22  of  _August__,  2020  (the  "Restrictive  Covenant            Agreement"),  which are in full force and effect and will continue to apply throughout the Term of            this  Agreement  and  thereafter  as  provided  in  the  Restrictive  Covenant  Agreement.  For            avoidance  of  doubt,  Executive  recognizes,  acknowledges  and  agrees  that  all  payments  and            benefits described in Section  5 (other than the Accrued Obligations) are made in consideration            of Executive's execution and  continuous compliance with the Restrictive Covenant Agreement.              7.    Confidentiality  Agreement.  Executive  recognizes,  acknowledges  and  agrees  that  the            documents,  lists,  files,  records,  data  and  other  information  developed  and  acquired  by  the           Company,  including  all  information  developed  and  acquired  by  Executive  in  the  course  of           Executive’s  employment  with  the  Company as  it  may  exist  from  time to time, are considered           confidential, and include, but are not limited to, all information relating to the Company’s projects,           proposed projects or applications, whether existing in tangible paper form or in electronic form,           whether stored on CDs, tape, cloud or other electronic storage formats (collectively, “Confidential            Information”).                    (a)   Prohibited  Acts.  Executive  understands  and  agrees  that  all  such  Confidential            Information is to be preserved and protected, is not to be disclosed or made available, directly or            indirectly, to third persons for purposes unrelated to the objectives of the Company, without prior            authorization of an executive officer of the Company, and is not to be used, directly or indirectly,            for any purpose unrelated to the objectives of the Company without prior written authorization of            an executive officer of the Company.                    (b)   Continuing  Obligations.  Executive  understands  and  agrees  that  Executive’s            obligations under this Agreement, specifically including the obligations to preserve and protect            and  not  to  disclose  (or  make  available  to  third  persons)  or  use  for  purposes  unrelated  to  the            objectives  of  the  Company,  without  prior  written  authorization of  an  executive  officer  of  the            Company, Confidential Information, continue indefinitely and do not, under any circumstances or            for any reason (specifically including wrongful discharge), cease upon termination of employment;            and  that,  in  the  event  of  termination  of  Executive’s  employment  for  any  reason  (specifically           including wrongful discharge), such Confidential Information shall remain the sole property of the           Company and shall be left in its entirety in the undisputed possession and control of the Company           after such termination.              8.    Enforcement of Covenants. In addition to all other remedies available at law or in equity,            the  covenants  contained  in  Sections  6  and  7  hereof  shall  be  enforceable  by decree  of  specific            performance  and/or  injunctive  relief  and  shall  be  construed  as separate  covenants  covering            competition in the geographical territory set forth, and if any court shall finally determine that the            restraints provided for therein are too broad as to the area, activity or time covered, then the area,                                              Page 5 of 11               

 

                    activity or time covered, as the case may be, may be reduced by such court to whatever extent the            court deems reasonable and such covenants shall be enforced as to such reduced area, activity or            time.              9.    Applicability  of  Clawback  Policy. Notwithstanding  anything  in  this  Agreement  to  the            contrary, payment of all amounts due and payable under this Agreement shall be subject to the            Company’s Clawback Policy as may be in effect from time to time.              10.   Notices.  All notices, demands and other communications that may or are required to be            given to or made by either party to the other in connection with this Agreement shall be in writing,            shall be given by hand delivery, by overnight delivery through a nationally recognized delivery           service, or by U. S. certified or registered mail, return receipt requested, postage prepaid, and shall           be deemed to have been given or made when received by the addressee, addressed to the respective           parties as follows:                    If to Executive:              PATRICK MCCAHILL                                                7431 N Cypresshead Drive,                                                 Parkland, FL 33067                    If to Company:               FEDNAT HOLDING COMPANY                                                14050 N.W. 14th Street, Suite 180                                                Sunrise, Florida 33323                                                Attn: Corporate Secretary              11.   Miscellaneous.                    (a)   This  Agreement  has  been  executed  in  and  shall  be  governed  and  construed  in            accordance with the laws of the State of Florida.                    (b)   Unless  otherwise  provided  herein,  all  rights,  powers,  and  privileges  conferred            hereunder upon the parties shall be cumulative and not restrictive of those given by law.                    (c)   No failure of any party hereto to exercise any power given such party hereunder or            to insist upon strict compliance by the other party with its obligations hereunder, and no customary            practice of the parties at variance with the terms hereof, shall constitute a waiver of a party’s right            to demand exact compliance with the terms hereof.                    (d)   Time is of the essence in complying with the terms, conditions and provisions of            this Agreement.                    (e)   This  Agreement  and  the  Restrictive  Covenant  Agreement  contain  the  entire            agreement  of the parties  hereto  pertaining to  the  subject  matter hereof, and  no  representations,            inducements,  promises or agreements  between the parties  not  contained  herein  shall  be of  any            force or effect.                    (f)   This Agreement is binding upon and shall inure to the benefit of the Company, its           successors and assigns and Executive and his respective heirs, personal representatives, successors           and assigns.                                              Page 6 of 11               

 

                          (g)   Any amendment to this Agreement shall not be binding upon the parties to this            Agreement unless such amendment is in writing and due executed by all the parties hereto.                    (h)   In the event any litigation or controversy arises out of or in connection with this            Agreement between the parties hereto, the prevailing party in such litigation or controversy shall            be entitled to recover from the other party or parties all reasonable attorney’s fees, expenses and            suit costs, including those associated with any appellate or post-judgment collection proceeding.              12.   Section 409A Compliance.                    (a)   General.  It is the intention of both the Company and Executive that the benefits            and rights to which Executive is entitled pursuant to this Agreement comply with Code Section            409A, to the extent that the requirements of Code Section 409A are applicable thereto, and the            provisions  of  this  Agreement  shall  be  construed  in  a  manner  consistent  with  that  intention.  If            Executive or the Company believes, at any time, that any such benefit or right that is subject to            Code  Section  409A  does  not  so comply,  it  shall  promptly advise the  other  and  shall  negotiate            reasonably and in good faith to amend the terms of such benefits and rights such that they comply            with Code Section 409A (with the most limited possible economic effect on Executive and on the            Company).                    (b)   Distributions  on  Account  of  Separation  from  Service.  To  the  extent  required  to            comply with Code Section 409A, for purposes of determining the timing of payment of any amount            or  benefit  required  to  be  paid  under  this  Agreement  on  account of  termination  of  Executive’s            service (or any other similar term), any reference to termination of employment or similar terms            shall be defined as a "separation from service" with respect to Executive within the meaning of            Code  Section  409A. Further,  notwithstanding  anything  in  this  Agreement  to  the  contrary,  all            severance payments payable under this Agreement shall be paid to Executive no later than the last            day of the second calendar year following the calendar year in which occurs the date of Executive’s            termination of employment.                    (c)   No Acceleration of Payments.  Neither the Company nor Executive, individually            or in combination, may accelerate any payment or benefit that is subject to Code Section 409A,            except  in  compliance  with  Code  Section  409A  and  the  provisions of  this  Agreement,  and  no            amount that is subject to Code Section 409A shall be paid prior to the earliest date on which it may            be paid without violating Code Section 409A.                    (d)   Six Month Delay for Specified Employees, Establishment of Rabbi Trust.  In the            event  that  Executive  is a  “specified  employee”  (as  described  in  Code  Section  409A),  and  any            payment or benefit payable pursuant to this Agreement constitutes deferred compensation under            Code Section 409A, then the Company and Executive shall cooperate in good faith to undertake            any  actions  that  would  cause  such  payment  or  benefit  not  to  constitute  deferred  compensation           under Code Section 409A.  In the event that, following such efforts, the Company determines (after           consultation with its counsel and tax advisors) that such payment or benefit is still subject to the           six (6) month delay requirement described in Code Section 409A(2)(b) in order for such payment           or benefit to comply with the requirements of Code Section 409A, then no such payment or benefit           shall be made before the date that is six (6) months after Executive’s “separation from service” (as           described in Code Section 409A) (or, if earlier, the date of Executive’s death). Any payment or                                               Page 7 of 11               

 

                    benefit  delayed  by  reason  of  the  prior  sentence  (the  “Delayed  Payment”)  shall  be  paid  out  or            provided in a single lump sum at the end of such required delay period in order to catch up to the            original  payment  schedule.  Notwithstanding  anything  in  this  Agreement  to  the  contrary,  if  a            Change of Control occurs prior to Executive receiving the Delayed Payment, the Company shall            establish and fund a "rabbi trust" in substantially the form described in IRS Rev. Proc. 92-64 in an           amount of money that is at all times at least equal to the amount of any payment or benefit being           delayed. The Company shall be required to establish and fund such "rabbi trust" within seven (7)           days following the later of (i) the date Executive becomes entitled to the Delayed Payment or (ii)           the occurrence of such  Change of Control and such trust shall be established with a nationally           recognized banking institution with experience in serving as trustee for such matters and pursuant           to such documentation as recommended by outside counsel to the Company.                    (e)   Treatment of Each Installment as a Separate Payment.  For purposes of applying            the  provisions  of  Code  Section  409A  to  this  Agreement,  each  separately  identified  amount  to            which  Executive  is  entitled  under  this  Agreement  shall  be  treated  as  a  separate  payment.  In            addition, to the extent permissible under Code Section 409A, any series of installment payments            under this Agreement shall be treated as a right to a series of separate payments.                    (f)   Reimbursements. Payments with respect to reimbursements of expenses or benefits            or provision of fringe or other in-kind benefits that are not otherwise exempt from Code Section            409A shall be made on or before the last day of the calendar year following the calendar year in            which the relevant expense or benefit is incurred.  The amount of expenses or benefits eligible for            reimbursement,  payment  or  provision  during  a  calendar  year  shall  not  affect  the  expenses  or            benefits eligible for reimbursement, payment or provision in any other calendar year.              13.   Golden Parachute Payments. In the event that any payment made to Executive under this            Agreement (a "Payment"), either alone or together with other "parachute payments" (as defined in            Section 280G(b)(2)(A) of the Code), would constitute an "excess parachute payment" (as defined            in Section 280G(b)(1) of the Code), such Payment shall be reduced to the largest amount as will            result in no portion of the  Payment being subject to the excise tax imposed by Section 4999 of the            Code (the "Reduced Payment"), provided, however, no reduction to the Payment shall occur if the            Payment, less any excise tax that would be imposed on such payment pursuant to Section 4999 of            the Code, would be greater than the Reduced Payment.                                   [SIGNATURES ON FOLLOWING PAGE]                                               Page 8 of 11               

 

                         IN WITNESS WHEREOF, the parties hereto have caused this Employment Agreement            to be executed effective as of the Effective Date.                                                    EXECUTIVE:                                                                                                     /s/ Patrick McCahill                                                     PATRICK MCCAHILL                                                                                                    FEDNAT HOLDING COMPANY                                                a Florida corporation                                                  By:  /s/ Michael Braun                                                   Name:  Michael H. Braun                                                 Title:  Chief Executive Officer                                               Page 9 of 11               

 

                                                    APPENDIX A                                              DEFINITIONS                “Board” shall mean the Board of Directors of FedNat Holding Company.             “Cause” shall mean that:                   (i)   there has been a good faith determination by the Board that Executive has willfully            refused  or  grossly  neglected  to perform  the  duties  reasonably  assigned  to  him  by  the  Chief            Executive Officer, with notice and an opportunity to cure;                    (ii)  Executive shall have committed a material breach of any term or condition of this            Agreement;                    (iii) Executive  shall  have  continued  to  fail  to  comply  with  the  written  policies  and            procedures of the Company, as may be in effect from time to time; or                    (iv)  Executive is convicted during the Term of this Agreement of a felony involving            moral turpitude.              Prior to terminating Executive for Cause under clauses (i), (ii) or (iii) above, the Company shall            provide Executive with at least ten (10) days’ written notice of the breach and an opportunity to           cure the breach. If Executive does not cure the breach during this period to the satisfaction of the           Chief Executive Officer, in his reasonable discretion, the Company may terminate Executive for           Cause.              If Executive is terminated under clause (iv) above, his termination will be immediate upon the date            of the conviction and no written notice is required by the Company.              “Change of Control” shall be deemed to have taken place if: (1) any person, including a “group”            as defined in Section 13(d)(3) of the Securities Exchange Act of 1934, as amended, becomes the            owner or beneficial owner of Company securities, after the date of this Agreement, having 50% or            more of the combined voting power of the then outstanding securities of the Company that may            be  cast  for  the  election  of  directors  of  the  Company  (other  than  as  a  result  of  an  issuance  of            securities initiated by the Company, or open market purchases approved by the Board, as long as            the majority of the Board approving the purchases is the majority at the time the purchases are            made), or (2) the persons who were directors of the Company before such transactions shall cease            to constitute a majority of the Board, or any successor to the Company, as the direct or indirect            result  of  or  in  connection  with, any  cash  tender  or  exchange  offer, merger or other business            combination, sale of assets or contested election, or any combination of the foregoing transactions.            Notwithstanding  the  foregoing,  a  Change  of  Control  shall  not  be  deemed  to  occur  unless  it            constitutes  a  “change  in  control event”  within  the  meaning  of  Section  1.409A-3(i)(5)  of  the            Treasury Regulations promulgated under Section 409A.              “COBRA” shall mean the Consolidated Omnibus Budget Reconciliation Act, as amended, and the            regulations promulgated thereunder.                                              Page 10 of 11               

 

                    "Code"  shall  mean  the  Internal  Revenue  Code  of  1986,  as  amended,  and  the  regulations            promulgated thereunder.              "Code Section 409A" shall mean Section 409A of the Code and its implementing regulations and            guidance.              "Good Reason" shall mean the occurrence of one of the following conditions:              (1)   a material reduction in Executive's base compensation;              (2)   a material reduction in the overall benefits package available to Executive as compared to            Executive’s benefits package in effect immediately prior to the date of the definitive agreement            for the transaction resulting in the Change of Control;              (3)   a  material  diminution  in  Executive's  authority,  duties,  or  responsibilities,  including  a            requirement that Executive report to a corporate officer or employee instead of reporting directly            to the Board;              (4)   a material diminution in the budget over which Executive retains authority;              (5)   a change of more than 15 miles in the geographic location at which Executive must perform            the services; or              (6)   any other  action  or  inaction  that  constitutes  a  material  breach  by the  Company of  this            Agreement.              Notwithstanding the foregoing, Executive shall not be deemed to have terminated this Agreement           for  Good  Reason  unless:  (i)  Executive  terminates  this  Agreement  no  later  than  two  (2)  years           following the initial existence of one or more of the above referenced conditions; and (ii) Executive           provides to the Company a written notice of the existence of the above-referenced condition(s)           within ninety (90) days following the initial existence of such condition(s) and the Company fails            to remedy such condition(s) within 30 days following the receipt of such notice.                                               Page 11 of 11

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