Document:

exhibit101capitalreturns

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

                                                     EXHIBIT B   PRESS RELEASEmlnd_Ex10_1

		
			Exhibit 10.1
		

		
			 
		

		
			June 7, 2019
		

		
			 
		

		
			Julia C. Owens
		

		
			7 Jefferson Court
		

		
			Ann Arbor, MI 48103
		

		
			 
		

		
			Re:      Amended and Restated Employment Terms
		

		
			Dear Julia:
		

		
			Millendo Therapeutics US, Inc. (the “Company”) desires to amend and restate the terms of your employment as the President and Chief Executive Officer of the Company pursuant to the terms of this letter (the “Agreement”).   Subject to your execution of this Agreement, effective as of January 1, 2019 (the “Effective Date”) this Agreement amends, restates and supersedes in its entirety your employment terms with Millendo Therapeutics US, Inc. (formerly known as Atterocor, Inc.) dated July 25, 2012 (the “Prior Agreement”).
		

		
			1.         Duties and Responsibilities.  As the President and Chief Executive Officer, you will continue to have the duties and responsibilities set forth in the job description for such position, including the duties that you have been performing during your employment to date with the Company. It is anticipated that such duties will include your providing services to Millendo Therapeutics, Inc. (the “Parent”) as Parent’s President and Chief Executive Officer, without further or additional compensation or benefits other than as set forth in this Agreement.  You will report to the Parent’s Board of Directors (the “Board”).
		

		
			2.         Location.  You will continue to be based out of the Company’s Ann Arbor, Michigan office, subject to business travel as necessary.
		

		
			3.         Compensation.
		

		
			a.         Base Salary.  Starting on the Effective Date, your annual base salary rate will be $478,900, less payroll deductions and all required withholdings and subject to review and adjustment by the Company in its sole discretion (“Base Salary”).  You will be paid in accordance with the Company’s standard payroll practices, currently semi-monthly. Because your position is classified as exempt, you will not be eligible for overtime premiums.
		

		
			b.         Bonus.  You will continue to be eligible to earn an annual performance bonus targeted at 50% (the “Target Amount”) of your then-current base salary (“Annual Bonus”). The Annual Bonus will be based upon the assessment by the Board, or any authorized committee thereof, in its sole discretion, of both your performance and the Company’s performance. The Board, or any authorized committee thereof, may, in its sole discretion, approve an Annual Bonus in an amount in excess of the Target Amount.  The Annual Bonus, if any, will be subject to applicable payroll deductions and withholdings. Following the close of each calendar year, the Company and the Board (or any authorized committee thereof) will determine whether you have earned the Annual Bonus, and the amount of any Annual Bonus. No amount of the Annual
		

		
			
		

		
			

		 

		

		
			 
		

		
			Bonus is guaranteed, and you must be an employee in good standing on the Annual Bonus payment date to be eligible to receive an Annual Bonus.  Your eligibility for an Annual Bonus is subject to change in the discretion of the Company or the Board (or any authorized committee thereof).
		

		
			c.         Expense Reimbursement.  The Company shall reimburse you for all customary and appropriate business-related expenses actually incurred and documented in accordance with Company policy, as in effect from time to time.  For the avoidance of doubt, to the extent that any reimbursements payable to you are subject to the provisions of Section 409A of the Code:  (a) any such reimbursements will be paid no later than December 31 of the year following the year in which the expense was incurred, (b) the amount of expenses reimbursed in one year will not affect the amount eligible for reimbursement in any subsequent year, and (c) the right to reimbursement under this Agreement will not be subject to liquidation or exchange for another benefit.
		

		
			4.         Benefits.  You continue to be eligible to participate on the same basis as similarly situated employees in the Company’s benefit plans in effect from time to time during your employment.  All matters of eligibility for coverage or benefits under any benefit plan shall be determined in accordance with the provisions of such plan.  The Company reserves the right to change, alter or terminate any benefit plan in its sole discretion.
		

		
			5.         Options. You were previously granted one or more options to purchase shares of the Parent’s common stock as set forth on Exhibit A hereto (collectively the “Existing Options”).  The Existing Options remain subject to the terms and conditions of the applicable plan pursuant to which such option(s) was granted (either the Millendo Therapeutics, Inc. 2012 Stock Plan, as amended (the “Original Millendo Plan”) or the OvaScience, Inc. (now known as Millendo Therapeutics, Inc.) 2012 Stock Incentive Plan, as amended (the “New Millendo Plan”, and together with the Original Millendo Plan,  the “Stock Plans”), and the applicable option agreement(s) between you and the Company entered into pursuant to the applicable Stock Plan, and any applicable early exercise rights granted to you by the Company on March 4, 2016.  You understand, acknowledge and agree that, as of the date hereof, you do not hold any stock options or other incentive equity awards of the Parent, other than as set forth on Exhibit A, and that the Existing Options shall only be subject to accelerated vesting in the event of a change in control of or similar transaction involving Parent as set forth on Exhibit A hereto or as expressly provided in the applicable Stock Plan, option agreement or granting resolutions.
		

		
			6.         Company Policies.  As a Company employee, you shall continue to abide by all Company policies and procedures and all applicable policies and procedures of Parent as they may be interpreted, adopted, revised or deleted from time to time in the Company’s and Parent’s sole discretion.
		

		
			7.         Employee Confidential Information, Inventions, Non-Solicitation and Non-Competition Agreement. As a condition of continued employment and the increased benefits provided herein, you must sign and comply with the enclosed Employee Confidential Information, Inventions, Non-Solicitation and Non-Competition Agreement (the “CIIA”) which prohibits unauthorized use or disclosure of the Company’s and the Parent’s and their affiliates’ respective proprietary information, and prohibits certain solicitations and competitive activities, among other obligations.  The CIIA contains
		

		
			
		

		
			

		 

		

		
			 
		

		
			provisions that are intended by the parties to survive and do survive termination of this Agreement.
		

		
			8.         At-Will Employment.  Your employment relationship with the Company continues to be at-will.  You may terminate your employment with the Company at any time and for any reason whatsoever simply by notifying the Company.  Likewise, the Company may terminate your employment at any time, with or without cause or advance notice, subject to Sections 9, 10 and 11.  Your employment at-will status can only be modified in a written agreement signed by you and the Board.
		

		
			9.         Termination Without Cause or for Good Reason Absent a Change in Control.
		

		
			a.         If the Company terminates your employment, at any time except during the Change in Control Period (as defined below), without “Cause” (as defined below) or you resign for “Good Reason” (as defined below) then you shall be entitled to receive the Accrued Obligations (defined below).  Subject to your full compliance with this Section and Section 9(b) and provided that such termination constitutes a “separation from service” (as defined under Treasury Regulation Section 1.409A-1(h), without regard to any alternative definition thereunder, a “Separation from Service”), if you timely execute a separation agreement that includes a general release of claims in favor of the Company and the Parent, in the form presented by the Company (the “Release”), and allow it to become effective in accordance with Section 9(b) (the date that the Release becomes effective and may no longer be revoked by you is referred to as the “Release Effective Date”), then the Company will provide you with the following “Severance Benefits:”
		

		
			i.   The Company will pay you an amount equal to twelve (12) months of your then current Base Salary, less applicable withholdings and deductions, paid in twenty-four (24) equal installments beginning on the Company’s first regularly scheduled payroll date which occurs at least five (5) business days following the Release Effective Date, with the remaining twenty-three (23) installments occurring on the Company’s regularly scheduled payroll dates thereafter;
		

		
			ii.   If you timely elect continued coverage under COBRA for yourself and your covered dependents under the Company’s group health plans following such termination, then the Company shall pay 100% of the COBRA premiums necessary to continue your and your covered dependents’ health insurance coverage in effect for yourself (and your covered dependents) on the termination date until the earliest of: (i) twelve (12) months following the termination date; (ii) the date when you become eligible for substantially equivalent health insurance coverage in connection with new employment or self-employment; or (iii) the date you cease to be eligible for COBRA continuation coverage for any reason, including plan termination (such period from the termination date through the earlier of (i)-(iii), (the “COBRA Payment Period”).  Notwithstanding the foregoing, if at any time the Company determines that its payment of COBRA premiums on your behalf would result in a violation of applicable law (including, but not limited to, the 2010 Patient Protection and Affordable Care Act, as amended by the 2010 Health Care and Education Reconciliation Act), then in lieu of paying COBRA premiums pursuant to this Section, the Company shall pay you on the last day of each remaining month of the COBRA Payment Period, a fully taxable cash payment equal to the COBRA premium for
		

		
			
		

		
			

		 

		

		
			 
		

		
			such month, subject to applicable tax withholding, for the remainder of the COBRA Payment Period.  Nothing in this Agreement shall deprive you of your rights under COBRA or ERISA for benefits under plans and policies arising under your employment by the Company.
		

		
			b.         You shall not receive the Severance Benefits (pursuant to Section 9(a)) or Change in Control Severance Benefits (pursuant to and as defined in Section 10(a)) unless you execute the Release within the consideration period specified therein, which shall in no event be more than 60 days following your Separation from Service, and until the Release becomes effective and can no longer be revoked by you under its terms.  Your ability to receive the Severance Benefits or Change in Control Severance Benefits is further conditioned upon you:  returning all Company property and any Parent property; complying with your post-termination obligations under this letter and the CIIA; and complying with the Release including without limitation any non-disparagement and confidentiality provisions contained therein.  For the avoidance of doubt, you will only be eligible to receive, at most, either the Severance Benefits or the Change in Control Severance Benefits, but under no circumstance will you be eligible to receive both Severance Benefits and Change in Control Severance Benefits.
		

		
			c.         The Severance Benefits (provided to you pursuant to Section 9(a)) or Change in Control Severance Benefits (provided to you pursuant to Section 10(a)) are in lieu of, and not in addition to, any benefits to which you may otherwise be entitled under any Company and any Parent severance plan, policy or program.
		

		
			d.         The damages caused by your termination of employment without Cause would be difficult to ascertain; therefore, the Severance Benefits or Change in Control Severance Benefits for which you are eligible in exchange for the Release are agreed to by the parties as liquidated damages, to serve as full compensation, and not a penalty.
		

		
			e.         “Cause” shall mean the Company (or its designee) has determined in its sole discretion that you have engaged in any of the following: (i) a material breach of any covenant or condition under this Agreement or any other agreement between the parties; (ii) any act constituting dishonesty, fraud, immoral or disreputable conduct; (iii) any conduct which constitutes a felony under applicable law; (iv) material violation of any Company policy or any applicable Parent policy or any act of misconduct; (v) refusal to follow or implement a clear and reasonable directive of Company or, if applicable, Parent; (vi) negligence or incompetence in the performance of your  duties or failure to perform such duties in a manner satisfactory to the Company after the expiration of ten (10) days without cure after written notice of such failure; or (vii) breach of fiduciary duty.
		

		
			f.          For purposes of this Agreement, “Good Reason” shall mean the occurrence of any of the following events without your consent: (i) a material reduction in your Base Salary of at least 10%; (ii) a material reduction in your duties, authority and responsibilities relative to your duties, authority, and responsibilities in effect immediately prior to such reduction; or (iii) the relocation of your principal place of employment, without your consent, in a manner that lengthens your one-way commute distance by fifty (50) or more miles from your then-current principal place of employment immediately prior to such relocation; provided, however, that, any such termination by you shall only be deemed for
		

		
			
		

		
			

		 

		

		
			 
		

		
			Good Reason pursuant to this definition if: (1) you give the Company written notice of your intent to terminate for Good Reason within thirty (30) days following the first occurrence of the condition(s) that you believe constitute(s) Good Reason, which notice shall describe such condition(s); (2) the Company fails to remedy such condition(s) within thirty (30) days following receipt of the written notice (the “Cure Period”); (3) the Company has not, prior to receiving such notice from you, already informed you that your employment with the Company is being terminated and (4) you voluntarily terminate your employment within thirty (30) days following the end of the Cure Period.
		

		
			g.         For purposes of this Agreement, “Accrued Obligations” are (i) your accrued but unpaid salary through the date of termination, (ii) any unreimbursed business expenses incurred by you payable in accordance with the Company’s standard expense reimbursement policies, and (iii) benefits owed to you under any qualified retirement plan or health and welfare benefit plan in which you were a participant in accordance with applicable law and the provisions of such plan.
		

		
			10.            Termination Without Cause or for Good Reason Coincident with a Change in Control.
		

		
			a.         If you experience a “Termination Event,” which shall mean that your employment by the Company is terminated by the Company or any successor entity without Cause (not including termination by virtue of death or Disability (as defined below)) or by you for Good Reason in either case within twelve (12) months following or three (3) months prior to the effective date of a “Change in Control” (as defined in Section 10(b) below) (such time period referred to herein as the “Change in Control Period”), provided that such Termination Event constitutes a Separation from Service, then in addition to providing you with the Accrued Obligations and subject to your compliance with Sections 9(a) and 9(b), the Company will provide you with the following “Change in Control Severance Benefits:”
		

		
			i.   The Company will pay you an amount equal to eighteen (18) months’ of your then current Base Salary, less applicable withholdings and deductions, paid in thirty-six (36) equal installments beginning on the Company’s first regularly scheduled payroll date which occurs at least five (5) business days following the Release Effective Date, with the remaining thirty-five (35) installments occurring on the Company’s regularly scheduled payroll dates thereafter;
		

		
			ii.   If you timely elect continued coverage under COBRA for yourself and your covered dependents under the Company’s group health plans following such termination, then the Company shall pay 100% of the COBRA premiums necessary to continue your and your covered dependents’ health insurance coverage in effect for yourself (and your covered dependents) on the termination date until the earliest of: (i) eighteen (18) months following the termination date; (ii) the date when you become eligible for substantially equivalent health insurance coverage in connection with new employment or self-employment; or (iii) the date you cease to be eligible for COBRA continuation coverage for any reason, including plan termination (such period from the termination date through the earlier of (i)-(iii), (the “COBRA Payment Period”).  Notwithstanding the foregoing, if at any time the Company determines that its payment of COBRA premiums on your behalf would result in a violation of applicable law (including, but not limited to,
		

		
			
		

		
			

		 

		

		
			 
		

		
			the 2010 Patient Protection and Affordable Care Act, as amended by the 2010 Health Care and Education Reconciliation Act), then in lieu of paying COBRA premiums pursuant to this Section, the Company shall pay you on the last day of each remaining month of the COBRA Payment Period, a fully taxable cash payment equal to the COBRA premium for such month, subject to applicable tax withholding, for the remainder of the COBRA Payment Period.  Nothing in this Agreement shall deprive you of your rights under COBRA or ERISA for benefits under plans and policies arising under your employment by the Company;
		

		
			iii.  The Company will pay an additional amount equivalent to eighteen (18) months of your Annual Bonus, which is calculated using the full Target Amount as defined in Section 3(b) and multiplied by 1.5, for the performance year in which your termination occurs.  This amount will be payable subject to standard federal and state payroll withholding requirements and will be paid when bonuses for that year are paid to similarly situated employees;
		

		
			iv.  Notwithstanding anything to the contrary set forth in any applicable equity incentive plans or award agreements, and provided the applicable stock option or other equity award is assumed or continued by the successor or acquiror entity in such Change in Control or such stock option or other equity award is substituted for a similar award of the successor or acquiror entity, then effective as of the later of the effective date of the Change in Control or the date of the Termination Event, the vesting and exercisability of (i) the Existing Options subject to acceleration of vesting upon a Change in Control, as stated on Exhibit A, and (ii) all equity awards granted after the date of this Agreement that are subject to a time-based vesting schedule, shall accelerate such that all such shares become immediately vested and exercisable by you.  The applicable Existing Options and all applicable equity awards granted after the date of this Agreement shall remain outstanding following the Termination Event if and to the extent necessary to give effect to this Section 10(a)(iv), subject to the original maximum term of the award (without regard to your termination).
		

		
			b.         “Change in Control” means the occurrence of any of the following events: (i) any “person” (as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934) becomes the “beneficial owner” (as defined in Rule 13d-3 of the Securities Exchange Act of 1934), directly or indirectly, of securities of the Parent representing 50% or more of the total voting power represented by the Parent’s then outstanding voting securities; (ii) the consummation of the sale or disposition by the Parent of all or substantially all of the Parent’s assets; or (iii) the consummation of a merger or consolidation of the Parent with any other corporation, other than a merger or consolidation which would result in the voting securities of the Parent outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity or its parent) at least 50% of the total voting power represented by the voting securities of the Parent or such surviving entity or its parent outstanding immediately after such merger or consolidation.
		

		
			11.       Other Terminations.
		

		
			a.         For all other types of terminations, including a resignation by you not for Good Reason, a termination for Cause, or a termination on account of your death
		

		
			
		

		
			

		 

		

		
			 
		

		
			or Disability, you will not be eligible to receive the Severance Benefits or Change in Control Severance Benefits and the Company will be required only to provide the Accrued Obligations.
		

		
			b.         Anything in this letter to the contrary notwithstanding, in the event the Company’s business is discontinued because rendered impracticable by substantial financial losses, lack of funding, legal decisions, administrative rulings, declaration of war, dissolution, national or local economic depression or crisis or any reasons beyond the control of the Company, then your employment shall terminate as of the day the Company determines to cease operations.  In the event your employment is terminated pursuant to this Section 11(b), you will not receive the Severance Benefits, the Change in Control Severance Benefits, or any other severance compensation or benefit, except that, pursuant to the Company’s standard payroll policies, the Company shall provide the Accrued Obligations.
		

		
			c.         For purposes of this Agreement, termination by the Company based on “Disability” shall mean termination because you are unable due to a physical or mental condition to perform the essential functions of your position with or without reasonable accommodation for six (6) months in the aggregate during any twelve (12) month period or based on the written certification by two licensed physicians of the likely continuation of such condition for such period.  This definition shall be interpreted and applied consistent with the Americans with Disabilities Act, the Family and Medical Leave Act, and other applicable law.
		

		
			12.       Section 409A.
		

		
			a.         Notwithstanding anything to the contrary herein, the following provisions apply to the extent severance benefits provided herein are subject to Section 409A of the Internal Revenue Code (the “Code”) and the regulations and other guidance thereunder and any state law of similar effect (collectively “Section 409A”).  Severance benefits shall not commence until you have a “separation from service” (as defined under Treasury Regulation Section 1.409A-1(h), without regard to any alternative definition thereunder, a “separation from service”).   Each installment of severance benefits is a separate “payment” for purposes of Treas. Reg. Section 1.409A-2(b)(2)(i), and the severance benefits are intended to satisfy the exemptions from application of Section 409A provided under Treasury Regulations Sections 1.409A-1(b)(4), 1.409A-1(b)(5) and 1.409A-1(b)(9).  However, if such exemptions are not available and you are, upon separation from service, a “specified employee” for purposes of Section 409A, then, solely to the extent necessary to avoid adverse personal tax consequences under Section 409A, the timing of the severance benefits payments shall be delayed until the earlier of (i) six (6) months and one day after your separation from service, or (ii) your death.  The parties acknowledge that the exemptions from application of Section 409A to severance benefits are fact specific, and any later amendment of this Agreement to alter the timing, amount or conditions that will trigger payment of severance benefits may preclude the ability of severance benefits provided under this Agreement to qualify for an exemption.
		

		
			b.         It is intended that this Agreement shall comply with the requirements of Section 409A, and any ambiguity contained herein shall be interpreted in such manner so as to avoid adverse personal tax consequences under Section 409A.
		

		
			
		

		
			

		 

		

		
			 
		

		
			Notwithstanding the foregoing, the Company shall in no event be obligated to indemnify you for any taxes or interest that may be assessed by the Internal Revenue Service pursuant to Section 409A of the Code to payments made pursuant to this Agreement.
		

		
			13.       Section 280G; Limitations on Payment.
		

		
			a.         If any payment or benefit you will or may receive from the Company or otherwise under Section 10 of this Agreement (a “280G Payment”) would (i) constitute a “parachute payment” within the meaning of Section 280G of the Code, and (ii) but for this sentence, be subject to the excise tax imposed by Section 4999 of the Code (the “Excise Tax”), then any such 280G Payment provided pursuant to this Agreement (a “Payment”) shall be equal to the Reduced Amount.  The “Reduced Amount” shall be either (x) the largest portion of the Payment that would result in no portion of the Payment (after reduction) being subject to the Excise Tax or (y) the largest portion, up to and including the total, of the Payment, whichever amount (i.e., the amount determined by clause (x) or by clause (y)), after taking into account all applicable federal, state and local employment taxes, income taxes, and the Excise Tax (all computed at the highest applicable marginal rate), results in your receipt, on an after-tax basis, of the greater economic benefit notwithstanding that all or some portion of the Payment may be subject to the Excise Tax.  If a reduction in a Payment is required pursuant to the preceding sentence and the Reduced Amount is determined pursuant to clause (x) of the preceding sentence, the reduction shall occur in the manner (the “Reduction Method”) that results in the greatest economic benefit for you.  If more than one method of reduction will result in the same economic benefit, the items so reduced will be reduced pro rata (the “Pro Rata Reduction Method”).
		

		
			b.         Notwithstanding any provision of Section 13(a) to the contrary, if the Reduction Method or the Pro Rata Reduction Method would result in any portion of the Payment being subject to taxes pursuant to Section 409A that would not otherwise be subject to taxes pursuant to Section 409A, then the Reduction Method and/or the Pro Rata Reduction Method, as the case may be, shall be modified so as to avoid the imposition of taxes pursuant to Section 409A as follows: (A) as a first priority, the modification shall preserve to the greatest extent possible, the greatest economic benefit for you as determined on an after-tax basis; (B) as a second priority, Payments that are contingent on future events (e.g., being terminated without Cause), shall be reduced (or eliminated) before Payments that are not contingent on future events; and (C) as a third priority, Payments that are “deferred compensation” within the meaning of Section 409A shall be reduced (or eliminated) before Payments that are not deferred compensation within the meaning of Section 409A.
		

		
			c.         Unless you and the Company agree on an alternative accounting firm or law firm, the accounting firm engaged by the Company for general tax compliance purposes as of the day prior to the effective date of the change in control transaction shall perform the foregoing calculations.  If the accounting firm so engaged by the Company is serving as accountant or auditor for the individual, entity or group effecting the change in control transaction, the Company shall appoint a nationally recognized accounting or law firm to make the determinations required by this Section 13.  The Company shall bear all expenses with respect to the determinations by such accounting or law firm required to be made hereunder.
		

		
			
		

		
			

		 

		

		
			 
		

		
			d.         If you receive a Payment for which the Reduced Amount was determined pursuant to clause (x) of Section 13(a) and the Internal Revenue Service determines thereafter that some portion of the Payment is subject to the Excise Tax, you agree to promptly return to the Company a sufficient amount of the Payment (after reduction pursuant to clause (x) of Section 13(a)) so that no portion of the remaining Payment is subject to the Excise Tax.  For the avoidance of doubt, if the Reduced Amount was determined pursuant to clause (y) of Section 13(a), you shall have no obligation to return any portion of the Payment pursuant to the preceding sentence.
		

		
			14.       Obligations to Prior Employers.  In your work for the Company and in the context of providing services to the Parent, you will continue to be expected not to use or disclose any confidential information, including trade secrets, of any former employer or other person to whom you have an obligation of confidentiality.  Rather, you will be expected to use only that information which is generally known and used by persons with training and experience comparable to your own, which is common knowledge in the industry or otherwise legally in the public domain, or which is otherwise provided or developed by the Company or the Parent.  You agree that you will not bring onto Company or Parent premises any unpublished documents or property belonging to any former employer or other person to whom you have an obligation of confidentiality.  You specifically warrant that you are not subject to an employment agreement or restrictive covenant preventing full performance of your duties under this Agreement.  You also agree to honor all obligations to former employers during your employment with the Company and in the context of providing services to the Parent.
		

		
			15.       Outside Activities during Employment.  Except with the prior written consent of the Board, including consent given to you prior to the signing of this Agreement, you will not, while employed by the Company, undertake or engage in any other employment, occupation or business enterprise that would interfere with your responsibilities and the performance of your duties hereunder except for (i) reasonable time devoted to volunteer services for or on behalf of such religious, educational, non-profit and/or other charitable organization as you may wish to serve, (ii) reasonable time devoted to activities in the non-profit and business communities consistent with your duties; and (iii) such other activities as may be specifically approved by the Board. This restriction shall not, however, preclude you (x) from owning less than one percent (1%) of the total outstanding shares of a publicly traded company, or (y) from employment or service in any capacity with Affiliates of the Company.  As used in this Agreement, “Affiliates” means an entity under common management or control with the Company.
		

		
			16.       Complete Agreement.  This letter, together with your CIIA and all policies and procedures of the Company and, as applicable, the Parent, forms the complete and exclusive statement of your continued employment agreement with the Company.  It supersedes any other representations or promises made to you by anyone, whether oral or written, including the Prior Agreement.  You and the Company and/or the Parent may have entered into agreements relating to your equity in the Parent, which are not affected by this Agreement unless otherwise stated herein.  If you and the Company have entered into a prior agreement relating to proprietary information and inventions assignment, that agreement shall be superseded prospectively only.  No term or provision of this Agreement may be amended waived, released, discharged or modified except in writing, signed by you and an authorized officer of the Company, except that the Company may,
		

		
			
		

		
			

		 

		

		
			 
		

		
			in its sole discretion, adjust salaries, incentive compensation, stock plans, benefits, job titles, locations, duties, responsibilities, and reporting relationships.
		

		
			17.       Successors and Assigns.  This Agreement will bind the heirs, personal representatives, successors and assigns of both you and the Company, and inure to the benefit of both you and the Company, their heirs, successors and assigns.  The Company may assign this Agreement and its rights and obligations hereunder in whole or in part, to the Parent and to any company or other entity (including an affiliated entity) with or into which the Company may hereafter merge or consolidate, or who becomes a successor, or to which the Company may transfer all or substantially all of its assets, and, in consideration of your employment or continued employment hereunder, you hereby consent to any such assignment.  You may not assign or transfer this Agreement or any rights or obligations hereunder, other than to your estate upon your death.
		

		
			18.       Resolution of Disputes.  The parties recognize that litigation in federal or state courts or before federal or state administrative agencies of disputes arising out of your employment with the Company or out of this Agreement, or your termination of employment or termination of this Agreement, may not be in the best interests of either you or the Company, and may result in unnecessary costs, delays, complexities, and uncertainty.  The parties agree that any dispute between the parties arising out of or relating to the negotiation, execution, performance or termination of this Agreement or your employment, including, but not limited to, any claim arising out of this Agreement, claims under Title VII of the Civil Rights Act of 1964, as amended, the Civil Rights Act of 1991, the Age Discrimination in Employment Act of 1967, the Americans with Disabilities Act of 1990, Section 1981 of the Civil Rights Act of 1966, as amended, the Family Medical Leave Act, the Employee Retirement Income Security Act, and any similar federal, state or local law, statute, regulation, or any common law doctrine, whether that dispute arises during or after employment, shall be settled by binding arbitration conducted before a single arbitrator by JAMS, Inc. (“JAMS”) or its successor, under the then applicable JAMS rules; provided, however, that this dispute resolution provision shall not apply to any separate agreements between the parties that do not themselves specify arbitration as an exclusive remedy.  The location for the arbitration shall be in the Ann Arbor/Detroit, Michigan area.  Any award made by such arbitrator shall be final, binding and conclusive on the parties for all purposes, and judgment upon the award rendered by the arbitrators may be entered in any court having jurisdiction thereof.  The arbitrators’ fees and expenses and all administrative fees and expenses associated with the filing of the arbitration shall be borne by the Company; provided, however, that at your option, you may voluntarily pay up to one-half the costs and fees.  The parties acknowledge and agree that their obligations to arbitrate under this Section survive the termination of this Agreement and continue after the termination of the employment relationship between you and the Company. The parties each further agree that the arbitration provisions of this Agreement shall provide each party with its exclusive remedy, and each party expressly waives any right it might have to seek redress in any other forum, except as otherwise expressly provided in this Agreement.  By electing arbitration as the means for final settlement of all claims, the parties hereby waive their respective rights to, and agree not to, sue each other in any action in a federal, state or local court with respect to such claims, but may seek to enforce in court an arbitration award rendered pursuant to this Agreement.  The parties specifically agree to waive their respective rights to a trial by jury, and further agree that no demand, request or motion will be made for trial
		

		
			
		

		
			

		 

		

		
			 
		

		
			by jury.  In addition, all claims, disputes, or causes of action under this Section, whether by you or the Company, must be brought in an individual capacity, and shall not be brought as a plaintiff (or claimant) or class member in any purported class or representative proceeding, nor joined or consolidated with the claims of any other person or entity.  The arbitrator may not consolidate the claims of more than one person or entity, and may not preside over any form of representative or class proceeding.  To the extent that the preceding sentences regarding class claims or proceedings are found to violate applicable law or are otherwise found unenforceable, any claim(s) alleged or brought on behalf of a class shall proceed in a court of law rather than by arbitration.
		

		
			Please sign and date this letter, and the enclosed CIIA, and return them to me by April 29, 2019 if you wish to accept continued employment at the Company under the terms described above.
		

		
			We thank you for your service to date and look forward to the opportunity to continue working with you.
		

		
			Sincerely,
		

		
			 
		

		
			 
		

			
					
						 

					
					
						 

				
	
					
						/s/ Louis J. Arcudi III

					
					
						 

					
					
						 

				
	
					
						Name: Louis J. Arcudi III

					
					
						 

				
	
					
						Title: Chief Financial Officer

					
					
						 

				

		
			 
		

		
			 
		

		
			Agreed and Accepted:
		

		
			 
		

		
			 
		

			
					
						 

					
					
						 

				
	
					
						/s/ Julia C. Owens

					
					
						 

					
					
						 

				
	
					
						Julia C. Owens, Ph.D.

					
					
						 

				
	
					
						Date: 6/19/2019

					
					
						 

				

		
			 
		

		
			 
		

		
			Attachment:  Employee Confidential Information, Inventions, Non-Solicitation and Non-Competition Agreement
		

		
			
		

		
			

		 

		

		
			 
		

		
			Exhibit A
		

		
			Existing Options
		

		
			 
		

			
					
						 

					
					
						 

					
					
						 

					
					
						 

					
					
						 

					
					
						 

					
					
						 

					
					
						 

					
					
						 

					
					
						 

					
					
						 

					
					
						 

					
					
						 

					
					
						 

					
					
						 

					
					
						 

					
					
						 

				
	
					
						Grant Date

					
					
						  

					
					
						  

					
					
						Exercise
Price

					
					
						  

					
					
						  

					
					
						Number of
Shares

					
					
						  

					
					
						  

					
					
						Stock Plan

					
					
						  

					
					
						  

					
					
						Vesting Schedule or Date
Fully vested

					
					
						  

					
					
						  

					
					
						Change in Control
Acceleration Terms

				
	
					
						08/30/2012

					
					
						 

					
					
						 

					
					
						$

					
1.08
					
					
						 

					
					
						 

					
60,179
					
					
						 

					
					
						 

					
					
						2012 Original 
Millendo Plan

					
					
						 

					
					
						 

					
					
						7/25/2016

					
					
						 

					
					
						 

					
					
						Fully vested

				
	
					
						1/28/2016

					
					
						 

					
					
						 

					
					
						$

					
4.44
					
					
						 

					
					
						 

					
151,600
					
					
						 

					
					
						 

					
					
						2012 Original 
Millendo Plan

					
					
						 

					
					
						 

					
					
						25% Year 1, shares subject to 
option, 1/48th monthly remaining 
36 months

					
					
						 

					
					
						 

					
					
						See March 4, 2016 Board 
Minutes 1

				
	
					
						08/24/2018

					
					
						 

					
					
						 

					
					
						$

					
16.40
					
					
						 

					
					
						 

					
174,839
					
					
						 

					
					
						 

					
					
						2012 Original 
Millendo Plan

					
					
						 

					
					
						 

					
					
						25% Year 1, shares subject to 
option, 1/48th monthly remaining 
36 months

					
					
						 

					
					
						 

					
					
						See August 24, 2018 Board 
Written Consent2

				
	
					
						01/15/2019

					
					
						 

					
					
						 

					
					
						$

					
8.80
					
					
						 

					
					
						 

					
66,666
					
					
						 

					
					
						 

					
					
						2012 New Millendo 
Plan

					
					
						 

					
					
						 

					
					
						25% Year 1, of remaining shares, 
1/36th monthly each month 
thereafter

					
					
						 

					
					
						 

					
					
						See this letter: Section 10(a) 
(iv)

				
	
					
						01/15/2019

					
					
						 

					
					
						 

					
					
						$

					
8.80
					
					
						 

					
					
						 

					
107,327
					
					
						 

					
					
						 

					
					
						2012 Original 
Millendo Plan

					
					
						 

					
					
						 

					
					
						25% Year 1, of remaining shares, 
1/36th monthly each month 
thereafter

					
					
						 

					
					
						 

					
					
						See this letter: Section 10(a) 
(iv)

				

		

		
			1 If within 6 months prior to or within 6 months following a Change in Control, the Optionee will be entitled to accelerated vesting as to 100% of the option.
		

		
			2 If within 6 months prior to or within 12 months following a Change in Control, (i) the Company (or any parent or subsidiary or successor of the Company) terminates the Optionee’s employment with the Company other than for Cause, death or disability, or (ii) the Optionee Resigns from such employment for Good Reason, then in each such event, to the terms herein, the Optionee will be entitled to accelerated vesting as to 100% of the option.

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