Supplemental Indenture No. 1 dated as of December 28, 2017, regarding Senior Unsecured Floating Rate Notes due 2027

THIS SUPPLEMENTAL INDENTURE NO. 1 (the “Supplemental Indenture”) is made effective as of the 28^th day of December, 2017, by and between Federated National Holding Company, a Florida corporation (the “Company”), The Bank of New York Mellon, a company organized under the laws of New York, as trustee (together with its successors and assigns, in such capacity, the “Trustee”), The Bank of New York Mellon, London Branch, as paying agent (together with its successors and assigns, in such capacity, the “Paying Agent”), and The Bank of New York Mellon SA/NV, Luxembourg Branch, as registrar (together with its successors and assigns, in such capacity, the “Registrar”).  Capitalized terms used but not defined herein shall have the meanings set forth in Indenture (as defined below).

WHEREAS, pursuant to Section 9.2 of the Indenture, the Company desires to amend certain provisions of the Indenture with respect to the 2027 Notes (as defined below); and

WHEREAS, in accordance with the terms of the Indenture, the Company has executed and delivered this Supplemental Indenture to the Trustee.

NOW, THEREFORE, in consideration of the agreements and obligations set forth herein and for other good and valuable consideration, the sufficiency of which is hereby acknowledged, the parties hereto hereby agree as follows:

Section 1.          Amendments.     As permitted by Section 9.2 of the Indenture:

“2027 Notes” means the $25,000,000 in aggregate principal amount of Senior Unsecured Floating Rate Notes due 2027 of the Company issued under the Indenture, as supplemented by Supplemental Indenture No. 1, on the Issue Date.”

“Interest Rate” means a per annum rate equal to the LIBOR Rate plus (a) 7.00 per cent. if a Premium Event has not occurred or is not continuing; or (b) if a Premium Event has occurred and is continuing, 8.00 per cent. for the period of time that such Premium Event continues.”

“Premium Event" means any of: (a) failure by the Company to comply with its obligations under Article III of the Indenture, as supplemented by this Supplemental Indenture, with a Premium Event in accordance with this paragraph (a) deemed to occur on the date falling 60 days after the date on which such failure occurs (and only occurring if such failure is not remedied within such 60 day period) and continuing until such failure is remedied; or (b) the occurrence of an Event of Default with respect to the 2027 Notes. If a Premium Event has occurred and is continuing, the Company shall notify the Trustee in writing of any Premium Event within three Business Days following such Premium Event.  The Trustee shall not be charged with knowledge of a Premium Event unless and until it has received written notice of such Premium Event from either (i) the Company or (ii) Holders representing a majority of the outstanding principal amount of the 2027 Notes.”

(b) Article III of the Indenture is hereby amended by adding new Sections 3.18 and 3.19, as follows:

 

 

(a)     As of the end of each fiscal year while the 2027 Notes are outstanding, beginning with the fiscal year ended December 31, 2017, the Company shall not have a Debt to Equity Ratio greater than 35%.

 

(b)     For each fiscal year while the 2027 Notes are outstanding, the Company shall not have a ratio of Consolidated EBIT to Consolidated Interest Expense of less than 4:1, cumulatively, for any two consecutive years, beginning with the fiscal years ended December 31, 2018 and 2019.

 

(c)     For each fiscal year while the 2027 Notes are outstanding, beginning with the fiscal year ended December 31, 2018, the Company shall cause each Insurance Subsidiary to maintain its authorized control level risk-based capital ratio of not less than 300% as of the end of each such fiscal year, determined in accordance with the guidelines of the NAIC.

 

SECTION 3.19.  Ratings.  The Company shall use its best efforts to maintain a rating by Egan Jones or an equivalent NRSRO of not less than BBB+.”

Section 2.          Rights of Holders Modified.     For the avoidance of doubt, the rights of the Holders of the 2027 Notes are modified by this Supplemental Indenture, the provisions of which shall be controlling in the event of any conflict between such provisions and any provisions set forth in the 2027 Notes.

Section 3.          Ratification and Incorporation of Indenture.     The Indenture, supplemented and amended as hereinabove set forth, is in all respects ratified and confirmed, and the terms and conditions thereof, supplemented and amended as hereinabove set forth, shall be and remain in full force and effect. The Trustee is not responsible for the validity or sufficiency of this Supplemental Indenture or for the recitals contained herein.

Section 4.          Governing Law.     THIS SUPPLEMENTAL INDENTURE SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW (EXCEPT SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW TO THE EXTENT THAT IT MANDATES THAT THE LAW OF THE STATE OF NEW YORK GOVERN).

Section 5.          Counterparts.     This Supplemental Indenture may be executed in any number of counterparts, each of which so executed shall be deemed to be an original, but all such counterparts shall together constitute but one and the same instrument.