As filed with the Securities and Exchange Commission on January 16, 2020
Registration No. 333-
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
FedNat Holding Company
(Exact name of registrant as specified in its charter)
Florida | 6331 | 65-0248866 | ||
(State or other jurisdiction of incorporation or organization) |
(Primary Standard Industrial Classification Code Number) |
(IRS Employer Identification Number) |
14050 N.W. 14th Street, Suite 180
Sunrise, Florida 33323
(800) 293-2532
(Address, including zip code, and telephone number, including area code, of registrants principal executive offices)
Michael H. Braun
Chief Executive Officer and President
FedNat Holding Company
14050 N.W. 14th Street, Suite 180
Sunrise, Florida 33323
(954) 581-9993
(Name, address, including zip code, and telephone number, including area code, of agent for service)
With copies to:
Nina S. Gordon, Esq.
Nelson Mullins Riley & Scarborough LLP
2 South Biscayne Boulevard, Suite 2100
Miami, Florida 33131
(305) 373-9400
Approximate date of commencement of proposed sale of the securities to the public: As soon as practicable after this registration statement becomes effective.
If the securities being registered on this Form are being offered in connection with the formation of a holding company and there is compliance with General Instruction G, check the following box. ☐
If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of large accelerated filer, accelerated filer, smaller reporting company, and emerging growth company in Rule 12b-2 of the Exchange Act.
Large accelerated filer | ☐ | Accelerated filer | ☒ | |||
Non-accelerated filer | ☐ | Smaller Reporting Company | ☐ | |||
Emerging growth company | ☐ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act. ☐
If applicable, place an X in the box to designate the appropriate rule provision relied upon in conducting this transaction:
Exchange Act Rule 13e-4(i) (Cross-Border Issuer Tender Offer) ☐
Exchange Act Rule 14d-1(d) (Cross-Border Third Party Tender Offer) ☐ |
CALCULATION OF REGISTRATION FEE
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Title of each class of securities to be registered |
Amount to be registered |
Proposed maximum offering price per unit |
Proposed maximum aggregate offering price |
Amount of registration fee(1) | ||||
7.50% Senior Unsecured Notes due 2029 |
$100,000,000 | 100% | $100,000,000 | $12,980.00 | ||||
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(1) | Calculated pursuant to Rule 457(f)(2) under the Securities Act of 1933, as amended (the Securities Act). |
The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act or until the registration statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. A REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. WE MAY NOT COMPLETE THE EXCHANGE OFFER AND ISSUE THESE SECURITIES UNTIL THE REGISTRATION STATEMENT IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE SECURITIES, NOR SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY JURISDICTION IN WHICH SUCH OFFER, SOLICITATION OR SALE IS NOT PERMITTED OR WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH JURISDICTION.
SUBJECT TO COMPLETION, DATED JANUARY 16, 2020
PROSPECTUS
OFFER TO EXCHANGE
Up to $100,000,000 aggregate principal amount of
7.50% Senior Unsecured Notes due 2029
that have been registered under the Securities Act of 1933
for a like principal amount of any and all outstanding unregistered
7.50% Senior Unsecured Notes due 2029
The exchange offer will expire at 5:00 p.m., New York City time, on , 2020, unless extended.
We are offering to exchange, upon the terms and subject to the conditions set forth in this prospectus, up to $100,000,000 aggregate principal amount of our 7.50% Senior Unsecured Notes due 2029 (CUSIP No. 31431B AC3) that have been registered under the Securities Act of 1933, as amended (the Securities Act), which we refer to in this prospectus as the New Notes, for a like principal amount of any and all of our outstanding unregistered 7.50% Senior Unsecured Notes due 2029 (CUSIP Nos. 31431B AA7 and 31431B AB5) that we issued in a private placement on March 5, 2019, which we refer to in this prospectus as the Old Notes. We are making this offer to exchange the New Notes for the Old Notes to satisfy our obligations under registration rights agreements that we entered into with the purchasers of the Old Notes in connection with our issuance of the Old Notes to those purchasers.
We will not receive any cash proceeds from this exchange offer. The issuance of the New Notes in exchange for the Old Notes will not result in any increase in our outstanding indebtedness. Old Notes that are not exchanged for New Notes in this exchange offer will remain outstanding. The exchange offer is not subject to any minimum tender condition but is subject to certain customary conditions.
The terms of the New Notes are identical in all material respects to the terms of the Old Notes, except that the New Notes are registered under the Securities Act and are not subject to transfer restrictions, bear a different CUSIP number and ISIN number from the Old Notes, are issuable in minimum denominations of $1,000 and integral multiples of $1,000 in excess thereof, and are not entitled to registration rights under the registration rights agreements that we entered into with the initial purchasers of the Old Notes. The New Notes evidence the same debt as the Old Notes and are governed by the same indenture under which the Old Notes were issued, as amended by a first supplemental indenture to be entered into on the date of issuance of the New Notes, which we refer to as the First Supplemental Indenture.
There is no existing public market for the Old Notes or the New Notes and we do not expect any public market to develop in the future for either the Old Notes or the New Notes. The Old Notes are not listed on any national securities exchange or quotation system and we do not intend to list the New Notes on any national securities exchange or quotation system.
You may withdraw your tender of Old Notes at any time prior to the expiration of the exchange offer. We will exchange all of the outstanding Old Notes that are validly tendered and not validly withdrawn prior to the expiration of the exchange offer for an equal principal amount of New Notes that are freely tradable. If you fail to tender your Old Notes, you will continue to hold unregistered securities and it may be difficult for you to transfer them.
Each broker-dealer that receives New Notes for its own account pursuant to the exchange offer must acknowledge that it will deliver a prospectus meeting the requirements of the Securities Act in connection with any resale of such New Notes. A broker-dealer that acquired Old Notes because of market-making or other trading activities may use this prospectus, as supplemented or amended from time to time, in connection with resales of the New Notes for a period of 180 days after the completion of the exchange offer. We have agreed to furnish to each broker-dealer who has delivered the notice to us required by and in accordance with the registration rights agreements, without charge, as many copies of this prospectus and any amendment and supplement hereto, as such participating broker-dealer may reasonably request in connection with its resale of such exchange notes. See Plan of Distribution.
Investing in our securities involves certain risks. See Risk Factors beginning on page 9, as well as the risk factors contained in our Annual Report on Form 10-K for the fiscal year ended December 31, 2018, as amended, and in the other reports filed by us with the Securities and Exchange Commission and incorporated by reference into this prospectus.
Neither the Securities and Exchange Commission nor any state securities commission or regulatory body has approved or disapproved of these securities or passed upon the adequacy or accuracy of the disclosure in this prospectus. Any representation to the contrary is a criminal offense.
The date of this prospectus is , 2020.
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This prospectus is a part of a registration statement that we have filed with the Securities and Exchange Commission, or the SEC, under the Securities Act. This prospectus does not contain all the information set forth in the registration statement, certain parts of which are omitted in accordance with the rules and regulations of the SEC. For further information with respect to us, the exchange offer and the securities offered by this prospectus, reference is made to the registration statement, including the exhibits to the registration statement and the documents incorporated by reference.
We are providing this prospectus to holders of Old Notes in connection with our offer to exchange Old Notes for New Notes. We are not making this exchange offer in any jurisdiction where the exchange offer is not permitted.
You should rely only on the information contained or incorporated by reference in this prospectus and in the accompanying exchange offer transmittal documents filed by us with the SEC. We have not authorized any other person to provide you with any other information. We take no responsibility for, and provide no assurance as to the reliability of, any other information that others may give you. You should not assume that the information contained or incorporated by reference in this prospectus is accurate as of any date other than the date of the applicable document that contains that information. Our business, financial condition, results of operations and prospects may have changed since that date.
You should not consider any information in this prospectus to be investment, legal or tax advice. You should consult your own counsel, accountant and other advisors for legal, tax, business, financial and related advice regarding the exchange offer and ownership of these securities.
Each broker-dealer that receives New Notes for its own account in exchange for Old Notes acquired by the broker-dealer as a result of market-making or other trading activities must acknowledge that it will deliver a prospectus meeting the requirements of the Securities Act in connection with any resale of such New Notes. This prospectus, as it may be amended or supplemented from time to time, may be used by a participating broker-dealer in connection with resales of New Notes received in exchange for Old Notes. We have agreed in the letter of transmittal to make this prospectus, as amended or supplemented, available to any such broker-dealer that requests copies of this prospectus for use in connection with any such resale. See Plan of Distribution.
References in this prospectus to we, us, our, FNHC or the Company refer to FedNat Holding Company and its subsidiaries, unless the context otherwise requires.
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The New Notes will be available in book-entry form only. The New Notes exchanged pursuant to this prospectus will be issued in the form of one or more global certificates, which will be deposited with, or on behalf of, The Depository Trust Company, or DTC, and registered in its name or in the name of Cede & Co., its nominee. Beneficial interests in the global certificates will be shown on, and transfer of the global certificates will be effected only through, records maintained by DTC and its participants. After the initial issuance of the global certificates, New Notes in certificated form will be issued in exchange for global certificates only in the limited circumstances set forth in the indenture, dated as of March 5, 2019, and the First Supplemental Indenture governing the New Notes, which together we refer to herein as the indenture. See Description of the NotesForm, Denomination, Transfer, Exchange and Book-Entry Procedures.
WHERE YOU CAN FIND MORE INFORMATION
We are subject to the informational requirements of the Securities Exchange Act of 1934, as amended, or the Exchange Act, and therefore we file annual, quarterly and current reports, proxy statements, and other documents with the SEC. The SEC maintains a website at www.sec.gov that contains reports, proxies, information statements, and other information regarding registrants, including us, that file electronically with the SEC. We also maintain a website at www.fednat.com; however, the information contained on our website does not constitute part of this prospectus.
We have filed with the SEC a registration statement on Form S-4 relating to the New Notes and the exchange offer. This prospectus is a part of the registration statement and, as permitted by SEC rules, does not contain all of the information in the registration statement. The registration statement, including the exhibits thereto, contains additional relevant information about us, the New Notes and the exchange offer. This prospectus contains summaries of the terms of certain agreements that we believe to be accurate in all material respects. However, we refer you to the actual agreements for complete information relating to those agreements. All summaries of such agreements contained in this prospectus or incorporated by reference into this prospectus are qualified in their entirety by this reference. To the extent that any such agreement is attached as an exhibit to this registration statement, we will make a copy of such agreement available to you upon request.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The SEC allows us to incorporate by reference in this prospectus the information in other documents that we file with it, which means that we can disclose important information to you by referring you to those documents. This prospectus incorporates by reference important business and financial information about us that is not included in or delivered with this prospectus. The information incorporated by reference is considered to be part of this prospectus, and information that we file later with the SEC that is incorporated by reference in this prospectus will automatically update and supersede information contained in documents filed earlier with the SEC or contained in this prospectus. That information will become part of this prospectus from the date the information is filed with the SEC. We incorporate by reference the following documents we have filed with the SEC and the future filings we make with the SEC under Sections 13(a), 13(c), 14, or 15(d) of the Exchange Act, (a) on or after the date of filing the registration statement of which this prospectus forms a part and prior to the effectiveness of the registration statement, and (b) on or after the date of this prospectus until the date we complete the exchange offer (in each case excluding any information furnished and not filed according to SEC rules, such as information furnished pursuant to Item 2.02 or Item 7.01 on any Current Report on Form 8-K):
| our Annual Report on Form 10-K for the year ended December 31, 2018, filed on March 7, 2019; |
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| our Quarterly Report on Form 10-Q for the quarter ended March 31, 2019, filed on May 8, 2019; |
| our Quarterly Report on Form 10-Q for the quarter ended June 30, 2019, filed on August 7, 2019; |
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Holders of the Old Notes may request a copy of these filings, at no cost, by contacting us at the following address or telephone number:
FedNat Holding Company
Attention: Corporate Secretary
14050 N.W. 14th Street, Suite 180
Sunrise, Florida 33323
Telephone: (954) 581-9993
To ensure timely delivery of any requested information, holders of the Old Notes must make any request no later than , 2020, which is five business days before the expiration date of the exchange offer, or, if we decide to extend the expiration date of the exchange offer, no later than five business days before such extended expiration date.
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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus, including the documents that we incorporate by reference herein, contains forward-looking statements about the Company that are intended to be subject to the safe harbors created under U.S. federal securities laws. The use of words such as may, will, anticipate, assume, should, indicate, would, believe, contemplate, expect, estimate, continue, plan, point to, project, could, can, might, intend, target, and other similar words and expressions, generally identify forward-looking statements; however, these words are not the exclusive means of identifying such statements. Forward-looking statements can be identified by the fact that they do not relate strictly to historical or current facts.
By their nature, forward-looking statements are subject to numerous assumptions, risks, and uncertainties. A number of factors could cause actual conditions, events, or results to differ significantly from those described in the forward-looking statements. These factors include, but are not limited to, those contained in our Annual Report on Form 10-K for the year ended December 31, 2018 and our Amendment No. 1 on Form 10-K/A thereto, which is incorporated by reference in this prospectus, including those discussed under Item 1A. Risk Factors and Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations, as well as those discussed in any subsequent filings of the Company that are incorporated in this prospectus by reference. See Where You Can Find More Information and Incorporation of Certain Documents by Reference for information about how to obtain copies of our filings with the SEC. For a discussion of significant risk factors that apply to the exchange offer and the notes, see Risk Factors beginning on page 9 of this prospectus.
Potential risks and uncertainties that could cause our actual results to differ from those anticipated in any forward-looking statements include, but are not limited to, those described below:
| uncertainties related to estimates, assumptions and projections relating to unpaid losses and loss adjustment expenses and other accounting policies; |
| the costs of reinsurance, assessments charged by various governmental agencies, pricing competition and other initiatives by competitors; |
| the risk of non-collectability of reinsurance; |
| the ability to successfully integrate operations we recently acquired; |
| trends in claims and coverage issues; |
| the impact of new regulations adopted in Florida and in other states in which we do business that affect the property and casualty insurance market; |
| our ability to obtain regulatory approval for requested rate changes and the timing thereof; |
| the statutorily approved assessments that support property and casualty insurance pools and associations, which will cause our revenues and operating performance to fluctuate; |
| weather conditions and natural disasters (including, but not limited to, the severity and frequency of storms, hurricanes, tornados and hail); |
| inflation and other changes in economic conditions, including changes in financial markets; |
| legislative and regulatory developments; |
| climate change; |
| security breaches and other system disruptions; |
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| the implications of having debt outstanding, including the potential failure to comply with the covenants in our senior note indenture, which failure could arise as a result of events beyond our control; |
| dependence on investment income and the composition of our investment portfolio; |
| the adequacy of our liability for loss, loss reserves and loss adjustment expense; |
| our relationship with insurance agents, and our ability to recruit and retain them; |
| claims experience and catastrophe losses; |
| ratings by industry services; |
| reliance on key personnel; |
| acts of war and terrorist activities, among other man-made disasters; |
| court decisions and trends in litigation and health care; and |
| other factors set forth in this prospectus or in our other filings with the SEC. |
If any of these risks or uncertainties materialize, or if any of the assumptions underlying such forward-looking statements proves to be incorrect, our results could differ materially from those expressed in, implied or projected by, such forward-looking statements. You should not place undue reliance on any forward-looking statements, which speak only as of the dates they are made. Except to the extent required by applicable law or regulation, we undertake no obligation to update these forward-looking statements to reflect events or circumstances after the date of this prospectus or to reflect the occurrence of unanticipated events.
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This summary highlights selected information appearing elsewhere, or incorporated by reference, in this prospectus and is, therefore, qualified in its entirety by the more detailed information appearing elsewhere, or incorporated by reference, in this prospectus. It may not contain all of the information that may be important to you in deciding to exchange your Old Notes for New Notes. We urge you to read carefully this entire prospectus and the other documents to which it refers to understand fully the terms of the New Notes and the exchange offer. You should pay special attention to the Risk Factors and the Cautionary Note Regarding Forward-Looking Statements.
FedNat Holding Company
We are an insurance holding company that controls substantially all steps in the insurance underwriting, distribution and claims processes through our subsidiaries and our contractual relationships with our independent agents and general agents.
We, through our wholly owned subsidiaries, are authorized to underwrite, and/or place, homeowners multi-peril (which we refer to as homeowners), federal flood and other lines of insurance in Florida and other states. We market, distribute and service our own and third-party insurers products and other services through a network of independent and general agents.
FedNat Insurance Company, or FNIC, one of our wholly owned insurance subsidiaries, is licensed as an admitted carrier, to write specific lines of insurance by the states insurance departments in Florida, Louisiana, Texas, Georgia, South Carolina, Alabama and Mississippi. Monarch National Insurance Company, or MNIC, one of our other insurance subsidiaries, is licensed as an admitted carrier in Florida. As discussed under Maison Acquisition below, we recently acquired Maison Insurance Company, or Maison, which is licensed as an admitted carrier in Louisiana, Texas and Florida. Admitted carriers are bound by rate and form regulations, and are strictly regulated to protect policyholders from a variety of illegal and unethical practices. Admitted carriers are also required to financially contribute to the state guarantee fund used to pay for losses if an insurance carrier becomes insolvent or unable to pay loss amounts due to their policyholders.
Through our wholly owned subsidiary, FedNat Underwriters, Inc., we serve as managing general agent for FNIC and MNIC and through our recently acquired wholly owned subsidiary, Maison Managers, Inc., we serve as managing general agent for Maison.
We were incorporated in Florida in 1991, and changed our name from 21st Century Holding Company to Federated National Holding Company in 2012 and to FedNat Holding Company in 2018. Our principal executive offices are located at 14050 N.W. 14th Street, Suite 180, Sunrise, Florida 33323, and our telephone number is (954) 581-9993. Our website is www.fednat.com. The information contained on our website is not incorporated by reference into this prospectus, and such information should not be considered to be part of this prospectus.
The Private Placement
On March 5, 2019, we issued $100,000,000 in aggregate principal amount of our 7.50% Senior Unsecured Notes due 2029, which we have referred to in this prospectus as the Old Notes. The Old Notes were issued in a private placement transaction (the Private Placement) to certain qualified institutional buyers and accredited investors, and as such, were not registered under the Securities Act. The Old Notes were issued under an indenture dated March 5, 2019, between FedNat Holding Company, as issuer, and The Bank of New York Mellon, as trustee. The term notes refers collectively to the Old Notes and the New Notes.
Maison Acquisition
Acquisition of Maison Companies
On December 2, 2019, the Company closed its acquisition from 1347 Property Insurance Holdings, Inc., or PIH, of PIHs insurance operations conducted through Maison, Maison Managers, Inc. and Claimcor, LLC, which we refer to collectively as the Maison Companies. The acquisition was completed pursuant to the Equity Purchase Agreement dated as of February 25, 2019 among the Company, PIH and the Maison Companies.
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In exchange for the equity of the Maison Companies, PIH received as consideration from the Company (i) $25.5 million in cash and (ii) 1,773,102 shares of the Companys common stock, which is equal to $25.5 million divided by the weighted average closing price per share of the Companys common stock on Nasdaq during the 20 trading days immediately preceding the closing date. The shares issued to PIH, which represent approximately 12% of the Companys shares outstanding, were issued without registration under the Securities Act of 1933, as amended, pursuant to the exemption from registration set forth in Section 4(a)(2) of the Securities Act. With the completion of this acquisition, the Company owns 100% of the Maison Companies.
The Company agreed to register the resale of the shares issued to PIH following the closing, pursuant to the Registration Rights Agreement dated December 2, 2019 with PIH. The resale of these shares is subject to the terms of a five-year Standstill Agreement dated December 2, 2019 with PIH, the terms of which are described below (see Standstill Agreement with PIH).
In addition, surplus notes issued by Maison to PIH in an amount equal to $18 million plus accrued but unpaid interest were repaid to PIH and were replaced with new surplus notes funded by the Company.
PIH received five-year rights of first refusal to provide reinsurance of up to 7.5% of any layer in the Companys catastrophe reinsurance program, up to a maximum aggregate in force amount of all reinsurance coverage sold to the Company of $15 million, pursuant to a Reinsurance Capacity Right of First Refusal Agreement dated December 2, 2019 with PIH. A wholly owned subsidiary of PIH, Fundamental Global Advisors LLC, or the Advisor, and the Company also entered into an Investment Advisory Agreement dated December 2, 2019 pursuant to which the Advisor will provide investment advisory services to the Company for five years for an annual advisory fee of $100,000. PIH also agreed to a non-compete for five years following the closing with respect to residential property insurance in Alabama, Florida, Georgia, Louisiana, South Carolina and Texas.
Standstill Agreement with PIH
Under the Standstill Agreement, PIH has agreed to vote all shares of the Companys common stock in accordance with the recommendations of the Companys Board of Directors with respect to any matter presented for a vote by the Companys shareholders where the Board of Directors has made a recommendation on such matter. The term of the Standstill Agreement is five years from the closing date, or through December 2, 2024.
In addition, during the five-year term of the Standstill Agreement, PIH shall not, directly or indirectly, do any of the following:
| Acquire, offer, propose to acquire, agree to acquire, purchase, or make a tender or exchange offer to acquire, any Voting Securities (as defined below), other than a direct issuance of Voting Securities by FedNat that is approved in writing in advance by FedNat; |
| Sell, offer, propose to sell, agree to sell, or accept any tender or exchange offer for, in any one transaction or in any series of related transactions, any Voting Securities in excess of: (i) 2.5% of all Voting Securities that are issued and outstanding at the time of such sale; or (ii) with respect to PIH only, in any three consecutive month period, 25.0% of the shares of FedNat common stock that were issued to PIH pursuant to the acquisition of the Maison Companies; |
| Engage or participate in any solicitation of proxies or consents regarding the FedNat common stock, make any stockholder proposals at a meeting of FedNats stockholders, or induce or attempt to induce any other person to initiate any stockholder proposals at any meeting of FedNats stockholders; |
| Publicly advise, seek to advise, encourage, seek to encourage, influence or seek to influence any person with respect to the voting of any shares of FedNat common stock held by other stockholders of FedNat; |
| Take action to nominate or present any person for election to the FedNat Board of Directors at any annual meeting of FedNats stockholders or any other meeting of FedNats stockholders called for the purpose of electing directors; |
| Seek, propose or make any public statements with respect to any FedNat action requiring approval of FedNats stockholders; |
| Deposit any Voting Securities in any voting trust or subject any Voting Securities to any arrangement or agreement with respect to the voting of any Voting Securities; |
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| Propose, or make any public statement with respect to, any form of business combination, restructuring, recapitalization, dissolution or similar transaction involving FedNat, including, without limitation, a merger, tender or exchange offer, share repurchase or liquidation of FedNats assets; |
| Seek, alone or in concert with others, (i) to call a meeting of stockholders of FedNat; (ii) representation on the Board; (iii) the removal of any FedNat officer and/or director; or (iv) to support financially, or through the giving of services or information, any Person who is suing or contemplating suing FedNat or any of its affiliates, or is conducting or contemplating a solicitation in opposition to a proposal by the Board or FedNats management; or |
| Enter into, engage in, encourage or otherwise participate in any transaction designed to circumvent any of the restrictions set forth in the Standstill Agreement. |
For purposes of the Standstill Agreement, Voting Securities are defined as (i) all shares of FedNat common stock, (ii) all other equity securities issued by FedNat pursuant to which the holder thereof has the right to vote on any matter relating to FedNat (whether such right is conveyed by the terms of the securities, by law, or otherwise), and (iii) all securities and other instruments of any type that are convertible into the securities described in items (i) and (ii) above, in each case that are owned or held, whether direct or indirectly, and whether beneficially or of record, by PIH at any time, regardless of when they were acquired and regardless of whether they were issued pursuant to the acquisition of the Maison Companies.
The foregoing restrictions are applicable to any purchaser or transferee of Voting Securities in a privately negotiated transaction.
Summary of the Exchange Offer
The following provides a summary of certain terms of the exchange offer. Please refer to the section The Exchange Offer appearing elsewhere in this prospectus for a more complete description of the exchange offer and the section Description of the Notes for a more complete description of the terms of the New Notes.
Old Notes | $100,000,000 in aggregate principal amount of 7.50% Senior Unsecured Notes due 2029. | |
New Notes | Up to $100,000,000 in aggregate principal amount of 7.50% Senior Unsecured Notes due 2029 that have terms that are identical in all material respects to the terms of the Old Notes, except that the New Notes are registered under the Securities Act and are not subject to transfer restrictions, bear a different CUSIP number and ISIN number from the Old Notes, are issuable in minimum denominations of $1,000 and integral multiples of $1,000 in excess thereof, and are not entitled to registration rights under any registration rights agreements. | |
Exchange Offer | We are offering to exchange the New Notes for a like principal amount of Old Notes. Subject to the terms of this exchange offer, promptly following the termination of the exchange offer, we will exchange New Notes for all Old Notes that have been validly tendered and not validly withdrawn prior to the expiration of the exchange offer. | |
Expiration Date | The exchange offer will expire at 5:00 p.m., New York City time, on , 2020, unless extended. | |
Withdrawal Rights | You may withdraw the tender of your Old Notes at any time before the expiration date. | |
Conditions to Exchange Offer | This exchange offer is subject to customary conditions, which we may waive. See The Exchange OfferConditions. The exchange offer is not conditioned upon any minimum amount of Old Notes being tendered for exchange. |
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Procedures for Tendering Old Notes | Since the Old Notes are represented by global book-entry notes, DTC, as depositary, or its nominee, is treated as the registered holder of the Old Notes and will be the only entity that can tender your Old Notes for New Notes.
In order to participate in the exchange offer, you must follow the procedures established by DTC for tendering Old Notes held in book-entry form. These procedures, which we call ATOP (Automated Tender Offer Program) procedures, require that (i) the exchange agent receive, prior to the expiration date of the exchange offer, a computer generated message known as an agents message that is transmitted through ATOP, and (ii) DTC has received (a) your instructions to exchange your Old Notes, and (b) your agreement to be bound by the terms of the accompanying letter of transmittal.
Please note that by signing, or agreeing to be bound by, the letter of transmittal, you will be making a number of important representations to us. See The Exchange OfferEligibility; Transferability. | |
Guaranteed Delivery Procedures for Tendering Old Notes | If your Old Notes are not immediately available, you cannot deliver your Old Notes, the letter of transmittal, or any other documentation in a timely fashion, or you cannot complete the applicable procedures of DTCs ATOP on or before the expiration date, you may tender your notes according to the guaranteed delivery procedures set forth under The Exchange OfferGuaranteed Delivery Procedures. | |
Material United States Federal Income Tax Considerations | The exchange of Old Notes for New Notes in the exchange offer generally should not constitute a taxable event for U.S. federal income tax purposes. See Material United States Federal Income Tax Considerations. You should consult your own tax advisor as to the tax consequences of exchanging your Old Notes for New Notes. | |
Appraisal Rights | Holders of Old Notes do not have appraisal or dissenters rights under applicable law or the indenture. See The Exchange OfferGeneral. | |
Registration Rights | Under the terms of the registration rights agreements that we entered into with the initial purchasers of the Old Notes at the time we issued the Old Notes, we agreed to register the New Notes and undertake this exchange offer. This exchange offer is intended to satisfy the rights of holders of Old Notes under those registration rights agreements. After the exchange offer is completed, we will have no further obligations, except under certain limited circumstances, to provide for any exchange or undertake any further registration with respect to the Old Notes. | |
Resale of the New Notes | Based upon existing interpretations of the Securities Act by the staff of the SEC contained in several no-action letters issued to third parties, we believe that the New Notes may be offered for resale, resold or otherwise transferred by you without compliance with the registration and prospectus delivery requirements of the Securities Act, provided that: | |
you are acquiring the New Notes in the ordinary course of your business; | ||
you are not participating or engaged in, do not intend to participate or engage in, and have no arrangement or understanding with any person to participate in, the distribution of the New Notes issued to you; | ||
you are not an affiliate of ours within the meaning of Rule 405 under the Securities Act; and |
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you are not acting on behalf of any person who could not truthfully make these statements. | ||
Our belief that transfers of New Notes would be permitted without registration or prospectus delivery under the conditions described above is based on interpretations by the staff of the SEC given to other, unrelated issuers in similar exchange offers. The staff of the SEC has not considered this exchange offer in the context of a no-action letter, and we cannot assure you that the staff of the SEC would make a similar interpretation with respect to our exchange offer.
If our belief is not accurate and you transfer a New Note without delivering a prospectus meeting the requirements of the Securities Act or without an exemption from such requirements, you may incur liability under the Securities Act. We do not and will not assume, or indemnify you against, such liability.
Each broker-dealer that receives New Notes for its own account under the exchange offer in exchange for Old Notes that were acquired by the broker-dealer as a result of market-making or other trading activity must acknowledge that it will deliver a prospectus meeting the requirements of the Securities Act in connection with any resale of the New Notes.
See The Exchange OfferEligibility; Transferability and Plan of Distribution. | ||
Consequences of Failing to Exchange Old Notes | Any Old Notes that are not exchanged in the exchange offer will continue to be governed by the indenture relating to the Old Notes and the terms of the Old Notes. Old Notes that are not exchanged will remain subject to the restrictions on transfer described in the Old Notes, and you will not be able to offer or sell the Old Notes except under an exemption from the requirements of the Securities Act or unless the Old Notes are registered under the Securities Act. Upon the completion of the exchange offer, we will have no further obligations, except under limited circumstances, to provide for registration of the Old Notes under the U.S. federal securities laws. If you do not participate in the exchange offer, the liquidity of your Old Notes could be adversely affected. See The Exchange OfferConsequences of Failure to Exchange. | |
Use of Proceeds | We will not receive any cash proceeds from the exchange of Old Notes for New Notes as a result of the exchange offer. | |
Cancellation of Exchanged Old Notes | Old Notes that are surrendered in exchange for New Notes will be retired and cancelled by us upon receipt and will not be reissued. Accordingly, the issuance of the New Notes under this exchange offer will not result in any increase in our outstanding indebtedness. | |
Exchange Agent | The Bank of New York Mellon is serving as the exchange agent for this exchange offer. See The Exchange OfferExchange Agent for the address and telephone number of the exchange agent. |
Summary of the New Notes
The following provides a summary of certain terms of the New Notes. The New Notes have terms that are identical in all material respects to the terms of the Old Notes, except that the New Notes are registered under the Securities Act and are not subject to transfer restrictions, bear a different CUSIP number and ISIN number from the Old Notes, are issuable in minimum denominations of $1,000 and integral multiples of $1,000 in excess thereof, and are not entitled to registration rights under any registration rights agreements. The New Notes will evidence the same debt as the Old Notes and will be
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governed by the same indenture under which the Old Notes were issued, as amended by the First Supplemental Indenture. Please refer to the section Description of the Notes for a complete description of the terms of the New Notes. References in this prospectus to the notes include both the Old Notes and the New Notes unless otherwise specified or the context otherwise requires.
Issuer | FedNat Holding Company | |
Securities Offered | 7.50% Senior Unsecured Notes due 2029. | |
Aggregate Principal Amount | Up to $100,000,000. | |
Maturity Date | March 15, 2029, unless previously redeemed. | |
Form and Denomination | The New Notes will be issued only in fully registered form without interest coupons, in minimum denominations of $1,000 and any integral multiple of $1,000 in excess thereof. Unless otherwise required for institutional accredited investors, the New Notes will be evidenced by a global note deposited with the trustee for the New Notes, as custodian for DTC, and transfers of beneficial interests will be facilitated only through records maintained by DTC and its participants. | |
Interest Rate and Interest Rate Payment Dates | The New Notes will bear interest at a fixed rate equal to 7.50% per year, subject to adjustment as described below, payable semi-annually in arrears on March 15 and September 15 of each year, beginning on March 15, 2020.
The interest rate payable on the New Notes will be subject to adjustment from time to time if, at any time, the Applicable Rating Agency downgrades or upgrades the credit rating assigned to the New Notes, in which case the interest rate shall be 7.50% per year plus an additional 50 basis points for each notch downgrade below BBB- (or its equivalent rating) by the Applicable Rating Agency.
See Description of the NotesPrincipal, Maturity and Interest for the definition of Applicable Rating Agency. | |
Day Count Convention | 30-day month/360-day year. | |
Record Dates | Each interest payment will be made to the holders of record who held the New Notes at the close of business on the fifteenth calendar day prior to the applicable interest payment date. | |
Ranking | The New Notes will be our general unsecured obligations and will: | |
rank senior in right of payment to our existing and future debt and other obligations that expressly provide for their subordination to the New Notes; | ||
rank equally in right of payment to all of our existing and future senior unsecured debt; | ||
be effectively subordinated in right of payment to all of our existing and future secured indebtedness to the extent of the value of the assets securing such indebtedness; and | ||
be structurally subordinated to all of the existing and future indebtedness and liabilities of our subsidiaries. |
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Optional Redemption | On or after March 15, 2024, we may redeem some or all of the New Notes at any time at the redemption prices listed in Description of the NotesOptional Redemption, plus accrued and unpaid interest, if any, to the redemption date. We may also redeem some or all of the New Notes before March 15, 2024 at a redemption price of 100% of the principal amount plus accrued and unpaid interest, if any, to the redemption date, plus a make whole premium.
The New Notes are not subject to repayment at the option of the holders and there is no sinking fund for the New Notes. | |
Change of Control | If we experience certain kinds of changes of control, we must offer to purchase the New Notes at 101% of their principal amount, plus accrued and unpaid interest, if any. For more details, see Description of the NotesChange of Control. | |
Limitation on Incurrence of Indebtedness | The indenture limits our ability to incur indebtedness unless (1) no event of default has occurred and is continuing and (2) our Debt to Capital Ratio as of the balance sheet date immediately preceding the date on which such additional indebtedness is incurred would have been less than 35%, determined on a pro forma basis (including a pro forma application of the net proceeds therefrom) as if the additional indebtedness and all other indebtedness incurred since the immediately preceding balance sheet date had been incurred and the proceeds therefrom applied as of such day. The Debt to Capital Ratio and the restrictions of the covenant do not apply to indebtedness outstanding on the issuance date, intercompany indebtedness, indebtedness up to $10,000,000 outstanding at any time, and other exclusions set forth in the indenture.
See Description of the NotesLimitation on Incurrence of Indebtedness for the definition of Debt to Capital Ratio. | |
Maintenance of Reinsurance | While the New Notes are outstanding, the indenture requires us to, and to cause each of our insurance subsidiaries to, purchase and maintain reinsurance from reinsurers with a minimum financial strength rating of A- by A.M. Best Company or A- by Standard and Poors, unless such reinsurance limits have been fully collateralized by the applicable reinsurer. In addition, the indenture sets forth minimum standards for such reinsurance.
For more details, see Description of the NotesMaintenance of Reinsurance. |
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Limitation on Restricted Payments | The indenture prohibits us and our subsidiaries from, directly or indirectly:
(a) declaring or paying any dividend on or in respect of, its capital stock or purchasing, redeeming, retiring or otherwise acquiring for value any capital stock of the Company (other than wholly in exchange for capital stock of the Company (other than Disqualified Stock as defined in indenture)); or
(b) making any payment or other distribution on any other securities of the Company or any of its subsidiaries that rank junior to or pari passu with the New Notes, including on any indebtedness of the Company or any of its subsidiaries (all such payments and other actions under (a) and (b), are referred to as a Restricted Payment), unless, at the time of, and after giving effect to such Restricted Payment on a pro forma basis, (i) no default shall have occurred and be continuing (or would reasonably be expected to result therefrom); and (ii) the Companys Debt to Capital Ratio would be less than 35%.
For more details, see Description of the NotesLimitation on Restricted Payments. | |
Certain Other Indenture Covenants | The indenture contains other covenants that limit, among other things, our ability and the ability of our subsidiaries to create liens on assets and transfer or sell assets. These covenants are subject to important exceptions and qualifications, which are described in Description of the NotesCertain Other Indenture Covenants. | |
Listing; No Public Market | The New Notes are a new issue of securities with no established trading market and we do not expect any public market to develop in the future for the New Notes. We do not intend to list the New Notes on any national securities exchange or quotation system. | |
Risk Factors | See Risk Factors beginning on page 9 of this prospectus, as well as in our reports filed with the SEC, and other information included or incorporated by reference in this prospectus for a discussion of factors you should consider carefully before deciding to participate in the exchange offer. | |
Trustee | The Bank of New York Mellon, or successor if replaced in accordance with the applicable provisions of the indenture. | |
Governing Law | The indenture and the New Notes will be governed by and construed in accordance with the laws of the State of New York. |
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In consultation with your own advisors, you should carefully consider, among other matters, the factors set forth below as well as the other information included or incorporated by reference in this prospectus before deciding whether to participate in the exchange offer. In particular, you should carefully consider, among other things, the factors described under the caption Risk Factors in our Annual Report on Form 10-K for the fiscal year ended December 31, 2018, as amended, which is incorporated herein by reference, as updated by our subsequently filed Quarterly Reports on Form 10-Q and Current Reports on Form 8-K. If any of the risks contained in or incorporated by reference into this prospectus develop into actual events, our business, financial condition, liquidity, results of operations and prospects could be materially and adversely affected, the value of the New Notes could decline, our ability to repay the New Notes may be impaired, and you may lose all or part of your investment. Some statements in this prospectus, including statements in the following risk factors, constitute forward-looking statements. See the Cautionary Note Regarding Forward-Looking Statements section in this prospectus.
Risks Related to Our Business
We may face difficulties related to our recently completed acquisition of the Maison Companies, which could harm our growth or operating results.
On December 2, 2019, we completed our previously announced acquisition of the Maison Companies (see SummaryMaison Acquisition). As with any acquisition, we face the substantial risks associated with acquisitions of existing businesses. These risks include, but are not limited to, the risk that we may not be able to fully integrate the operations, personnel, services or technologies of the Maison Companies; the risks associated with determining adequate loss reserves for the insurance operations we acquired; the potential disruption of our ongoing businesses; the diversion of management attention because of the substantial management time and resources required; and the difficulty in developing or maintaining controls and procedures. We have begun the process of integrating the operations we acquired. There can be no assurances, however, that we will be able to successfully complete this integration.
Completing the integration of the Maison Companies may require us to use cash resources, incur contingent liabilities, amortize intangible assets, or write-off acquisition-related expenses. We may also be faced with material liabilities not disclosed to us as part of our due diligence process. If we are not able to address these liabilities and otherwise successfully integrate the acquired business, we may not receive the intended benefits of this acquisition. As a result, our ongoing business, financial condition and results of operations could be materially adversely affected.
Risks Related to the Exchange Offer
If you do not properly tender your Old Notes, you will continue to hold unregistered Old Notes and your ability to transfer Old Notes will be adversely affected.
We will only issue New Notes in exchange for Old Notes that you timely and properly tender. Therefore, you should allow sufficient time to ensure timely delivery of the Old Notes and you should carefully follow the instructions on how to tender your Old Notes. Neither we nor the exchange agent are required to tell you of any defects or irregularities with respect to your tender of Old Notes. See The Exchange OfferProcedures for Tendering Old Notes.
If you do not exchange your Old Notes for New Notes in the exchange offer, you will continue to be subject to the restrictions on transfer of your Old Notes described in the legend on the certificates for your Old Notes. In general, you may only offer or sell the Old Notes if they are registered under the Securities Act and applicable state securities laws, or you offer and sell under an exemption from these requirements. We do not plan to register any sale of the Old Notes under the Securities Act.
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The tender of Old Notes under the exchange offer will reduce the principal amount of the Old Notes outstanding, which may have an adverse effect upon, and increase the volatility of, the market price of the Old Notes due to reduction in liquidity.
If you fail to exchange your Old Notes, they will continue to be restricted securities and may become less liquid.
Old Notes that you do not tender or that we do not accept will, following the exchange offer, continue to be restricted securities, and may not be offered or sold except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act and applicable state securities laws.
Because we anticipate that most holders of the Old Notes will elect to exchange their Old Notes, we expect that the liquidity of the market for Old Notes remaining after the completion of the exchange offer will be substantially limited. Any Old Notes tendered and exchanged in the exchange offer will reduce the aggregate principal amount of the Old Notes outstanding. Following the exchange offer, if you do not tender your Old Notes you generally will not have any further registration rights, and your Old Notes will continue to be subject to certain transfer restrictions. Accordingly, the liquidity of the market for the Old Notes could be adversely affected. A more limited trading market might adversely affect the liquidity, market price and price volatility of such untendered Old Notes.
You may not receive New Notes in the exchange offer if you do not properly follow the exchange offer procedures.
We will issue New Notes in exchange for your Old Notes only if you properly tender the Old Notes before expiration of the exchange offer. Neither we nor the exchange agent are required to tell you of any defects or irregularities with respect to your tender of Old Notes. If you are the beneficial holder of Old Notes that are held through your broker, dealer, commercial bank, trust company or other nominee, and you wish to tender such Old Notes in the exchange offer, you should promptly contact the person through whom your Old Notes are held and instruct that person to tender on your behalf in accordance with the procedures described in this prospectus and the accompanying transmittal letter.
Some holders who exchange their Old Notes may be deemed to be underwriters.
Based on interpretations of the staff of the SEC contained in certain no action letters addressed to other parties, we believe that you may offer for resale, resell or otherwise transfer the New Notes without compliance with the registration and prospectus delivery requirements of the Securities Act. However, in some instances described in this prospectus under Plan of Distribution, certain holders of New Notes will remain obligated to comply with the registration and prospectus delivery requirements of the Securities Act to transfer the New Notes. If such a holder transfers any New Notes without delivering a prospectus meeting the requirements of the Securities Act or without an applicable exemption from registration under the Securities Act, such a holder may incur liability under the Securities Act. We do not and will not assume, or indemnify such a holder against, such liability.
Risks Related to the Notes
Your right to receive payments on the notes is effectively subordinated to the rights of our existing and future secured creditors.
Holders of our secured indebtedness and the secured indebtedness of the guarantors could have claims that are prior to the claims of holders of the notes to the extent of the value of the assets securing that other indebtedness. The notes are effectively subordinated to all of our secured indebtedness to the extent of the value of the assets securing such indebtedness. In the event of any distribution or payment of our assets in any foreclosure, dissolution, winding-up, liquidation, reorganization, or other bankruptcy proceeding, holders of secured indebtedness will have a prior claim to those of our assets that constitute their collateral. Holders of the notes will participate ratably with all holders of our unsecured indebtedness that is deemed to be of the same class as the notes, and potentially with all of our other general creditors, based upon the respective amounts owed to each holder or creditor, in our remaining assets. In any of the foregoing events, we cannot assure you that there will be sufficient assets to pay amounts due on the notes. As a result, holders of the notes may receive less, ratably, than holders of secured indebtedness.
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As of September 30, 2019, the aggregate amount of our long-term debt, net of deferred financing costs, was approximately $98.5 million. We are permitted to incur substantial additional indebtedness, including secured debt, in the future under the terms of the indenture governing the notes. See Description of the NotesLimitation on Incurrence of Indebtedness.
Restrictive covenants in the indenture governing the notes may restrict our ability to pursue our business strategies.
The indenture governing the notes limits our ability, and the terms of any future indebtedness may limit our ability, among other things, to:
| incur or guarantee additional indebtedness; |
| issue disqualified and preferred stock; |
| make certain investments; |
| pay dividends or make distributions on our capital stock; |
| sell assets, including capital stock of restricted subsidiaries; |
| agree to payment restrictions affecting our restricted subsidiaries; |
| consolidate, merge, sell or otherwise dispose of all or substantially all of our assets; |
| enter into transactions with our affiliates; and |
| incur liens. |
The restrictions contained in the indenture governing the notes could also limit our ability to plan for or react to market conditions, meet capital needs or make acquisitions or otherwise restrict our activities or business plans.
We are a holding company with no operations and may not have access to sufficient cash to make payments on the notes.
We are a holding company and have limited direct operations. Our most significant assets are the equity interests we hold in our subsidiaries. As a result, we are dependent upon dividends and other payments from our subsidiaries to generate the funds necessary to meet our outstanding debt service and other obligations and such dividends may be restricted by law, the instruments governing our indebtedness, including the indenture governing the notes, or other agreements of our subsidiaries. Our subsidiaries may not generate sufficient cash from operations to enable us to make principal and interest payments on our indebtedness, including the notes. In addition, our subsidiaries are separate and distinct legal entities and any payments of dividends, distributions, loans or advances to us by our subsidiaries could be subject to legal and contractual restrictions on dividends. In addition, payments to us by our subsidiaries are contingent upon our subsidiaries earnings. Subject to certain qualifications, our subsidiaries are permitted under the terms of our indebtedness, including the indenture governing the notes, to incur additional indebtedness that may restrict payments from those subsidiaries to us. We cannot assure you that agreements governing the current and future indebtedness of our subsidiaries will permit those subsidiaries to provide us with sufficient cash to fund payments of principal premiums, if any, and interest on the notes when due.
We may not be able to satisfy our obligations to holders of the notes upon a change of control.
Upon the occurrence of a change of control, as defined in the indenture, each holder of the notes has the right to require us to purchase the notes at a price equal to 101% of the principal amount, together with any accrued and unpaid interest, if any. Our failure to purchase, or give notice of purchase of, the notes would be a default under the indenture.
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If a change of control occurs, we may not have enough assets to satisfy all obligations under the indenture related to the notes. Upon the occurrence of a change of control we could seek to refinance the notes or obtain a waiver from you as a holder of the notes. We cannot assure you, however, that we would be able to obtain a waiver on commercially reasonable terms, if at all. No assurances can be given that any court would enforce the change of control provisions in the indenture governing the notes as written for the benefit of the holders, or as to how these change of control provisions would be impacted were we to become a debtor in a bankruptcy case.
The trading price of the notes may be volatile and can be directly affected by many factors, including our credit rating.
The trading price of the notes could be subject to significant fluctuation in response to, among other factors, changes in our operating results, interest rates, the market for non-investment grade securities, general economic conditions and securities analysts recommendations, if any, regarding our securities.
Credit rating agencies continually revise their ratings for companies they follow, including us. Any ratings downgrade could adversely affect the trading price of the notes, or the trading market for the notes, to the extent a trading market for the notes develops. The condition of the financial and credit markets and prevailing interest rates have fluctuated in the past and are likely to fluctuate in the future and any fluctuation may impact the trading price of the notes.
Our indebtedness could adversely affect our financial results and prevent us from fulfilling our obligations under the notes.
In addition to our currently outstanding indebtedness, we may be able to borrow substantial additional indebtedness in the future. If new indebtedness is incurred in addition to our current debt levels, the related risks that we now face could increase. Our indebtedness, including the indebtedness we may incur in the future, could have important consequences for the holders of the notes, including:
| limiting our ability to satisfy our obligations with respect to the notes; |
| increasing our vulnerability to general adverse economic industry conditions; |
| limiting our ability to obtain additional financing to fund future working capital, capital expenditures and other general corporate requirements; |
| requiring a substantial portion of our cash flow from operations for the payment of principal of and interest on our indebtedness and thereby reducing our ability to use our cash flow to fund working capital, capital expenditures and general corporate requirements; |
| limiting our flexibility in planning for, or reacting to, changes in our business and the industry; and |
| putting us at a disadvantage compared to competitors with less indebtedness. |
Changes in our credit ratings may adversely affect your investment in the notes.
The credit ratings on the notes are an assessment by rating agencies of our ability to pay our debts when due. These ratings are not recommendations to purchase, hold or sell the notes, inasmuch as the ratings do not comment as to market price or suitability for a particular investor, are limited in scope, and do not address all material risks relating to an investment in the notes, but rather reflect only the view of each rating agency at the time the rating is issued. The ratings are based on current information furnished to the ratings agencies by us and information obtained by the ratings agencies from other sources. An explanation of the significance of such rating may be obtained from such rating agency. There can be no assurance that such credit ratings will remain in effect for any given period of time or that such ratings will not be lowered, suspended or withdrawn entirely by the rating agencies, if, in each rating agencys judgment, circumstances so warrant.
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Any ratings of our long-term debt are based on a number of factors, including our financial strength as well as factors not entirely within our control, including conditions affecting the financial services industry generally. There can be no assurance that we will not receive adverse changes in our ratings in the future, which could adversely affect the cost and other terms upon which we are able to obtain funding and the way in which we are perceived in the capital markets. Actual or anticipated changes or downgrades in our credit ratings, including any announcement that our ratings are under review for a downgrade, could affect the market value and liquidity of the notes and increase our borrowing costs.
We will not receive any cash proceeds from the exchange offer. In consideration for issuing the New Notes as contemplated by this prospectus, we will receive in exchange Old Notes in like principal amount. We intend to cancel all Old Notes received in exchange for New Notes in the exchange offer.
General
In connection with the issuance of the Old Notes on March 5, 2019, we entered into registration rights agreements with the initial purchasers of the Old Notes, which provide for the exchange offer we are making pursuant to this prospectus. The exchange offer will permit eligible holders of Old Notes to exchange their Old Notes for New Notes that are identical in all material respects with the Old Notes, except that:
| the New Notes have been registered with the SEC under the Securities Act and, as a result, will not bear any legend restricting their transfer; |
| the New Notes bear different CUSIP and ISIN numbers from the Old Notes; |
| the New Notes will not be subject to transfer restrictions; |
| the New Notes are issuable in minimum denominations of $1,000 and integral multiples of $1,000 in excess thereof; and |
| the New Notes will not be entitled to registration rights under any registration rights agreements or otherwise. |
The New Notes will evidence the same debt as the Old Notes. Holders of the New Notes will be entitled to the benefits of the indenture. Accordingly, the New Notes and the Old Notes will be treated as a single series of debt securities under the indenture. Old Notes that are not tendered for exchange in the exchange offer will remain outstanding and interest on those Old Notes will continue to accrue at the applicable interest rate and be subject to the terms of the indenture.
The exchange offer does not depend on any minimum aggregate principal amount of Old Notes being tendered for exchange.
We intend to conduct the exchange offer in accordance with the provisions of the registration rights agreements and the applicable requirements of the Exchange Act, and the related rules and regulations of the SEC applicable to transactions of this type.
We will be deemed to have accepted validly tendered Old Notes when and if we have given oral or written notice to the exchange agent of our acceptance of such Old Notes. Subject to the terms and conditions of this exchange offer, delivery of New Notes will be made by the exchange agent promptly after receipt of our notice of acceptance. The
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exchange agent will act as agent for the holders of Old Notes tendering their Old Notes for the purpose of receiving New Notes from us in exchange for such tendered and accepted Old Notes. If any tendered Old Notes are not accepted for exchange because of an invalid tender, the occurrence of other events described in this prospectus or otherwise, we will return or cause to be returned the certificates for any unaccepted Old Notes, at our expense, to the tendering holder promptly after the expiration of the exchange offer.
If a holder of Old Notes validly tenders Old Notes in the exchange offer, the tendering holder will not be required to pay us brokerage commissions or fees. In addition, subject to the instructions in the letter of transmittal and certain limited exceptions described in this prospectus, the tendering holder will not have to pay transfer taxes for the exchange of Old Notes. Subject to certain exceptions described in this prospectus, we will pay all of the expenses in connection with the exchange offer, other than certain applicable taxes. See Fees and Expenses.
Holders of outstanding Old Notes do not have any appraisal, dissenters or similar rights in connection with the exchange offer. Outstanding Old Notes which are not tendered, or are tendered but not accepted, in connection with the exchange offer will remain outstanding. See Risk FactorsRisks Related to the Exchange OfferIf you do not properly tender your Old Notes, you will continue to hold unregistered Old Notes and your ability to transfer Old Notes will be adversely affected.
NEITHER WE NOR THE EXCHANGE AGENT ARE MAKING ANY RECOMMENDATION TO THE HOLDERS OF THE OUTSTANDING OLD NOTES AS TO WHETHER TO TENDER OR REFRAIN FROM TENDERING ALL OR ANY PORTION OF THEIR OUTSTANDING OLD NOTES IN THE EXCHANGE OFFER. IN ADDITION, NEITHER WE NOR THE EXCHANGE AGENT HAVE AUTHORIZED ANYONE TO MAKE ANY SUCH RECOMMENDATION. HOLDERS OF THE OUTSTANDING OLD NOTES MUST MAKE THEIR OWN DECISION WHETHER TO TENDER PURSUANT TO THE EXCHANGE OFFER, AND, IF SO, THE AGGREGATE PRINCIPAL AMOUNT OF OUTSTANDING OLD NOTES TO TENDER AFTER READING THIS PROSPECTUS AND THE LETTER OF TRANSMITTAL AND CONSULTING WITH THEIR ADVISERS, IF ANY, BASED ON THEIR FINANCIAL POSITION AND INDIVIDUAL REQUIREMENTS.
Registration Rights Agreements
The following provides a summary of certain terms of the registration rights agreements. This summary is qualified in its entirety by reference to the complete version of the registration rights agreements, the form of which is incorporated by reference as an exhibit to the registration statement of which this prospectus is a part.
Under the terms of the registration rights agreements that we entered into with the purchasers of the Old Notes at the time we issued the Old Notes, we agreed to register the New Notes and undertake this exchange offer. This exchange offer is intended to satisfy the rights of holders of Old Notes under those registration rights agreements. After the exchange offer is completed, we will have no further obligations, except under the limited circumstances described below, to provide for any exchange or undertake any further registration with respect to the Old Notes.
Under the terms of the registration rights agreements, we agreed, among other things, to:
| on or prior to the 45th day after the closing date of the Acquisition, file a registration statement with the SEC under the Securities Act with respect to a registered offer to exchange the Old Notes for substantially identical notes that do not contain transfer restrictions and will be registered under the Securities Act; and |
| use our reasonable best efforts to cause that registration statement to become effective no later than 30 days after it is filed with the SEC. |
The registration rights agreements also require us to commence the exchange offer promptly after the effectiveness of the registration statement and to keep the exchange offer open for not less than 20 business days and not more than 40 business days (or longer if required by applicable law) after the date on which notice of the exchange offer is mailed to the holders of the Old Notes.
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We also agreed to issue and exchange New Notes for all Old Notes validly tendered and not validly withdrawn before the expiration of the exchange offer. We are sending this prospectus, together with a letter of transmittal, to all the holders of the Old Notes known to us. For each Old Note validly tendered to us in the exchange offer and not validly withdrawn, the holder will receive a New Note having a principal amount equal to the principal amount of the tendered Old Note. Old Notes may be exchanged, and New Notes will be issued, only in minimum denominations of $1,000 and integral multiples of $1,000 in excess thereof.
Our obligation to register the New Notes will terminate upon completion of the exchange offer. However, under certain limited circumstances specified in the registration rights agreements, we may be required to file a shelf registration statement for a continuous offer in connection with the Old Notes. We further agreed that under certain circumstances we would file a shelf registration statement with the SEC that would allow resales by certain holders of the Old Notes in lieu of such holders participating in the exchange offer.
Eligibility; Transferability
We are making this exchange offer in reliance on interpretations of the staff of the SEC set forth in several no-action letters provided to other parties. We have not sought our own no-action letter from the staff of the SEC with respect to this particular exchange offer. However, based on these existing SEC staff interpretations, we believe that you, or any other person receiving New Notes, may offer for resale, resell or otherwise transfer the New Notes without complying with the registration and prospectus delivery requirements of the U.S. federal securities laws, if:
| you are, or the person receiving the New Notes is, acquiring the New Notes in the ordinary course of business; |
| you do not, nor does any such person, have an arrangement or understanding with any person to participate in any distribution (within the meaning of the Securities Act) of the New Notes; |
| you are not, nor is any such person, our affiliate as such term is defined under Rule 405 under the Securities Act; |
| you are not, or any such person is not, a broker-dealer registered under the Exchange Act, and you are not engaged in or such person is not engaged in, and do not intend to engage in, any distribution (within the meaning of the Securities Act) of the New Notes; and |
| you are not acting on behalf of any person who could not truthfully make these statements. |
To participate in the exchange offer, you must represent as a holder of Old Notes that each of these statements is true.
In addition, in order for broker-dealers registered under the Exchange Act to participate in the exchange offer, each such broker-dealer must also (i) represent that it is participating in the exchange offer for its own account and is exchanging Old Notes acquired as a result of market-making activities or other trading activities; (ii) confirm that it has not entered into any arrangement or understanding with us or any of our affiliates to distribute the New Notes; and (iii) acknowledge that it will deliver a prospectus meeting the requirements of the Securities Act in connection with any resale of the New Notes. The letter of transmittal to be delivered in connection with a tender of the Old Notes states that by acknowledging that it will deliver, and by delivering, a prospectus, a broker-dealer will not be deemed to admit that it is an underwriter within the meaning of the Securities Act. This prospectus, as it may be amended or supplemented from time to time, may be used by a broker-dealer in connection with resale of the New Notes received in exchange for the Old Notes where such Old Notes were acquired by such broker-dealer as a result of market-making activities or other trading activities. We have agreed that, for a period of 180 days following the expiration date, we will amend or supplement this prospectus to expedite or facilitate the disposition of any New Notes by such broker-dealers.
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Any holder of Old Notes (i) who is our affiliate, (ii) who does not acquire the New Notes in the ordinary course of business, (iii) who intends to participate in the exchange offer for the purpose of distributing the New Notes, or (iv) who is a broker-dealer who purchased the Old Notes directly from us:
| will not be able to rely on the interpretation of the staff of the SEC set forth in the no-action letters described above; |
| will not be able to tender Old Notes in the exchange offer; and |
| must comply with the registration and prospectus delivery requirements of the Securities Act in connection with any sale or transfer of the New Notes, unless the sale or transfer is made pursuant to an exemption from those requirements. |
The exchange offer is not being made to, nor will we accept tenders for exchange from, holders of Old Notes in any jurisdiction in which the exchange offer or the acceptance of the exchange offer would not be in compliance with the securities or blue sky laws of such jurisdiction.
Expiration of the Exchange Offer; Extensions; Amendments
The exchange offer will expire at 5:00 p.m., New York City time on , 2020, which we refer to as the expiration date, unless we extend the exchange offer. If we extend the exchange offer, the expiration date will be the latest date and time to which the exchange offer is extended. To extend the exchange offer, we will notify the exchange agent and each registered holder of the Old Notes of any extension before 9:00 a.m., New York City time on the next business day after the previously scheduled expiration date. During any such extension, all Old Notes previously tendered will remain subject to the exchange offer and may be accepted for exchange by us.
We reserve the right to extend the exchange offer, delay accepting any tendered Old Notes or, if any of the conditions described below under the heading Conditions have not been satisfied, to terminate the exchange offer. We also reserve the right to amend the terms of the exchange offer in any manner. We will give oral or written notice of any delay, extension, termination or amendment to the exchange agent. We will keep the exchange offer open for not less than 20 business days, or longer if required by applicable law, after the date on which notice of the exchange offer is mailed to holders of the Old Notes.
If we amend the exchange offer in a manner that we consider material, we will disclose that amendment by means of a prospectus supplement, and we will extend the exchange offer so that at least five business days remain in the exchange offer following notice of the material change.
If we determine to make a public announcement of any delay, extension, amendment or termination of the exchange offer, we will do so by making a timely release through an appropriate news agency.
If we terminate or withdraw the exchange offer, we will promptly return any Old Notes deposited, under the exchange offer as required by Rule 14e-1(c) under the Exchange Act.
Conditions
The exchange offer is not conditioned on any minimum aggregate principal amount of Old Notes being tendered or accepted for exchange. Notwithstanding any other term of the exchange offer, we will not be required to accept for exchange, or issue any New Notes for, any Old Notes, and may terminate or amend the exchange offer before the acceptance of the Old Notes, if:
| such Old Notes are tendered to us other than in accordance with the terms and conditions of the exchange offer; |
| we determine that the exchange offer violates any law, statute, rule, regulation or interpretation by the staff of the SEC; or |
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| any action or proceeding is instituted or threatened in any court or by or before any governmental agency relating to the exchange offer which, in our judgment, could reasonably be expected to impair our ability to proceed with the exchange offer. |
The conditions listed above are for our sole benefit and may be asserted by us regardless of the circumstances giving rise to any of these conditions. We may waive these conditions in our absolute discretion in whole or in part at any time and from time to time prior to the expiration date. Our failure at any time to exercise any of the above rights will not be considered a waiver of that right, and that right will be considered an ongoing right which we may assert at any time and from time to time.
In addition, we will not accept for exchange any Old Notes tendered, and no New Notes will be issued in exchange for those Old Notes, if at any time any stop order is threatened or issued by the SEC with respect to the registration statement for the exchange offer and the New Notes or the qualification of the indenture under the Trust Indenture Act of 1939, as amended, or the Trust Indenture Act. In any such event, we must use our commercially reasonable efforts to obtain the withdrawal of any stop order as soon as practicable.
Further, we will not be obligated to accept for exchange the Old Notes of any holder that has not made to us the representations described under Eligibility; Transferability and Plan of Distribution.
Procedures for Tendering Old Notes
In order to participate in the exchange offer, you must validly tender your Old Notes to the exchange agent as described below. It is your responsibility to validly tender your Old Notes. We have the right to waive any defects. However, we are not required to waive defects and are not required to notify you of defects in your tender.
If you have any questions or need help in exchanging your Old Notes, please call the exchange agent, whose address and phone number are set forth in Exchange Agent.
All of the Old Notes were issued in book-entry form, and all of the Old Notes are currently represented by global certificates held for the account of DTC. Accordingly, DTC will be the only entity that can tender your Old Notes for New Notes. Therefore, to tender Old Notes subject to the exchange offer and to obtain New Notes you must:
| comply with DTCs ATOP procedures described below; and |
| the exchange agent must receive a timely confirmation of a book-entry transfer (which we refer to as a Book-Entry Confirmation) of the Old Notes into its account at DTC through ATOP pursuant to the procedure for book-entry transfer described below, along with a properly transmitted agents message (as defined below), before the expiration date of the exchange offer. |
Following receipt, the exchange agent will establish an ATOP account with DTC for purposes of the exchange offer promptly after the commencement of the exchange offer. Any financial institution that is a DTC participant, including your broker or bank, may make a book-entry tender of outstanding Old Notes by causing the book-entry transfer of such Old Notes into our ATOP account in accordance with DTCs procedures for such transfers. In connection with the transfer, DTC must send an agents message to the exchange agent on or prior to 5:00 p.m., New York City time, on the expiration date of the exchange offer.
The term agents message means a message transmitted by the DTC participants to DTC, and thereafter transmitted by DTC to the exchange agent, which states that DTC has received an express acknowledgement from the participant stating that such participant and beneficial holder agree to be bound by the terms of the exchange offer, including the letter of transmittal, and that the agreement may be enforced against such participant.
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Each agents message must include the following information:
| name of the beneficial owner tendering such Old Notes; |
| account number of the beneficial owner tendering such Old Notes; |
| principal amount of Old Notes tendered by such beneficial owner; and |
| a confirmation that the beneficial owner of the Old Notes has made the representations for our benefit set forth under Representations below. |
If you cannot tender your Old Notes by the expiration date, you must comply with the guaranteed delivery procedures described under Guaranteed Delivery Procedures.
The delivery of the Old Notes through DTC, and any transmission of an Agents Message through ATOP, is at the election and risk of the person tendering Old Notes. If we do not accept any tendered Old Notes for exchange or if Old Notes are submitted for a greater principal amount than the holder desires to exchange, the unaccepted or non-exchanged Old Notes will be returned, without expense, to their tendering holder. Such non-exchanged Old Notes will be credited to an account maintained with DTC. These actions will occur promptly after the expiration or termination of the exchange offer.
The tender by a holder of Old Notes that is not validly withdrawn prior to the expiration date of the exchange offer and that is accepted by us will constitute a binding agreement between us and the holder in accordance with the terms and subject to the conditions set forth in this prospectus and in the accompanying letter of transmittal. By using the ATOP procedures to exchange Old Notes, you will not be required to deliver a letter of transmittal to the exchange agent. However, you will be bound by its terms, and you will be deemed to have made the acknowledgements and the representations and warranties it contains, just as if you had signed it.
We will determine all questions as to the validity, form, eligibility (including time of receipt) and acceptance and withdrawal of tendered Old Notes in our sole discretion. We reserve the absolute right to reject any and all Old Notes not properly tendered or any Old Notes whose acceptance by us would, in the opinion of our counsel, be unlawful. We also reserve the right to waive any defects, irregularities or conditions of tender as to any particular Old Notes either before or after the expiration date. Our interpretation of the terms and conditions of the exchange offer (including the instructions in the accompanying letter of transmittal) will be final and binding on all parties. Unless waived, any defects or irregularities in connection with tenders of Old Notes must be cured within a time period we will reasonably determine. Although we intend to request the exchange agent to notify holders of defects or irregularities relating to tenders of Old Notes, neither we, the exchange agent nor any other person will have any duty or incur any liability for failure to give such notification. Tenders of Old Notes will not be considered to have been made until such defects or irregularities have been cured or waived. If we waive any terms or conditions with respect to a noteholder, we will extend the same waiver to all noteholders with respect to that term or condition. Any Old Notes received by the exchange agent that are not validly tendered and as to which the defects or irregularities have not been cured or waived will be returned by the exchange agent, without expense, to the tendering holders, unless otherwise provided in the accompanying letter of transmittal, promptly following the expiration date of the exchange offer.
Representations
By tendering Old Notes, each holder is deemed to have represented to us that:
| any New Notes that you receive will be acquired in the ordinary course of business; |
| you have no arrangement or understanding with any person to participate in the distribution (within the meaning of the Securities Act) of the New Notes in violation of the provisions of the Securities Act; |
| you are not an affiliate (within the meaning of Rule 405 under the Securities Act); and |
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| if you are a broker-dealer that will receive New Notes for your own account in exchange for Old Notes, you acquired those New Notes as a result of market-making or other trading activities and you will deliver a prospectus (or to the extent permitted by law, make available a prospectus to purchasers) in connection with any resale of such New Notes. |
Guaranteed Delivery Procedures
If a holder desires to accept the exchange offer and time will not permit a letter of transmittal or Old Notes to reach the exchange agent before the expiration date, a tender may be effected if the exchange agent has received at its office set forth in Exchange Agent on or prior to the expiration date a letter or facsimile transmission from a firm that is a member of a recognized signature guarantee medallion program within the meaning of Rule 17Ad-15 under the Exchange Act (an Eligible Institution) setting forth the name and address of the tendering holder, the names in which the Old Notes are registered, the principal amount of the Old Notes and, if possible, the certificate numbers of the Old Notes to be tendered, and stating that the tender is being made thereby and guaranteeing that within three business days after the date of execution of such letter or facsimile transmission by the Eligible Institution (but in any event no later than three business days following the expiration date), the Old Notes, in proper form for transfer, will be delivered by such Eligible Institution together with a properly completed and duly executed letter of transmittal (and any other required documents). Unless Old Notes being tendered by the above-described method (or a timely Book-Entry Confirmation) are deposited with the exchange agent within the time period set forth above (accompanied or preceded by a properly completed letter of transmittal and any other required documents), we may, at our option, reject the tender. Copies of a Notice of Guaranteed Delivery that may be used by Eligible Institutions for the purposes described in this paragraph are being delivered with this prospectus and the related letter of transmittal.
A tender will be deemed to have been received as of the date when the tendering holders properly completed and duly signed letter of transmittal accompanied by the Old Notes (or a timely Book-Entry Confirmation) is received by the exchange agent. Issuances of exchange notes in exchange for Old Notes tendered pursuant to a Notice of Guaranteed Delivery or letter or facsimile transmission to similar effect (as provided above) by an Eligible Institution will be made only against deposit of the letter of transmittal (and any other required documents) and the tendered Old Notes (or a timely Book-Entry Confirmation).
All questions as to the validity, form, eligibility (including time of receipt) and acceptance for exchange of any tender of Old Notes will be determined by us and our determination will be final and binding. We reserve the absolute right to reject any or all tenders not in proper form or the acceptances for exchange of which may, in the opinion of our counsel, be unlawful. We also reserve the absolute right to waive any of the conditions of the exchange offer or any defect or irregularities in tenders of any particular holder whether or not similar defects or irregularities are waived in the case of other holders. None of us, the exchange agent or any other person will be under any duty to give notification of any defects or irregularities in tenders or shall incur any liability for failure to give any such notification. Our interpretation of the terms and conditions of the exchange offer (including the letter of transmittal and the instructions thereto) will be final and binding.
Withdrawal of Tenders
Except as otherwise provided in this prospectus, you may validly withdraw your tender of Old Notes at any time prior to 5:00 p.m., New York City time, on the expiration date of the exchange offer. For a withdrawal to be effective you must comply with the appropriate procedures of DTCs ATOP system prior to 5:00 p.m., New York City time, on the expiration date of the exchange offer. Any such notice of withdrawal must:
| specify the name of the tendering holder of Old Notes; |
| the principal amount of the Old Notes delivered for exchange; |
| specify the name and number of the account at DTC to be credited with the withdrawn Old Notes; and |
| a statement that such holder is withdrawing its election to have such Old Notes exchanged. |
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We will determine all questions as to the validity, form and eligibility (including time of receipt) of such withdrawal notices. Any Old Notes so withdrawn will be considered not to have been validly tendered for purposes of the applicable exchange offer, and no New Notes will be issued in exchange for such Old Notes unless the Old Notes withdrawn are validly re-tendered. Any Old Notes which have been tendered but which are not accepted for exchange or which are withdrawn will be returned to the holder, without expense to such holder, promptly after withdrawal, rejection of tender or termination of the applicable exchange offer. Validly withdrawn Old Notes may be re-tendered by following one of the procedures described above under Procedures for Tendering at any time prior to the expiration date of the exchange offer.
Exchange Agent
The Bank of New York Mellon, the trustee under the indenture, has been appointed the exchange agent for this exchange offer. Letters of transmittal, notices of guaranteed delivery and all correspondence in connection with this exchange offer should be sent or delivered by each holder of Old Notes, or a beneficial owners commercial bank, broker, dealer, trust company or other nominee, to the exchange agent as follows:
By Mail or Hand Delivery: | The Bank of New York Mellon, as Exchange Agent c/o The Bank of New York Mellon Corporation Corporate Trust OperationsReorganization Unit 111 Sanders Creek Parkway East Syracuse, NY 13057 Attn: Tiffany Castor | |
Telephone: | (315) 414-3034 | |
Facsimile: | (732) 667-9408 | |
Email: | CT_REORG_UNIT_INQUIRIES@BNYMELLON.COM |
We will pay the exchange agent reasonable and customary fees for its services and will reimburse it for its reasonable, out-of-pocket expenses in connection with this exchange offer.
Fees and Expenses
We will bear the expenses of soliciting tenders of the Old Notes and issuance of the New Notes. The principal solicitation is being made by mail. However, we may make additional solicitations by email, telephone or in person by our officers and employees and those of our affiliates.
We have not retained any dealer-manager in connection with the exchange offer and will not make any payments to broker-dealers or others soliciting acceptances of the exchange offer. As indicated above, we will, however, pay the exchange agent reasonable and customary fees for its services and reimburse it for its related reasonable out-of-pocket expenses. We will also pay any other cash expenses that we incur in connection with the exchange offer.
Except as described below, we will pay all transfer taxes, if any, applicable to the exchange of Old Notes under the exchange offer. The tendering holder will be required to pay any transfer taxes, whether imposed on the registered holder or any other person, if:
| New Notes and/or substitute Old Notes not exchanged are to be delivered to, or registered or issued in the name of, any person other than the registered holder of the Old Notes so exchanged; |
| tendered Old Notes are registered in the name of any person other than the person signing the letter of transmittal; or |
| a transfer tax is imposed for any reason other than the exchange of Old Notes under the exchange offer. |
If satisfactory evidence of payment of transfer taxes is not submitted with the letter of transmittal, the amount of any transfer taxes will be billed to the tendering holder.
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Accounting Treatment
We will record the New Notes at the same carrying value as the Old Notes reflected in our accounting records on the date of the exchange. Accordingly, we will not recognize any gain or loss for accounting purposes upon completion of the exchange offer.
Consequences of Failure to Exchange
Old Notes that are not exchanged will remain restricted securities within the meaning of Rule 144(a)(3) under the Securities Act.
Accordingly, they may not be offered, sold, pledged or otherwise transferred except:
| to us or to any of our subsidiaries; |
| under a registration statement which has been declared effective under the Securities Act; |
| for so long as the Old Notes are eligible for resale pursuant to Rule 144A under the Securities Act, to a person the holder of the Old Notes and any person acting on its behalf reasonably believes is a qualified institutional buyer as defined in Rule 144A, that purchases for its own account or for the account of another qualified institutional buyer, in each case to whom notice is given that the transfer is being made in reliance on Rule 144A; or |
| under any other available exemption from the registration requirements of the Securities Act (in which case we and the trustee shall have the right to require the delivery of an opinion of counsel (at the holders sole cost), certifications and/or other information satisfactory to us and the trustee); |
in each case subject to compliance with any applicable foreign, state or other securities laws.
Upon completion of the exchange offer, due to the restrictions on transfer of the Old Notes and the absence of such restrictions applicable to the New Notes, it is likely that the market, if any, for Old Notes will be relatively less liquid than the market for New Notes. Consequently, holders of Old Notes who do not participate in the exchange offer could experience significant diminution in the value of their Old Notes, compared to the value of the New Notes. The holders of Old Notes not tendered will have no further registration rights, except that, under limited circumstances specified in the registration rights agreements, we may be required to file a shelf registration statement for a continuous offer of Old Notes.
On March 5, 2019, we issued $100,000,000 in aggregate principal amount of our 7.50% Senior Unsecured Notes due 2029, which we have referred to in this prospectus as the Old Notes. The Old Notes were issued in a private placement transaction to certain qualified institutional buyers and accredited investors, and as such, were not registered under the Securities Act. The Old Notes were issued under an indenture dated March 5, 2019, between FedNat Holding Company, as issuer, and The Bank of New York Mellon, as trustee. The term notes refers collectively to the Old Notes and the New Notes.
The New Notes will be issued under the same indenture as the Old Notes, as amended by the First Supplemental Indenture, and will evidence the same debt as the Old Notes. The terms of the New Notes are identical in all material respects to those of the Old Notes, except that:
| the New Notes have been registered with the SEC under the Securities Act and, as a result, will not bear any legend restricting their transfer; |
| the New Notes bear different CUSIP and ISIN numbers from the Old Notes; |
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| the New Notes will not be subject to transfer restrictions; |
| the New Notes are issuable in minimum denominations of $1,000 and integral multiples of $1,000 in excess thereof; and |
| the New Notes will not be entitled to registration rights under any registration rights agreements or otherwise. |
The New Notes will be issued only in fully registered form without interest coupons, in minimum denominations of $1,000 and any integral multiple of $1,000 in excess thereof. Unless otherwise required for institutional accredited investors, the New Notes will be evidenced by a global note deposited with the trustee for the New Notes, as custodian for The Depository Trust Company, or DTC, and transfers of beneficial interests will be facilitated only through records maintained by DTC and its participants.
The terms of the New Notes include those stated in the indenture and those made part of the indenture by reference to the Trust Indenture Act.
The following provides a summary of certain terms of the indenture and the New Notes. This summary is qualified in its entirety by reference to the complete version of the indenture, which is incorporated by reference as an exhibit to the registration statement of which this prospectus is a part and to the form of New Notes, which is included as an exhibit to the registration statement of which this prospectus is a part. We urge you to read the indenture and the form of New Notes because those documents, not this summary description, define your rights as holders of the New Notes. Whenever we refer to the defined terms of the indenture in this prospectus without defining them, the terms have the meanings given to them in the indenture. You must look to the indenture for the most complete description of the information summarized in this prospectus.
General
The exchange offer for the New Notes will be for up to $100,000,000 in aggregate principal amount of the Old Notes. The New Notes, together with any Old Notes that remain outstanding after the exchange offer, will be treated as a single class for all purposes of the indenture, including, without limitation, waivers, consents, amendments, redemptions and offers to purchase.
Principal, Maturity and Interest
The New Notes have materially identical interest terms as the Old Notes. Interest on the notes will accrue from the most recent date on which interest on the notes was paid. The notes will mature and become payable, unless earlier redeemed, on March 15, 2029.
The New Notes will bear interest at a fixed rate equal to 7.50% per year, payable semi-annually in arrears on March 15 and September 15 of each year, beginning on March 15, 2020. Interest will be computed on the basis of a 360-day year consisting of twelve 30-day months.
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Interest Payments
We will make each interest payment to the holders of record of the notes at the close of business on the fifteenth calendar day prior to the applicable interest payment date. Principal of and interest on the notes will be payable, and the notes will be exchangeable and transferable, at the office or agency that we have designated and maintain for such purposes, which, initially, will be the corporate trust office of the trustee located at The Bank of New York Mellon, 240 Greenwich Street, Floor 7E, New York, NY 10286, Attention: Corporate Trust Administration; except that payment of interest may be made at our option by check mailed or to the person entitled thereto as shown on the security register or by wire transfer to an account appropriately designated by the person entitled thereto.
Ranking
The New Notes will be our general unsecured obligations and will:
| rank senior in right of payment to our existing and future debt and other obligations that expressly provide for their subordination to the New Notes; |
| rank equally in right of payment to all of our existing and future senior unsecured debt; |
| be effectively subordinated in right of payment to all of our existing and future secured indebtedness to the extent of the value of the assets securing such indebtedness; and |
| be structurally subordinated to all of the existing and future indebtedness and liabilities of our subsidiaries. |
We are a holding company with limited direct operations. All of our operations are conducted through our subsidiaries. Claims of creditors of such subsidiaries, including trade creditors, and claims of preferred stockholders (if any) of such subsidiaries generally will have priority with respect to the assets and earnings of such subsidiaries over the claims of creditors of us, including holders of the notes. The notes, therefore, will be structurally subordinated to claims of creditors (including trade creditors) and preferred stockholders (if any) of our subsidiaries. Although the indenture contains limitations on the amount of additional indebtedness that we and our subsidiaries may incur, such limitations are subject to a number of significant exceptions.
Change of Control
Upon the occurrence of any of the following Change of Control events, each holder will have the right to require us to purchase all or any part (in integral multiples of $1,000) of such holders notes at a purchase price in cash equal to 101% of the principal amount thereof, plus accrued and unpaid interest, if any, to the date of purchase (subject to the right of holders of record on the relevant record date to receive interest due on the relevant interest payment date):
| any person or group of related persons (as such terms are used in Sections 13(d) and 14(d) of the Exchange Act) becomes the beneficial owner (as defined in Rules 13d-3 and 13d-5 under the Exchange Act), directly or indirectly, of a majority of the total voting power of the voting stock of the Company (or its successors by merger, consolidation or purchase of all or substantially all of its assets); |
| during any period of twelve consecutive months, a majority of the members of the board of directors of the Company are not continuing directors; |
| the sale, assignment, lease, transfer, conveyance or other disposition (other than by way of merger or consolidation), in one or a series of related transactions, of all or substantially all of the assets of the Company and its subsidiaries taken as a whole to any person (as such term is used in Sections 13(d) and 14(d) of the Exchange Act); or |
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| the adoption by the stockholders of the Company of a plan or proposal for the liquidation or dissolution of the Company. |
Within 15 days following any Change of Control, we will mail or electronically deliver a notice, or Change of Control Offer, to each holder with a copy to the trustee describing:
| that a Change of Control Offer is being made and that such holder has the right to require us to purchase such holders notes at a purchase price in cash equal to 101% of the principal amount of such notes plus accrued and unpaid interest, if any, to, but excluding, the date of purchase (subject to the right of holders of record on the relevant record date to receive interest due on the relevant payment date) (such payment is referred to as the Change of Control Payment); |
| the repurchase date (which shall be no earlier than 15 days nor later than 45 days from the date such notice is mailed or delivered) (such date is referred to as the Change of Control Payment Date); |
| the procedures determined by us, consistent with the indenture, that a holder must follow in order to have its notes repurchased; |
| that any notes not tendered will continue to accrue interest in accordance with the terms of the applicable note and the indenture; |
| that, unless we default in the payment of the Change of Control Payment, all notes accepted for payment pursuant to the Change of Control Offer will cease to accrue interest on the Change of Control Payment Date; |
| that holders will be entitled to withdraw their election if the paying agent receives, not later than the close of business on the second business day preceding the Change of Control Payment Date, a facsimile transmission or letter setting forth the name of the holder, the principal amount of the notes delivered for purchase and a statement that such holder is unconditionally withdrawing its election to have such notes purchased; and |
| that holders whose notes are being purchased only in part will be issued new notes equal in principal amount to the unpurchased portion of the notes surrendered, which unpurchased portion must be equal to the then remaining balance of principal amount per note. |
We will not be required to make a Change of Control Offer upon a Change of Control if (i) a third party makes the Change of Control Offer in the manner, at the times and otherwise in compliance with the requirements set forth in the indenture applicable to a Change of Control Offer made by us and purchases all Notes validly tendered and not withdrawn under such Change of Control Offer or (ii) a notice of redemption for all of the outstanding notes has been given pursuant to the indenture unless and until there is a default in payment of the applicable redemption price, plus accrued and unpaid interest to, but excluding, the proposed redemption date.
A Change of Control Offer may be made in advance of a Change of Control, and conditioned upon such Change of Control, if a definitive agreement is in place for the Change of Control at the time of making the Change of Control Offer.
We will comply, to the extent applicable, with the requirements of Rule 14e-1 of the Exchange Act and any other securities laws or regulations in connection with the repurchase of notes pursuant to this covenant. To the extent that the provisions of any securities laws or regulations conflict with provisions of this covenant, we will comply with the applicable securities laws and regulations and will not be deemed to have breached its obligations under the indenture by virtue of such compliance.
This Change of Control purchase provision is a result of negotiations between us and the initial purchasers of the outstanding notes. We have no present intention to engage in a transaction involving a Change of Control, although it is possible that we could decide to do so in the future. Subject to the limitations discussed below, we could, in the future, enter into certain transactions, including acquisitions, refinancings or other recapitalizations, that would not constitute a Change of Control under the indenture, but that could increase the amount of indebtedness outstanding at such time or otherwise affect our capital structure or credit ratings.
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Our ability to pay cash to the holders upon a purchase may be limited by our then existing financial resources. There can be no assurance that sufficient funds will be available when necessary to make any required purchases.
The definition of Change of Control includes a phrase relating to the sale, lease or transfer of all or substantially all the assets of the Company and its subsidiaries taken as a whole. Although there is a developing body of case law interpreting the phrase substantially all, there is no precise established definition of the phrase under applicable law. Accordingly, the ability of a holder of notes to require us to purchase such notes as a result of a sale, lease or transfer of less than all of the assets of the Company and its subsidiaries taken as a whole to another person or group may be uncertain.
Optional Redemption
On or after March 15, 2024, we may redeem the notes, at our option, in whole at any time or in part from time to time, upon not less than 30 nor more than 60 days prior notice (provided that, in connection with (x) the satisfaction and discharge of the indenture or (y) defeasance of the notes, a redemption notice may be given more than 60 days, but not more than one year, prior to such event) mailed by a recognized international mail carrier or otherwise electronically delivered to each holders registered address or otherwise in accordance with the procedures of the DTC, at the following redemption prices (expressed as a percentage of principal amount), plus accrued and unpaid interest, if any, to the redemption date (subject to the right of holders of record on the relevant record date to receive interest due on the relevant interest payment date), if redeemed during the 12-month period commencing on March 15 of the years set forth below:
Year |
Redemption Price |
|||
2024 |
103.750 | % | ||
2025 |
101.875 | % | ||
2026 and thereafter |
100.000 | % |
In addition, at any time prior to March 15, 2024, we may redeem the notes at our option, in whole at any time or in part from time to time, upon not less than 30 nor more than 60 days prior notice mailed by a recognized international mail carrier or otherwise electronically delivered to each holders registered address or otherwise in accordance with the procedures of DTC, at a redemption price equal to 100% of the principal amount of the notes redeemed plus the Applicable Premium as of, and accrued and unpaid interest, if any, to the applicable redemption date (subject to the right of holders of record on the relevant record date to receive interest due on the relevant interest payment date).
Applicable Premium means, with respect to any note on any applicable redemption date, the greater of (1) 1.0% of the then outstanding principal amount of such note and (2) the excess (if any) of:
| the present value at such redemption date of (i) the redemption price of such note at March 15, 2024 (such redemption price being set forth in the table above) (excluding any accrued but unpaid interest), plus (ii) all required interest payments due on such note through March 15, 2024 (excluding accrued but unpaid interest), computed using a discount rate equal to the Treasury Rate (as defined in the indenture) on such redemption date plus 50 basis points; over |
| the then outstanding principal amount of such note. |
We, or our affiliates, may at any time and from time to time purchase notes. Any such purchases may be made through open market or privately negotiated transactions with third parties or pursuant to one or more tender or exchange offers or otherwise, upon such terms and at such prices as well as with such consideration as we, or any such affiliates, may determine.
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Selection
In the case of any partial redemption, selection of the notes for redemption will be made in compliance with the rules and procedures of the depositary and requirements of the principal national securities exchange, if any, on which such notes are listed, or if such notes are not so listed, on a pro rata basis (and in such manner as complies with applicable legal requirements); provided, that the selection of notes for redemption shall not result in a holder of notes with a principal amount of notes less than the minimum denomination to the extent practicable. If any note is to be redeemed in part only, the notice of redemption relating to such note shall state the portion of the principal amount thereof to be redeemed. On and after the redemption date, interest will cease to accrue on notes or portions thereof called for redemption so long as the Company has deposited with the paying agent funds sufficient to pay the principal of, plus accrued and unpaid interest, if any, on, the notes to be redeemed.
Repurchases
We may purchase notes at any time on the open market or otherwise. If we purchase notes in this manner, we have the discretion to hold, resell or surrender the notes to the trustee under the indenture for cancellation.
No Sinking Fund; Non-Convertible
The notes will not be entitled to the benefit of any sinking fund. This means that we will not deposit money on a regular basis into any separate custodial account to repay the notes. The notes are not convertible into, or exchangeable for, any of our equity securities.
Limitation on Incurrence of Indebtedness
The indenture limits our ability to incur indebtedness unless (a) no event of default is continuing and (b) the Debt to Capital Ratio of the Company as of the balance sheet date immediately preceding the date on which such additional indebtedness is incurred would have been no greater than 35%, determined on a pro forma basis (including a pro forma application of the net proceeds therefrom) as if the additional indebtedness and all other indebtedness incurred since the immediately preceding balance sheet date had been incurred, except to the extent such indebtedness is used to prepay other indebtedness and the proceeds therefrom applied as of such day.
However, the limitations set forth above do not apply to the incurrence of the following indebtedness:
| the Old Notes or the New Notes; |
| any indebtedness outstanding on the issue date and any refinancing thereof, and any indebtedness incurred that is used to redeem the notes in accordance with the terms of the indenture; |
| indebtedness arising from the honoring by a bank or other financial institution of a check, draft or similar instrument if such indebtedness is extinguished within 10 business days; |
| indebtedness owed to banks and other financial institutions incurred in the ordinary course of business of the Company and its subsidiaries in connection with ordinary banking arrangements to provide treasury services or to manage cash balances; |
| intercompany indebtedness; |
| indebtedness in a total maximum amount not to exceed $10,000,000 outstanding at any time, provided that on the date any such indebtedness is incurred, and after giving effect thereto on a pro forma basis, no default has occurred and is continuing (or would result therefrom), including pro forma compliance with any financial covenant ratios applicable to the notes; |
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| indebtedness to the extent that the net proceeds thereof are promptly deposited to defease all of the notes in accordance with the indenture, provided that (1) such indebtedness (x) is subordinate to any notes not so defeased and (y) has a maturity date subsequent to any notes not so defeased and (2) unless all of the notes are defeased, such indebtedness shall not be issued by any subsidiary of the Company. |
Debt to Capital Ratio means, as of any date, the ratio (expressed as a percentage) equal to Consolidated Indebtedness of the Company as of such date divided by the Consolidated Capital of the Company as of such date.
Consolidated Indebtedness means, as of any date, the indebtedness of the Company and its subsidiaries on such date determined on a consolidated basis in accordance with GAAP.
Consolidated Capital means, as of any date, the total shareholders equity of the Company and its subsidiaries on such date determined on a consolidated basis in accordance with GAAP plus the indebtedness of the Company and its subsidiaries on a consolidated basis outstanding as of such date.
Maintenance of Reinsurance
While the New Notes are outstanding, the indenture requires us to, and to cause each of our insurance subsidiaries to, purchase and maintain reinsurance from reinsurers with a minimum financial strength rating of A- by A.M. Best Company or A- by Standard and Poors, unless such reinsurance limits have been fully collateralized by the applicable reinsurer. Additionally, our insurance subsidiaries shall purchase and maintain reinsurance coverage on the business each of them has underwritten that satisfies each of the following:
(a) | such reinsurance coverage shall at least equal that determined to be adequate by the relevant governmental authority with jurisdiction over its business and such other jurisdictions in which it is licensed as an insurer; |
(b) | such reinsurance coverage, with respect to catastrophe coverage for first event losses, shall provide full coverage to a level equal to or greater than a 1:100 probable maximum loss, or PML, from the occurrence exceedance probability curve projected to September 30th for the current reinsurance treaty year determined by a 50/50 blend of the U.S. hurricane models of AIR Worldwide Corporation, or AIR, and Risk Management Solutions, Inc., or RMS, publicly available at the date of inception of the relevant reinsurance renewal term based on the long-term modeling output and excluding demand and storm surge subject to the maximum retention specified in paragraph (d), provided that the amount of such first event limit shall be based on Florida exposure only, except if the combined PML for the United States and other jurisdictions in which any insurance subsidiary writes property business exceeds the PML for our Florida-only exposure at the 1 in 100 year blended return period by 10% or more, in which case we will purchase excess of loss reinsurance to such combined PML (except that the combined PML will exclude states, other than Florida, where we purchase separate excess of loss reinsurance coverage up to the 1 in 100 year return period); |
(c) | such reinsurance, with respect to catastrophe coverage for second event losses, shall provide full coverage to a level equal to or greater than a 1:50 PML from the occurrence exceedance probability curve determined by AIR or RMS, using the long-term modeling output and excluding demand and storm surge subject to the maximum retention specified in paragraph (d) below; and |
(d) | our catastrophe reinsurance program shall have a U.S. dollar maximum retention per catastrophe event, in connection with the 1:100 and 1:50 levels specified in paragraph (b) and (c) above, of no greater than 15% of our Consolidated Capital at the preceding March 31. |
See Description of the NotesLimitation on Incurrence of Indebtedness for the definition of Consolidated Capital.
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Limitation on Restricted Payments
The indenture prohibits us and our subsidiaries, directly or indirectly from:
(a) | declaring or paying any dividend on or in respect of, its capital stock or purchasing, redeeming, retiring or otherwise acquiring for value any capital stock of the Company (other than wholly in exchange for capital stock of the Company (other than Disqualified Stock)); or |
(b) | making any payment or other distribution on any other securities of the Company or any of its subsidiaries that rank junior to or pari passu with the notes, including on any indebtedness of the Company or any of its subsidiaries (all such payments and other actions under (a) and (b), are referred to as a Restricted Payment); unless, with respect to either clause (a) or clause (b), at the time of, and after giving effect to such Restricted Payment on a pro forma basis, |
(i) | no default shall have occurred and be continuing (or would reasonably be expected to result therefrom); and |
(ii) | the Companys Debt to Capital Ratio would be less than 35%. |
Disqualified Stock means, with respect to any person, any capital stock of such person that by its terms (or by the terms of any security into which it is convertible or for which it is exchangeable) or upon the happening of any event: (1) matures or is mandatorily redeemable pursuant to a sinking fund obligation or otherwise; (2) is convertible into or exchangeable for indebtedness or Disqualified Stock (excluding capital stock which is convertible or exchangeable solely at the option of the Company or a subsidiary (it being understood that upon such conversion or exchange it shall be an incurrence of such indebtedness or Disqualified Stock)); or (3) is redeemable at the option of the holder of the capital stock in whole or in part in each case on or prior to the date 91 days after the earlier of the final maturity date of any notes and the date on which no notes are outstanding; provided, however, that only the portion of capital stock that so matures or is mandatorily redeemable, is so convertible or exchangeable or is so redeemable at the option of the holder thereof prior to such date will be deemed to be Disqualified Stock; provided, further, that any capital stock that would constitute Disqualified Stock solely because the holders thereof have the right to require the Company to repurchase such capital stock upon the occurrence of a Change of Control shall not constitute Disqualified Stock if the terms of such capital stock (and all such securities into which it is convertible or for which it is ratable or exchangeable) provide that the Company may not repurchase or redeem any such capital stock (and all such securities into which it is convertible or for which it is ratable or exchangeable) pursuant to such provision unless such repurchase or redemption complies with the limitation on Restricted Payments.
See Description of the NotesLimitation on Incurrence of Indebtedness for the definition of Debt to Capital Ratio.
Certain Other Indenture Covenants
The indenture contains other covenants that limit us, including:
Limitation on Liens. The Company and its subsidiaries are prohibited from creating, assuming, incurring or permitting to exist any indebtedness (including any guarantee) that is secured by a lien (other than permitted liens) on (a) the capital stock of any significant subsidiary (as defined in Rule 1-02 of Regulation S-X under the Exchange Act) or (b) the capital stock of a subsidiary that owns, directly or indirectly, the capital stock of any of the significant subsidiaries, without, in either case, providing that the notes will be secured equally and ratably with the indebtedness so secured for so long as such indebtedness shall be so secured; provided that this limitation shall not apply to (i) liens on capital stock of a subsidiary existing as of the issue date if such subsidiary shall thereafter become a significant subsidiary, or any renewal or extension of such existing liens, or (ii) liens on capital stock or other securities of subsidiaries that are not significant subsidiaries.
Maintenance of Insurance Subsidiaries. We must cause each of our subsidiaries that is required to be licensed as an insurer or reinsurer to (i) be duly organized and licensed or otherwise eligible to conduct an insurance or a reinsurance business, as the case may be, under the insurance statutes and regulations as applied by the relevant insurance regulatory authorities in each jurisdiction in which the conduct of its business requires such licensing or eligibility, (ii) have all other necessary authorizations, approvals, orders, consents, certificates, permits, registrations and qualifications of and from all insurance regulatory authorities necessary to conduct their respective businesses and (iii) comply with all applicable insurance laws, rules and regulations, except in the case of clause (iii) where such non-compliance would not reasonably be expected, individually or in the aggregate, to have a material adverse effect on the Company and its subsidiaries, taken together.
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Limitation on Dispositions of Capital Stock of Significant Subsidiaries. The Company and its subsidiaries are prohibited from issuing, selling, assigning, transferring or otherwise disposing of, directly or indirectly, any capital stock of any significant subsidiary of the Company existing as of the issue date, except to the Company or one of its other subsidiaries, or for the purpose of qualifying directors or as may be required by law of regulation, unless (1) such issuance, sale, assignment, transfer or other disposition is required to comply with the order of a court or regulatory authority of competent jurisdiction, other than an order issued at the Companys request or at the request of any of its subsidiaries, (2) the Company or its subsidiary sells, assigns, transfers or otherwise disposes of the entire capital stock of the significant subsidiary at the same time in one transaction or in a series of related transactions, for consideration consisting of cash, property or a combination thereof that is at least equal to the fair market value of the capital stock or (3) the Company sells, assigns, transfers, or otherwise disposes of any capital stock of a significant subsidiary for at least fair market value and, after giving effect thereto, the Company and its subsidiaries would own, directly or indirectly, more than 80% of the issued and outstanding voting stock of such significant subsidiary.
Ratings. We must (i) use our best efforts to maintain a rating of the notes by the Applicable Rating Agency of not less than BBB+ (or its equivalent) and (ii) ensure that the notes are rated at least BB- (or its equivalent) by the Applicable Rating Agency (it being understood that this clause (ii) will be breached regardless of whether the Company has used its best efforts to maintain such rating).
Applicable Rating Agency means one of the following rating agencies at any given time: (i) in the case that there is only one rating agency rating the notes, such rating agency, (ii) in the case that there are two rating agencies rating the notes, such rating agency providing the lower rating, or (iii) in the case that there are three or more rating agencies rating the notes, such rating agency providing the second lowest rating. The initial rating agency shall be Egan Jones Rating Company.
Merger, Consolidation or Sale of All or Substantially All Assets
The indenture provides that the Company may not consolidate with or merge with or into (whether or not the Company is the surviving corporation), or sell, assign, convey, transfer, lease or otherwise dispose (including by means of a reinsurance transaction) of all or substantially all of the properties and assets of the Company and its subsidiaries, taken as a whole, in one or more related transactions, to any person unless:
| if other than the Company, the resulting, surviving or transferee person shall be a corporation, partnership or limited liability company organized and existing under the laws of the United States, any state thereof, the District of Columbia, or any territory thereof; |
| the successor company expressly assumes all the obligations of the Company under the indenture and the notes pursuant to supplemental indentures, unless such obligation to assume is waived by holders representing a majority of the principal amount of the notes; and |
| immediately after giving effect to such transaction (and treating any indebtedness that becomes an obligation of the Company, the successor company or any subsidiary as a result of such transaction as having been incurred by the Company, the successor company or such subsidiary at the time of such transaction), no default or event of default shall have occurred and be continuing (or would reasonably be expected to result therefrom). |
Notwithstanding the foregoing, (a) any subsidiary may consolidate with or merge with or into the Company or another subsidiary, so long as no capital stock of the subsidiary is distributed to any person other than the Company or such other subsidiary, as applicable, and (b) the Company may merge with an affiliate of the Company solely for the purpose of reincorporating or reorganizing the Company in another jurisdiction to realize tax or other benefits, so long as the amount of indebtedness of the Company and its subsidiaries is not increased thereby.
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In addition, each holder shall have the right, within 20 business days following a Change of Control of the Company, to require the successor to the Company to repurchase all or any part of such holders notes, for cash, at a purchase price equal to 101% of the then-outstanding principal balance of the notes to be repurchased, plus accrued and unpaid interest on such notes, if any, to the applicable repurchase date.
Events of Default; Right of Acceleration; Failure to Pay Principal or Interest
The following are events of default under the indenture:
| our failure to make payment of any interest on the notes when due, which continues for 10 consecutive business days; |
| our failure to make payment of any principal of the notes when due; |
| the entry of a court decree or order for relief in respect of us in an involuntary case or proceeding under any applicable bankruptcy, insolvency, or reorganization law, now or hereafter in effect, and such decree or order will have continued unstayed and in effect for a period of 60 consecutive days; |
| the commencement by us of a voluntary case under any applicable bankruptcy, insolvency or reorganization law, now or hereafter in effect, or the consent by us to the entry of a decree or order for relief in an involuntary case or proceeding under any such law; |
| our failure to comply with our obligations under the indenture in a merger or other disposition of assets; |
| our failure to comply with any obligations under any covenant under the indenture, which continues for 45 days after we have actual knowledge of such failure to comply or written notice; |
| our failure to perform any other obligation of ours under the notes or the indenture, which continues for 30 days after written notice as provided for in the indenture; |
| our default under any of our other indebtedness having an aggregate principal amount of at least $1,000,000, whether such indebtedness now exists or is created or incurred in the future, which default (i) constitutes failure in payment of principal of such indebtedness when due after the expiration of any applicable grace period without such indebtedness having been discharged or (ii) results in such indebtedness becoming due or being declared due and payable prior to the date on which it otherwise would have become due or payable without such indebtedness having been discharged or such acceleration having been rescinded or annulled; |
| our failure to pay final and non-appealable judgments aggregating in excess of $1,000,000 (net of any amounts that are covered by insurance, pursuant to which the insurer has not contested coverage), which judgments remain unsatisfied or undischarged for any period of 30 consecutive days during which a stay of enforcement of such judgments shall not be in effect; and |
| breach by us in any material respect of any representation, warranty or covenant made to the holders of the Old Notes in the Private Placement, and in the case of any such covenant such breach shall continue unremedied for a period of 30 days after the earlier of (i) written notice to us from any holder of notes, and (ii) the date on which our board of directors obtains actual knowledge of such breach. |
If an event of default with respect to the notes occurs due to a bankruptcy event, the principal of the notes and all accrued and unpaid interest thereon, if any, will be immediately due and payable without any declaration or other act on the part of the trustee or any holder of the notes. In the case of our failure to pay the principal of, or interest on, the notes, any affected holder may accelerate the maturity of the notes. If an event of default with respect to the notes occurs and is continuing due to any other reason, the holders of at least a majority in principal amount of the outstanding notes, by notice to the trustee, may accelerate the maturity of the notes.
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Amendment, Supplement and Waiver
Without the consent of any holder of notes, we and the trustee, at any time and from time to time, may enter into one or more indentures supplemental to the indenture for any of the following purposes:
| to cure any ambiguity, defect, omission, mistake or inconsistency; |
| to evidence a successor to our organization, and the assumption by any such successor of our covenants contained in the indenture and the notes; |
| to permit or facilitate the issuance of notes in uncertificated or global form; |
| to add guarantees with respect to the notes; |
| to add to our covenants for the benefit of the holders, to include additional events of default or to surrender any right or power conferred upon us with respect to the notes; |
| to conform any provision of the indenture to the requirements of the Trust Indenture Act; or |
| to evidence and provide for the acceptance of appointment under the indenture by a successor trustee. |
With the consent of the holders of not less than a majority in principal amount of the outstanding notes, we and the trustee may enter into an indenture or indentures supplemental to the indenture for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of the indenture or the notes or of modifying in any manner the rights of the holders of the notes under the indenture, except that no such supplemental indenture will, without the consent of the holder of each outstanding note affected thereby:
| reduce the rate of, or change the time for payment of, interest on any note; |
| reduce the principal of or change the stated maturity of any note, change the date on which any note may be subject to redemption, or reduce the price at which any note subject to redemption may be redeemed; |
| make any note payable in money other than dollars; |
| modify any provision of the indenture protecting the right of a holder to receive payment of principal of and interest on such note on or after the due date thereof or to bring suit to enforce payment; |
| reduce the threshold of holders the consent of whom is required for any such supplemental indenture or required to waive certain defaults and covenants under the indenture; |
| make the notes subordinated in right of payment to any other obligations; or |
| modify any of the provisions of the section of the indenture governing supplemental indentures with the consent of holders, or those provisions relating to waiver of defaults or certain covenants, except to increase any such percentage required for such actions or to provide that certain other provisions of the indenture cannot be modified or waived without the consent of the holder of each outstanding note affected thereby. |
The holders of not less than a majority in aggregate principal amount of the outstanding notes may on behalf of the holders of all notes waive any past default under the indenture and its consequences, except a default in any payment in respect of the principal of or interest on any note, or in respect of a covenant or provision of the indenture under which the indenture cannot be modified or amended without the consent of the holder of each outstanding note.
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Satisfaction and Discharge of the Indenture; Defeasance
We may terminate our obligations under the indenture when:
| either: (1) all notes that have been authenticated and delivered have been delivered to the trustee for cancellation, or (2) all notes that have not been delivered to the trustee for cancellation (i) have become due and payable or (ii) will become due and payable at their stated maturity within one year or are to be called for redemption within one year under arrangements satisfactory to the trustee for the giving of notice of redemption by the trustee, and in the case of the foregoing clause 2(i) or 2(ii), we have deposited or caused to be deposited with the trustee immediately available funds in an amount sufficient to pay and discharge the entire indebtedness on the outstanding notes; |
| we have paid or caused to be paid all other sums then due and payable by us under the indenture with respect to the notes; and |
| we have delivered to the trustee an officers certificate and an opinion of counsel, each stating that all conditions precedent under the indenture relating to the satisfaction and discharge of the indenture have been satisfied. |
We may elect, at our option and at any time, to have our obligations discharged with respect to the outstanding notes, which we refer to as legal defeasance. Legal defeasance means that we will be deemed to have paid and discharged the entire indebtedness represented by the outstanding notes, except for:
| the rights of the holders of such notes to receive payments in respect of the principal of and interest on such notes when payments are due; |
| our obligations with respect to such notes concerning registration of notes, mutilated, destroyed, lost or stolen notes and the maintenance of an office or agency for payment and money for payments on the notes to be held in trust; |
| the rights, powers, trusts, duties and immunities of the trustee under the indenture; and |
| the defeasance provisions of the indenture. |
In addition, we may elect, at our option, to have our obligations released with respect to certain covenants contained in the indenture, which is also called covenant defeasance. In the event covenant defeasance occurs, certain events (not including non-payment, bankruptcy and insolvency events) will no longer constitute an event of default with respect to the notes.
In order to exercise either legal defeasance or covenant defeasance with respect to outstanding notes:
| we must irrevocably have deposited or caused to be deposited with the trustee as trust funds in trust for the purpose of making the following payments, specifically pledged as security for, and dedicated solely to the benefits of the holders of such notes, (1) an amount in dollars, (2) U.S. government obligations that through the scheduled payment of principal and interest in respect thereof in accordance with their terms will provide, not later than one day before the due date of any payment on the notes, money in an amount, or (3) a combination thereof, in each case sufficient to pay and discharge, and which will be applied by the trustee to pay and discharge, the entire indebtedness in respect of the principal of and interest on the notes on the stated maturity thereof or, with respect to notes called for redemption, on the redemption date thereof; |
| in the case of legal defeasance, we will have delivered to the trustee an opinion of counsel stating that we have received from, or there has been published by, the Internal Revenue Service a ruling or since the date of the indenture there has been a change in the applicable U.S. federal income tax law, in either case to the effect that, and based thereon such opinion will confirm that, the holders of the notes will not recognize income, gain or loss for U.S. federal income tax purposes as a result of such legal defeasance to be effected with respect to such notes and will be subject to U.S. federal income tax on the same amount, in the same manner and at the same times as would be the case if such legal defeasance had not occurred; |
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| in the case of covenant defeasance, we will have delivered to the trustee an opinion of counsel to the effect that the holders of the outstanding notes will not recognize income, gain or loss for U.S. federal income tax purposes as a result of such covenant defeasance to be effected with respect to the notes and will be subject to U.S. federal income tax on the same amount, in the same manner and at the same times as would be the case if such covenant defeasance had not occurred; |
| such legal defeasance or covenant defeasance will not result in a breach or violation of, or constitute a default under, the indenture or any other material agreement or material instrument to which we or our subsidiaries are a party or by which we or our subsidiaries are bound; |
| no event of default, or event which with notice or lapse of time or both would become an event of default with respect to the outstanding notes will have occurred and be continuing at the time of such deposit referred to in the first bullet point above (and in the case of legal defeasance will have occurred and be continuing at any time during the period ending on and including the 91st day after the date of such deposit); and |
| we will have delivered to the trustee an officers certificate and an opinion of counsel, each stating that all conditions precedent with respect to such legal defeasance or covenant defeasance have been satisfied. |
In connection with a discharge or defeasance, in the event the trustee is unable to apply the moneys deposited as contemplated under the satisfaction and discharge provisions of the indenture for any reason, our obligations under the indenture and the notes will be revived as if the deposit had never occurred.
Regarding the Trustee
The Bank of New York Mellon is acting as the trustee under the indenture and the initial paying agent and registrar for the notes. From time to time, we and some of our subsidiaries may maintain deposit accounts and conduct other banking transactions, including lending transactions, with the trustee in the ordinary course of business.
Except during the continuance of an event of default under the indenture, the trustee will perform only such duties as are specifically set forth in the indenture. During the continuance of an event of default that has not been cured or waived, the trustee will exercise such of the rights and powers vested in it by the indenture, and use the same degree of care and skill in their exercise, as a prudent person would exercise or use under the circumstances.
The indenture and the Trust Indenture Act contain certain limitations on the rights of the trustee, should it become a creditor of our organization, to obtain payment of claims in certain cases or to realize on certain property received in respect of any such claim as security or otherwise. The trustee will be permitted to engage in other transactions; however, if it acquires any conflicting interest (as defined in the Trust Indenture Act) it must eliminate such conflict within 90 days, apply to the SEC for permission to continue or resign.
The holders of a majority in principal amount of the outstanding notes will have the right to direct the time, method and place of conducting any proceeding for any remedy available to the trustee or exercising any trust or power conferred on the trustee, subject to certain exceptions. Subject to such provisions, the trustee will be under no obligation to exercise any of the rights or powers vested in it by the indenture at the request or direction of any of the holders under the indenture, unless such holders will have provided to the trustee security or indemnity satisfactory to the trustee against the losses, liabilities and expenses which might be incurred by it in compliance with such request or direction.
No Personal Liability of Shareholders, Employees, Officers or Directors, or Exchange Agent
No past, present or future director, officer, employee or shareholder of our company or any of our predecessors or successors, as such or in such capacity, nor the Exchange Agent will have any personal liability for any of our obligations under the notes or the indenture by reason of his, her or its status as such director, officer, employee or
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shareholder. Each holder of notes by accepting a note waives and releases all such liability. The waiver and release are part of the consideration for the issuance of the notes. Such waiver may not be effective to waive liabilities under the federal securities laws, and it is the view of the SEC that such a waiver is against public policy.
Governing Law
The notes and the indenture will be governed by and construed in accordance with the laws of the State of New York.
Form, Denomination, Transfer, Exchange and Book-Entry Procedures
The notes will be issued only in fully registered form, without interest coupons, and in denominations of $1,000 and integral multiples of $1,000 in excess thereof.
Unless otherwise required for institutional accredited investors, the notes will be evidenced by a global note which will be deposited with, or on behalf of, DTC, or any successor thereto, and registered in the name of Cede & Co., or Cede, as nominee of DTC. Except as set forth below, record ownership of the global note may be transferred, in whole or in part, only to another nominee of DTC or to a successor of DTC or its nominee. If New Notes are issued to institutional accredited investors in certificated form, the New Notes will be transferable only on the records of the trustee and may not be exchanged for a beneficial interest in the global note unless the exchange occurs in connection with a transfer where the transferor and transferee provide evidence satisfactory to the trustee and DTC that the transferee is eligible to hold a beneficial interest in the global note.
The global note will not be registered in the name of any person, or exchanged for notes that are registered in the name of any person, other than DTC or its nominee, unless one of the following occurs:
| DTC notifies us that it is unwilling or unable to continue acting as the depositary for the global note, or DTC has ceased to be a clearing agency registered under the Exchange Act, and in either case we fail to appoint a successor depositary; or |
| an event of default with respect to the notes represented by the global note has occurred and is continuing. |
In those circumstances, DTC will determine in whose names any securities issued in exchange for the global note will be registered. Any such notes in certificated form will be issued in minimum denominations of $1,000 and multiples of $1,000 in excess thereof and may be transferred or exchanged only in such minimum denominations.
DTC or its nominee will be considered the sole owner and holder of the global note for all purposes, and as a result:
| you cannot get notes registered in your name if they are represented by the global note; |
| you cannot receive certificated (physical) notes in exchange for your beneficial interest in the global note; |
| you will not be considered to be the owner or holder of the global note or any note it represents for any purpose; and |
| all payments on the global note will be made to DTC or its nominee. |
The laws of some jurisdictions require that certain kinds of purchasers (for example, certain insurance companies) can only own securities in definitive (certificated) form. These laws may limit your ability to transfer your beneficial interests in the global note to these types of purchasers.
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Only institutions (such as a securities broker or dealer) that have accounts with DTC or its nominee (called participants) and persons that may hold beneficial interests through participants (including through Euroclear Bank SA/NV or Clearstream Banking, société anonyme, as DTC participants) can own a beneficial interest in the global note. The only place where the ownership of beneficial interests in the global note will appear and the only way the transfer of those interests can be made will be on the records kept by DTC (for their participants interests) and the records kept by those participants (for interests of persons held by participants on their behalf).
Secondary trading in bonds and notes of corporate issuers is generally settled in clearing-house (that is, next-day) funds. In contrast, beneficial interests in a global note usually trade in DTCs same-day funds settlement system, and settle in immediately available funds. We make no representations as to the effect that settlement in immediately available funds will have on trading activity in those beneficial interests.
Cash payments of interest on and principal of the global note will be made to Cede, the nominee for DTC, as the registered owner of the global note. These payments will be made by wire transfer of immediately available funds on each payment date.
You may exchange or transfer the notes at the corporate trust office of the trustee for the notes or at any other office or agency maintained by us for those purposes. We will not require payment of a service charge for any transfer or exchange of the notes, but we may require payment of a sum sufficient to cover any applicable tax or other governmental charge.
We have been informed that, with respect to any cash payment of interest on or principal of the global note, DTCs practice is to credit participants accounts on the payment date with payments in amounts proportionate to their respective beneficial interests in the notes represented by the global note as shown on DTCs records, unless DTC has reason to believe that it will not receive payment on that payment date. Payments by participants to owners of beneficial interests in notes represented by the global note held through participants will be the responsibility of those participants, as is now the case with securities held for the accounts of customers registered in street name.
We also understand that neither DTC nor Cede will consent or vote with respect to the notes. We have been advised that under its usual procedures, DTC will mail an omnibus proxy to us as soon as possible after the record date. The omnibus proxy assigns Cedes consenting or voting rights to those participants to whose accounts the notes are credited on the record date identified in a listing attached to the omnibus proxy.
Because DTC can only act on behalf of participants, who in turn act on behalf of indirect participants, the ability of a person having a beneficial interest in the principal amount represented by the global note to pledge the interest to persons or entities that do not participate in the DTC book-entry system, or otherwise take actions in respect of that interest, may be affected by the lack of a physical certificate evidencing its interest.
DTC has advised that it will take any action permitted to be taken by a holder of notes (including the presentation of notes for exchange) only at the direction of one or more participants to whose account with DTC interests in the global note are credited and only in respect of such portion of the principal amount of the notes represented by the global note as to which such participant has, or participants have, given such direction.
DTC has also advised as follows: DTC is a limited purpose trust company organized under the laws of the State of New York, a banking organization within the meaning of the New York Banking Law, a member of the Federal Reserve, a clearing corporation within the meaning of the Uniform Commercial Code, as amended, and a clearing agency registered pursuant to the provisions of Section 17A of the Exchange Act. DTC was created to hold securities for its participants and facilitate the clearance and settlement of securities transactions between participants through electronic book-entry changes in accounts of its participants. Participants include securities brokers and dealers, banks, trust companies and clearing corporations and may include certain other organizations. Certain of such participants (or their representatives), together with other entities, own DTC. Indirect access to the DTC system is available to other entities such as banks, brokers, dealers and trust companies that clear through or maintain a custodial relationship with a participant, either directly or indirectly. The rules applicable to DTC and its direct and indirect participants are on file with the SEC.
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The policies and procedures of DTC, which may change periodically, will apply to payments, transfers, exchanges and other matters relating to beneficial interests in the global note. We and the trustee have no responsibility or liability for any aspect of DTCs or any participants records relating to beneficial interests in the global note, including for payments made on the global note, and we and the trustee are not responsible for maintaining, supervising or reviewing any of those records.
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MATERIAL UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
The following is a general summary of the material U.S. federal income tax considerations of the exchange of outstanding Old Notes for New Notes in the exchange offer. It is not a complete analysis of all the potential tax considerations relating to the exchange of outstanding Old Notes for New Notes. This discussion is based upon the provisions of the Internal Revenue Code of 1986, as amended, or the Code, its legislative history, existing and proposed regulations under the Code, and administrative and judicial interpretations, all as currently in effect. These authorities are subject to change, possibly on a retroactive basis. We cannot assure you that the Internal Revenue Service, or the IRS, will not challenge one or more of the tax consequences described in this discussion, and we have not obtained, nor do we intend to obtain, a ruling from the Internal Revenue Service or an opinion of counsel with respect to the U.S. federal income tax consequences described herein.
The tax treatment of a holder of notes may vary depending on the holders particular situation. This discussion is limited to the U.S. federal income tax consequences applicable to holders that purchased their Old Notes from us in the initial offering and at the initial offering price for cash and who held the Old Notes, and will hold the New Notes, as capital assets within the meaning of Section 1221 of the Code for U.S. federal income tax purposes. This discussion does not address all U.S. federal income tax considerations that may be applicable to holders particular circumstances or to holders that may be subject to special tax rules under U.S. federal income tax laws including, but not limited to, banks, insurance companies, or other financial institutions, regulated investment companies, real estate investment trusts, tax-exempt organizations, dealers or traders in securities, commodities or currencies, U.S. expatriates, controlled foreign corporations, passive foreign investment companies, holders subject to the alternative minimum tax, traders in securities that elect to use a mark-to-market method of accounting for their securities holdings, United States holders whose functional currency is not the United States dollar, persons that will hold the New Notes as a position in a hedging transaction, straddle, conversion transaction or other integrated transactions or risk reduction transaction, persons deemed to sell the New Notes under the constructive sale provisions of the Code, persons that will hold the New Notes in an individual retirement account, persons that are subject to special tax accounting rules under Section 451(b) of the Code, 401(k) plan or similar tax-favored account, or entities or arrangements classified as partnerships for U.S. federal income tax purposes or other pass-through entities, or investors in such entities. This discussion does not address the tax considerations arising under the laws of any foreign, state or local jurisdiction, or any non-income tax consequences of the exchange of Old Notes for New Notes.
As used herein, U.S. Holder means a beneficial owner of notes that is or is treated for U.S. federal income tax purposes as:
| an individual that is a citizen or resident of the U.S.; |
| a corporation or other entity taxable as a corporation created or organized in or under the laws of the United States, any state thereof or the District of Columbia; |
| an estate, the income of which is subject to U.S. federal income tax regardless of its source; or |
| a trust, if a U.S. court can exercise primary supervision over the administration of the trust and one or more United States persons, as defined in Section 7701(a)(30) of the Code, have the authority to control all substantial decisions of the trust, or if the trust was in existence on August 20, 1996, and it has a valid election in effect under applicable U.S. Treasury Regulations to continue to be treated as a United States person. |
If a partnership (including an entity or arrangement treated as a partnership for U.S. federal income tax purposes) holds the Old Notes or will hold the New Notes, the tax treatment of a partner in such partnership generally will depend on the status of the partner and the activities of the partnership. Partners and partnerships should consult their own tax advisors as to the tax considerations of the exchange and ownership of the New Notes.
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Exchange of Old Notes for New Notes
The exchange of Old Notes for New Notes in the exchange offer will not constitute a taxable exchange for U.S. federal income tax purposes. Consequently, (1) holders of Old Notes should not recognize gain or loss upon the receipt of New Notes in the exchange offer, (2) a holders basis in the New Notes received in the exchange offer should be the same as such holders basis in the Old Notes surrendered in exchange therefor immediately before the exchange, and (3) a holders holding period in the New Notes should include such holders holding period in the Old Notes surrendered in exchange therefor.
Ownership and Disposition of New Notes
Additional Payments
In certain circumstances (see Description of the NotesChange of Control), we may be obligated to pay amounts in excess of principal plus stated interest on the New Notes. We intend to take the position that the New Notes should not be treated as contingent payment debt instruments because of such additional payments, and this disclosure assumes that our position will be respected. This position is based in part on assumptions regarding the possibility that, as of the date of issuance of the New Notes, such additional amounts will have to be paid. Assuming such position is respected, it is binding on a holder, and any additional amounts paid to a holder pursuant to any redemption or repurchase would be taxable as described below in U.S. HoldersSale, Redemption, Retirement or Other Taxable Disposition of the New Notes and Non-U.S. HoldersSale, Redemption, Retirement or Other Taxable Disposition of the New Notes (unless such holder of the New Notes discloses its contrary position in the manner required by the applicable Treasury Regulations). However, our position is not binding on the IRS and if the IRS successfully challenged this position, and the New Notes were treated as contingent payment debt instruments, holders of the New Notes could be required to accrue interest income at a rate higher than the rate that would otherwise apply and to treat as ordinary income, rather than capital gain, any gain recognized on a sale, redemption or other taxable disposition of the New Notes. Holders of the New Notes are urged to consult their own tax advisers regarding the potential application to the New Notes of the contingent payment debt instrument rules and the consequences thereof. The remainder of this discussion assumes that the New Notes are not treated as contingent payment debt instruments.
U.S. Holders
This discussion is a summary of the U.S. federal income tax considerations that will apply to U.S. Holders. Certain U.S. federal income tax considerations applicable to non-U.S. Holders are described below under the heading Non-U.S. Holders.
Stated Interest
Payments of stated interest on the New Notes generally will be treated as qualified stated interest for U.S. federal income tax purposes and taxable to a U.S. Holder as ordinary interest income at the time that such payments are received or accrued, in accordance with such U.S. Holders regular method of accounting for U.S. federal income tax purposes.
Sale, Redemption, Retirement or Other Taxable Disposition of the New Notes
A U.S. Holder will recognize gain or loss on the sale, exchange (other than a tax-free transaction), redemption, retirement or other taxable disposition of a New Note equal to the difference, if any, between the amount realized upon the disposition (other than amounts attributable to any accrued and unpaid interest, which will be taxable as described under U.S. HoldersStated Interest above, to the extent not previously taxed) and the U.S. Holders adjusted tax basis in the New Note. A U.S. Holders amount realized upon the disposition equals the sum of the cash plus the fair market value of any property received on the disposition. A U.S. Holders adjusted basis in a New Note will equal the basis in the Old Note exchanged therefor, which generally will be the U.S. Holders initial investment in such Old Note reduced by any cash payments received on the Old Note other than stated interest. Any gain or loss
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generally will be a capital gain or loss and will be a long-term capital gain or loss if the U.S. Holder has held the New Note (including the period such holder held the Old Note exchanged therefor) for more than one year. Otherwise, such gain or loss will be a short-term capital gain or loss. Certain non-corporate U.S. Holders (including individuals) currently are eligible for preferential rates of U.S. federal income tax in respect of long-term capital gain. The deductibility of capital losses by U.S. Holders is subject to limitations under the Code.
Surtax on Net Investment Income
Certain U.S. Holders who are individuals, estates or trusts will be required to pay a 3.8% surtax on the lesser of (i) the U.S. Holders net investment income (or undistributed net investment income in the case of an estate or trust) for the relevant taxable year and (ii) the excess of the U.S. Holders modified adjusted gross income (or adjusted gross income in the case of an estate or trust) for the taxable year over a certain threshold. A U.S. Holders net investment income generally will include interest and gains from the sale or other taxable disposition of the New Notes. Prospective investors should consult their own tax advisors regarding the effect, if any, of this surtax on their investment in the New Notes.
Backup Withholding and Information Reporting
A U.S. Holder may be subject to information reporting and backup withholding (currently at a rate of 24%) with respect to interest on the New Notes and the proceeds received upon the sale or other disposition of such New Notes (including a redemption or retirement). Certain holders (currently including, among others, certain tax-exempt organizations and corporations) generally are not subject to information reporting or backup withholding. A U.S. Holder will be subject to backup withholding if such holder is not otherwise exempt and such holder:
| fails to furnish its taxpayer identification number, or TIN, which, for an individual, is ordinarily his or her social security number, or a certification of exempt status; |
| furnishes an incorrect TIN; |
| is notified by the IRS that it has failed to properly report payments of interest or dividends; or |
| fails to certify, under penalties of perjury (generally on a properly completed and executed IRS Form W-9) that it has furnished a correct TIN and that the IRS has not notified the U.S. Holder that it is subject to backup withholding. |
U.S. Holders should consult their own tax advisors regarding their qualification for an exemption from backup withholding and the procedures for obtaining such an exemption, if applicable. Backup withholding is not an additional tax, and taxpayers may use amounts withheld as a credit against their U.S. federal income tax liability or may claim a refund as long as they timely provide certain information to the IRS.
Non-U.S. Holders
The following is a summary of the material U.S. federal income and withholding tax considerations generally applicable to non-U.S. Holders. A non-U.S. Holder is a beneficial owner of the New Notes that is neither a U.S. Holder nor a partnership (including an entity or arrangement treated as a partnership for U.S. federal income tax purposes). Non-U.S. Holders are encouraged to consult their own tax advisors concerning the relevant U.S. federal, state and local and any non-U.S. tax considerations that may be relevant to their particular situations.
Stated Interest
Subject to the discussion below concerning backup withholding and FATCA (as defined below), payments of interest on a New Note (which, for purposes of this discussion, includes any payments on the New Note that may be treated as interest for U.S. federal income tax purposes) made to a non-U.S. Holder generally will not be subject to
39
U.S. federal income tax or withholding tax, provided that:
| such payments are not effectively connected with such holders conduct of a U.S. trade or business (or, in the case of an applicable tax treaty, are not attributable to a permanent establishment or fixed base maintained by the non-U.S. Holder in the U.S.); |
| such holder does not directly or indirectly, actually or constructively, own 10% or more of the total combined voting power of all classes of our stock entitled to vote; |
| such holder is not a controlled foreign corporation that is related to us through actual or constructive stock ownership and is not a bank that received such New Notes on an extension of credit made pursuant to a loan agreement entered into in the ordinary course of its trade or business; and |
| either (1) the non-U.S. Holder certifies on a statement (generally a properly executed IRS Form W-8BEN or IRS Form W-8BEN-E (or any successor forms), as applicable) provided to us or the paying agent, under penalties of perjury, that such holder is not a United States person within the meaning of the Code and provides its name and address, (2) a securities clearing organization, bank or other financial institution that holds customers securities in the ordinary course of its trade or business and holds the New Notes on behalf of the non-U.S. Holder certifies to us or the paying agent under penalties of perjury that it, or the financial institution between it and the non-U.S. Holder, has received from the non-U.S. Holder a properly executed IRS Form W- 8BEN or IRS Form W-8BEN-E (or any successor forms), as applicable, under penalties of perjury, certifying that such holder is not a United States person and provides us or the paying agent with a copy of such statement, or (3) the non-U.S. Holder holds its New Notes directly through a qualified intermediary provided that such qualified intermediary has entered into a withholding agreement with the IRS and certain other conditions are satisfied. |
Payments of interest on a New Note that do not satisfy all of the foregoing requirements generally will be subject to U.S. federal withholding tax at a rate of 30% (or a lower applicable treaty rate, provided certain certification requirements are met). A non-U.S. Holder generally will be subject to U.S. federal income tax in the same manner as a U.S. Holder (but without regard to the surtax on net investment income discussed above), however, with respect to interest on a New Note if such interest is effectively connected with the non-U.S. Holders conduct of a trade or business within the U.S. (and, if required by an applicable tax treaty, is attributable to a permanent establishment or fixed base maintained by the non-U.S. Holder in the U.S.). Under certain circumstances, interest that is effectively connected with a corporate non-U.S. Holders conduct of a trade or business within the U.S. may be subject to an additional branch profits tax at a 30% rate (or a lower applicable treaty rate, provided certain certification requirements are met). Such effectively connected interest income generally will be exempt from U.S. federal withholding tax if a non-U.S. Holder delivers a properly executed IRS Form W-8ECI (or successor form) to us or the paying agent.
Non-U.S. Holders should consult applicable income tax treaties, which may provide reduced rates of or an exemption from U.S. federal income or withholding tax and branch profits tax. Non-U.S. Holders will be required to satisfy certification requirements in order to claim a reduction of or exemption from withholding tax pursuant to any applicable income tax treaties. A non-U.S. Holder may meet these requirements by providing a properly completed IRS Form W-8BEN or IRS Form W-8BEN-E (or any successor forms), as applicable, or appropriate substitute form, to us or the paying agent.
Sale, Redemption, Retirement or Other Taxable Disposition of the New Notes
Subject to the discussion below concerning backup withholding and FATCA, a non-U.S. Holder generally will not be subject to U.S. federal income tax or withholding tax on gain recognized on the sale, exchange, redemption, retirement or other taxable disposition of a New Note unless:
| that gain is effectively connected with the non-U.S. Holders conduct of a U.S. trade or business (and, if required by an applicable income tax treaty, is attributable to a permanent establishment or fixed base maintained by the non-U.S. Holder in the U.S.); or |
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| the non-U.S. Holder is an individual who is present in the U.S. for 183 days or more in the taxable year of the disposition and certain other conditions are met. |
Gain realized by a non-U.S. Holder described in the first bullet point above generally will be subject to U.S. federal income tax in the same manner as a U.S. Holder (but without regard to the surtax on net investment income discussed above). In addition, under certain circumstances, gain that is effectively connected with a corporate non-U.S. Holders conduct of a U.S. trade or business may be subject to an additional branch profits tax at the rate of 30% (or a lower applicable treaty rate, provided certain certification requirements are met). Gain realized by a non-U.S. Holder described in the second bullet point above generally will be subject to tax at a rate of 30% (or a lower applicable treaty rate, provided certain certification requirements are met) to the extent of the excess of such holders U.S.-source capital gains during the tax year over U.S.-source capital losses during such tax year.
To the extent that the amount realized on any sale, exchange, redemption or other taxable disposition of the New Notes is attributable to accrued but unpaid interest, such amount will be treated as interest for U.S. federal income tax purposes.
Backup Withholding and Information Reporting
We will, where required, report to non-U.S. Holders and to the IRS the amount of any principal and interest paid on the New Notes and proceeds from the sale or other taxable disposition (including a retirement or redemption) of the New Notes. Copies of these information returns may be made available under the provisions of a specific treaty or other agreement to the tax authorities of the country in which the non-U.S. Holder resides or is organized.
Backup withholding will not apply to payments of interest made by us or the paying agent to a non-U.S. Holder of New Note if the holder meets the identification and certification requirements discussed above under Non-U.S. HoldersStated Interest for exemption from U.S. federal withholding tax or otherwise establishes an exemption, provided that neither we nor our paying agent have actual knowledge or reason to know that the non-U.S. Holder is a United States person for U.S. federal income tax purposes that is not an exempt recipient or that the conditions of any other exemption are not, in fact, satisfied.
Backup withholding is not an additional tax. Non-U.S. Holders generally may use amounts withheld as a credit against their U.S. federal income tax liability or may claim a refund as long as they timely provide certain information to the IRS. Non-U.S. Holders should consult their own tax advisors regarding application of backup withholding in their particular circumstances, the availability of an exemption from information reporting and backup withholding, and the procedure for obtaining such an exemption, if available.
Foreign Account Tax Compliance Act
Pursuant to the Foreign Account Tax Compliance Act (FATCA), foreign financial institutions (which term includes most foreign hedge funds, private equity funds, mutual funds, securitization vehicles and other investment vehicles) and certain other foreign entities must comply with certain information reporting rules with respect to their U.S. account holders and investors. A foreign financial institution or such other foreign entity that does not comply with the FATCA reporting requirements generally will be subject to a 30% withholding tax with respect to any withholdable payments. For this purpose, withholdable payments include U.S.-source payments otherwise subject to nonresident withholding tax, such as interest paid in respect of the New Notes, and also include the entire gross proceeds from the sale of any debt of U.S. issuers, even if the payment would otherwise not be subject to U.S. nonresident withholding tax (e.g., because it is capital gain). The IRS recently issued Proposed Treasury Regulations that eliminate withholding on payments of gross proceeds (but not on payments of interest). Pursuant to the Proposed Treasury Regulations, we and any withholding agent may (but are not required to) rely on this proposed change to FATCA withholding until the final regulations are issued. Foreign financial institutions located in jurisdictions that have an intergovernmental agreement with the United States may be subject to different rules.
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We will not pay any additional amounts to holders in respect of any amounts withheld, including pursuant to FATCA. Under certain circumstances, a holder might be eligible for refunds or credits of such taxes. Holders are urged to consult with their own tax advisors regarding the effect, if any, of the FATCA provisions to them based on their particular circumstances.
This discussion of certain United States federal income tax considerations is for general information only and may not be applicable depending upon a holders particular situation. Holders of Old Notes considering the exchange offer are urged to consult their own tax advisors with respect to the tax consequences to them of exchanging Old Notes for New Notes, including the tax consequences under state, local, estate, foreign and other tax laws and the possible effects of changes in United States or other tax laws.
Each broker-dealer that receives New Notes for its own account pursuant to the exchange offer must acknowledge that it may be a statutory underwriter and that it will deliver a prospectus in connection with any resale of such New Notes. This prospectus, as it may be amended or supplemented from time to time, may be used by a broker-dealer in connection with resales of New Notes received in exchange for Old Notes where such Old Notes were acquired as a result of market-making activities or other trading activities provided that such broker-dealer notifies the Company to that effect by so indicating on the letter of transmittal. To the extent that any notifying broker-dealer participates in the exchange offer, we will use our commercially reasonable efforts to maintain the effectiveness of this prospectus.
We will not receive any proceeds from any sale of New Notes by broker-dealers or any other persons. New Notes received by broker-dealers for their own account pursuant to the exchange offer may be sold from time to time in one or more transactions in the over-the-counter market, in negotiated transactions, through the writing of options on the New Notes or a combination of such methods of resale, at market prices prevailing at the time of resale, at prices related to such prevailing market prices or at negotiated prices. Any such resale may be made directly to purchasers or to or through brokers or dealers who may receive compensation in the form of commissions or concessions from any such broker-dealer and/or the purchasers of any New Notes. Any broker-dealer that receives New Notes in exchange for Old Notes acquired for its own account as a result of market-making activities or other trading activities, and resells such New Notes, and any broker-dealer that participates in a distribution of such New Notes may be deemed to be an underwriter within the meaning of the Securities Act and any profit on any such resale of New Notes and any commission or concessions received by any such persons may be deemed to be underwriting compensation under the Securities Act. The letter of transmittal states that, by acknowledging that it will deliver and by delivering a prospectus, a broker-dealer will not be deemed to admit that it is an underwriter within the meaning of the Securities Act.
We will promptly send additional copies of this prospectus and any amendment or supplement to this prospectus to any broker-dealer that reasonably requests such documents. We have agreed to pay certain expenses in connection with the exchange offer and will indemnify the holders of the Old Notes (including any broker-dealers) against certain liabilities, including certain liabilities under the Securities Act.
The validity of the New Notes will be passed upon for us by Nelson Mullins Riley & Scarborough LLP, Miami, Florida.
The consolidated financial statements of FedNat Holding Company appearing in FedNat Holding Companys Annual Report on Form 10-K for the year ended December 31, 2018 (including schedules appearing therein), and the effectiveness of FedNat Holding Companys internal control over financial reporting as of December 31, 2018, have been audited by Ernst & Young LLP, independent registered public accounting firm, as set forth in their reports thereon, included therein, and incorporated herein by reference. Such consolidated financial statements are incorporated herein by reference in reliance upon such reports given upon the authority of such firm as experts in accounting and auditing.
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OFFER TO EXCHANGE
Up to $100,000,000 aggregate principal amount of
7.50% Senior Unsecured Notes due 2029
that have been registered under the Securities Act of 1933
for a like principal amount of any and all outstanding unregistered
7.50% Senior Unsecured Notes due 2029
PROSPECTUS
Until , 2020, all dealers that effect transactions in these securities, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to the dealers obligation to deliver a prospectus when acting as underwriters and with respect to their unsold allotments or subscriptions.
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 20. Indemnification of Officers and Directors.
The Registrant has authority under Section 607.0851 of the Florida Business Corporation Act to indemnify its directors and officers to the extent provided for in such statute. The Registrants Second Restated Articles of Incorporation and Second Amended and Restated Bylaws provide that the Registrant may insure, shall indemnify and shall advance expenses on behalf of its officers and directors to the fullest extent not prohibited by law. The Registrant is also a party to indemnification agreements with each of its directors and executive officers.
Item 21. Exhibits and Financial Statement Schedules.
(a)
Exhibits:
* | Filed herewith. |
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(b)
Financial Statement Schedules:
All schedules for which provision is made in the applicable accounting regulations of the Securities and Exchange Commission have been omitted because they are not required, amounts which would otherwise be required to be shown with respect to any item are not material, are inapplicable or the required information has already been provided elsewhere or incorporated by reference in the registration statement.
Item 22. Undertakings.
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement:
(i) to include any prospectus required by Section 10(a)(3) of the Securities Act of 1933;
(ii) to reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement (notwithstanding the foregoing, any increase or decrease in the volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Securities and Exchange Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than a 20% change in the maximum aggregate offering price set forth in the Calculation of Registration Fee table in the effective registration statement); and
(iii) to include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement.
(2) That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering.
The undersigned registrant hereby undertakes that, for the purpose of determining liability under the Securities Act of 1933 to any purchaser, each prospectus filed pursuant to Rule 424(b) as part of a registration statement relating to an offering, other than registration statements relying on Rule 430B or other than prospectuses filed in reliance on Rule 430A, shall be deemed to be part of and included in the registration statement as of the date it is first used after effectiveness; provided, however, that no statement made in a registration statement or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior to such first use, supersede or modify any statement that was made in the registration statement or prospectus that was part of the registration statement or made in any such document immediately prior to such date of first use.
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For the purpose of determining liability of the registrant under the Securities Act of 1933 to any purchaser in the initial distribution of the securities, the undersigned registrant undertakes that in a primary offering of securities of the undersigned registrant pursuant to this registration statement, regardless of the underwriting method used to sell the securities to the purchaser, if the securities are offered or sold to such purchaser by means of any of the following communications, the undersigned registrant will be a seller to the purchaser and will be considered to offer or sell such securities to such purchaser:
(i) any preliminary prospectus or prospectus of the undersigned registrant relating to the offering required to be filed pursuant to Rule 424;
(ii) any free writing prospectus relating to the offering prepared by or on behalf of the undersigned registrant or used or referred to by the undersigned registrant;
(iii) the portion of any other free writing prospectus relating to the offering containing material information about the undersigned registrant or its securities provided by or on behalf of the undersigned registrant; and
(iv) any other communication that is an offer in the offering made by the undersigned registrant to the purchaser.
The undersigned registrant hereby undertakes that, for purposes of determining any liability under the Securities Act of 1933, each filing of the registrants annual report pursuant to Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934 (and, where applicable, each filing of an employee benefit plans annual report pursuant to section 15(d) of the Securities Exchange Act of 1934) that is incorporated by reference in this registration statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act of 1933 and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act of 1933 and will be governed by the final adjudication of such issue.
The undersigned registrant hereby undertakes to respond to requests for information that is incorporated by reference into the prospectus pursuant to Item 4, 10(b), 11 or 13 of this form, within one business day of receipt of such request, and to send the incorporated documents by first class mail or other equally prompt means. This includes information contained in documents filed subsequent to the effective date of the registration statement through the date of responding to the request.
The undersigned registrant hereby undertakes to supply by means of a post-effective amendment all information concerning a transaction, and the company being acquired involved therein, that was not the subject of and included in this registration statement when it became effective.
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Pursuant to the requirements of the Securities Act, the registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Sunrise, State of Florida, on January 15, 2020.
FEDNAT HOLDING COMPANY | ||
By: | /s/ MICHAEL H. BRAUN | |
Michael H. Braun Chief Executive Officer and President |
POWER OF ATTORNEY
Each person whose signature appears below constitutes and appoints Michael H. Braun and Ronald A. Jordan, or any one of them, as his or her true and lawful attorneys-in-fact and agents with full power of substitution and resubstitution for him or her and in his or her name, place and stead in any and all capacities to execute in the name of each such person who is then an officer or director of the Registrant any and all amendments (including post-effective amendments) to this Registration Statement, and to file the same with all exhibits thereto and other documents in connection therewith with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents and each of them full power and authority to do and perform each and every act and thing required or necessary to be done in and about the premises as fully as he or she might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them, or their or his substitute or substitutes, may lawfully do or cause to be done by virtue thereof.
Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities and on the date indicated.
SIGNATURE | TITLE | DATE | ||
/s/ Michael H. Braun |
Chief Executive Officer, President and Director (Principal Executive Officer) |
January 15, 2020 | ||
Michael H. Braun | ||||
/s/ Ronald A. Jordan |
Chief Financial Officer (Principal Financial Officer) |
January 15, 2020 | ||
Ronald A. Jordan | ||||
/s/ Erick A. Fernandez |
Chief Accounting Officer (Principal Accounting Officer) |
January 15, 2020 | ||
Erick A. Fernandez | ||||
/s/ Bruce F. Simberg |
Chairman of the Board and Director | January 15, 2020 | ||
Bruce F. Simberg | ||||
/s/ Jenifer G. Kimbrough |
Director | January 15, 2020 | ||
Jenifer G. Kimbrough | ||||
/s/ David W. Michelson |
Director | January 15, 2020 | ||
David W. Michelson | ||||
/s/ David K. Patterson |
Director | January 15, 2020 | ||
David K. Patterson | ||||
/s/ Thomas A. Rogers |
Director | January 15, 2020 | ||
Thomas A. Rogers | ||||
/s/ William G. Stewart |
Director | January 15, 2020 | ||
William G. Stewart | ||||
/s/ Richard W. Wilcox, Jr. |
Director | January 15, 2020 | ||
Richard W. Wilcox, Jr. | ||||
/s/ Roberta N. Young |
Director | January 15, 2020 | ||
Roberta N. Young |
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Exhibit 4.4
FIRST SUPPLEMENTAL INDENTURE
between
FEDNAT HOLDING COMPANY
and
THE BANK OF NEW YORK MELLON,
as Trustee
Dated as of [●], 2020
to the
INDENTURE
Dated as of March 5, 2019
Reconciliation and tie between Trust Indenture Act of 1939
and the Indenture
Trust Indenture Act Section |
Section | |||
§310 |
(a)(1) | 7.10 | ||
(a)(2) (a)(5) (b) |
7.10 7.10 7.11 | |||
§311 |
(a) (b) |
6.12 6.12 | ||
§312 §313 |
(c) | 7.12 7.13 | ||
§314 |
(a) | 3.2, 3.10 | ||
(c)(1) | 10.2 | |||
(c)(2) | 10.2 | |||
(e) | 10.3 | |||
§315 |
(a) (b) (c) (d) (e) |
7.1 7.5 7.1 7.1 6.11 | ||
§316 |
(a) (last sentence) | 2.8 | ||
(a)(1)(A) | 6.2, 9.3 | |||
(a)(1)(B) | 6.4 | |||
(b) | 6.7 | |||
(c) | 6.10 | |||
§317 |
(a)(1) | 6.8 | ||
(a)(2) (b) |
6.9 2.14 | |||
§318 |
(a) | 1.3 | ||
(c) | 1.3 |
NOTE: This reconciliation and tie shall not, for any purpose, be deemed to be a part of the Indenture.
FIRST SUPPLEMENTAL INDENTURE
THIS FIRST SUPPLEMENTAL INDENTURE (this Supplemental Indenture), dated as of [●], 2020, between FedNat Holding Company, a Florida corporation (the Company), and The Bank of New York Mellon, as trustee (the Trustee).
RECITALS OF THE COMPANY
WHEREAS, the Company and the Trustee executed and delivered an Indenture, dated as of March 5, 2019 (the Original Indenture and, together with this Supplemental Indenture, the Indenture), providing for the issuance by the Company from time to time of the Companys Senior Unsecured Notes due 2029;
WHEREAS, pursuant to the Original Indenture, the Company initially issued $100,000,000 aggregate principal amount of its Senior Unsecured Notes due 2029 (the Initial Notes);
WHEREAS, the Company wishes to exchange up to $100,000,000 aggregate principal amount of the Initial Notes for a like principal amount of unrestricted Senior Unsecured Notes due 2029 issued under the Indenture (the Exchange Notes);
WHEREAS, pursuant to Section 9.1 of the Indenture the Company may, without the consent of the Holders, enter into a supplemental indenture to cure any ambiguity, omission, defect or inconsistency in the Indenture, or to comply with any requirement of the SEC in connection with the qualification of the Indenture under the Trust Indenture Act of 1939, as amended (the Trust Indenture Act);
WHEREAS, the Company wishes to correct the Indenture to provide for the proper minimum denomination amounts for the Exchange Notes;
WHEREAS, the Company wishes to incorporate into the Indenture the mandatory provisions of the Trust Indenture Act that were provided for by law pursuant to Section 318 of the Trust Indenture Act;
WHEREAS, pursuant to Sections 2.6, 9.1 and 9.5 of the Indenture, the parties hereto are authorized to execute and deliver this Supplemental Indenture to amend the Indenture, without the consent of any Holder; and
WHEREAS, the Company has duly authorized the execution and delivery of this Supplemental Indenture to provide for the issuance of the Exchange Notes and to amend certain terms of the Indenture, and all acts and things necessary to make this Supplemental Indenture a valid, binding, and legal obligation of the Company and to constitute a valid agreement of the Company, in accordance with its terms, have been done and performed.
NOW, THEREFORE, in consideration of the foregoing and for other good and valuable consideration, the receipt of which is hereby acknowledged, the Company and the Trustee mutually covenant and agree for the benefit of the Holders of the Notes as follows:
1. Defined Terms. As used in this Supplemental Indenture, terms defined in the Indenture or in the preamble or recitals hereto are used herein as so defined.
2. Exchange Notes. The Exchange Notes issued pursuant to this Supplemental Indenture constitute exchange notes issued pursuant to Section 2.6 of the Indenture. The Exchange Notes shall have the same terms in all respects as the Initial Notes, except that the first interest payment date with respect to the Exchange Notes shall be March 15, 2020, the Exchange Notes shall accrue interest from most recent date on which interest on the Initial Notes was paid, the Exchange Notes shall have a different issue date, and the Exchange Notes shall be issued as Unrestricted Global Notes. Subject to the foregoing, the Exchange Notes shall be substantially in the form of Exhibit A to the Indenture.
3. Aggregate Principal Amount. The aggregate principal amount of the Exchange Notes that may be authenticated and delivered pursuant to this Supplemental Indenture shall be limited to $100,000,000.
4. Amendments to the Original Indenture. The Indenture is hereby amended as follows.
1
The following is hereby added as new Section 1.3 of the Indenture:
SECTION 1.3. Conflict with Trust Indenture Act. If any provision hereof limits, qualifies or conflicts with a provision of the Trust Indenture Act of 1939, as amended (the Trust Indenture Act), that is required under such Act to be a part of and govern this Indenture, the latter provision shall control. If any provision of this Indenture modifies or excludes any provision of the Trust Indenture Act which may be so modified or excluded, the latter provision shall be deemed to apply to this Indenture as so modified or to be excluded, as the case may be.
The last sentence of Section 2.1(a) of the Indenture is hereby replaced in its entirety with the following:
The Notes shall be issuable only in minimum denominations of $1,000 principal amount and integral multiples of $1,000 thereafter.
The following is hereby added as new paragraph (d) in Section 3.2 of the Indenture:
(d) The Company will transmit by mail to the Holders of Notes, within 30 days after the filing thereof with the Trustee, in the manner and to the extent provided in Trust Indenture Act Section 313(c), such summaries of any information, documents and reports required to be filed by the Company pursuant to clause (a) of this section as may be required by rules and regulations prescribed from time to time by the Commission.
Section 3.8(a) of the Indenture is hereby replaced in its entirety with the following:
(a) If a Change of Control occurs, each Holder shall have the right to require the Company to repurchase all or any part (in integral multiples of $1,000) of such Holders Notes at a purchase price in cash equal to 101% of the then principal amount of the Notes plus accrued and unpaid interest, if any, to, but excluding, the date of purchase (subject to the right of Holders of record on the relevant Record Date to receive interest due on the relevant Payment Date).
The following is hereby added as new Section 6.12 of the Indenture:
SECTION 6.12. Preferential Collection of Claims Against Company. The Trustee is subject to Trust Indenture Act Section 311(a), excluding any creditor relationship listed in Trust Indenture Act Section 311(b). A Trustee who has resigned or been removed shall be subject to Trust Indenture Act Section 311(a) to the extent indicated therein.
The following is hereby added as new Section 7.10 of the Indenture:
SECTION 7.10. Corporate Trustee Required; Eligibility. There shall at all times be a Trustee hereunder which shall be eligible to act as Trustee under TIA Section 310(a)(1) and shall have a combined capital and surplus of at least $50,000,000. If such corporation publishes reports of condition at least annually, pursuant to law or the requirements of Federal, State, Territorial or District of Columbia supervising or examining authority, then for the purposes of this Section, the combined capital and surplus of such corporation shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. The Company may not, nor may any Person directly or indirectly controlling, controlled by or under common control with the Company serve as Trustee. If at any time the Trustee shall cease to be eligible in accordance with the provisions of this Section, it shall resign immediately in the manner and with the effect hereinafter specified in this Article.
The following is hereby added as new Section 7.11 of the Indenture:
SECTION 7.11. Disqualification; Conflicting Interests. If the Trustee has or shall acquire a conflicting interest within the meaning of the Trust Indenture Act, the Trustee shall either eliminate such interest, apply to the U.S. Securities and Exchange Commission (the Commission) for permission to continue as trustee, or resign, to the extent and in the manner provided by, and subject to the provisions of, the Trust Indenture Act and this Indenture. To the extent permitted by such Act, the Trustee shall not be deemed to have a conflicting interest with respect to the Notes or the securities of any other indenture of the Company by virtue of being a trustee under this Indenture with respect to the Notes.
2
The following is hereby added as new Section 7.12 of the Indenture:
SECTION 7.12. Disclosure of Names and Addresses of Holders. Every Holder of Notes, by receiving and holding the same, agrees with the Company and the Trustee that neither the Company nor the Trustee nor any authenticating agent nor any Paying Agent nor any Registrar nor any agent of any of them shall be held accountable by reason of the disclosure of any information as to the names and addresses of the Holders of Notes in accordance with Trust Indenture Act Section 312, regardless of the source from which such information was derived, and that the Trustee shall not be held accountable by reason of mailing or sending any material pursuant to a request made under Trust Indenture Act Section 312(b).
The following is hereby added as new Section 7.13 of the Indenture:
SECTION 7.13. Reports by Trustee. Within 60 days after May 15 of each year commencing with the first May 15 after the additional issuance of Notes pursuant to the Supplemental Indenture, the Trustee shall transmit by mail or send to all Holders of Notes as provided in Trust Indenture Act Section 313(c) a brief report dated as of such May 15 which meets the requirements of Trust Indenture Act Section 313(a).
A copy of each such report shall, at the time of such transmission to Holders, be filed by the Trustee with each stock exchange, if any, upon which the Notes are listed, with the Commission and with the Company. The Company will promptly notify the Trustee of the listing of the Notes on any stock exchange. In the event that, on any such reporting date, no events have occurred under the applicable sections of the Trust Indenture Act within the 12 months preceding such reporting date, the Trustee shall be under no duty or obligation to provide such reports.
5. Governing Law; Jurisdiction. THIS SUPPLEMENTAL INDENTURE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK (WITHOUT REGARD TO THE CONFLICTS OF LAWS PROVISIONS THEREOF THAT WOULD CAUSE THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION). THE PARTIES HERETO AGREE TO SUBMIT TO THE JURISDICTION OF ANY UNITED STATES FEDERAL OR STATE COURT LOCATED IN THE BOROUGH OF MANHATTAN, IN THE CITY OF NEW YORK IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS SUPPLEMENTAL INDENTURE.
6. Headings, Etc. The headings of this Supplemental Indenture have been inserted for convenience of reference only, are not to be considered a part hereof, and shall in no way modify or restrict any of the terms or provisions hereof.
7. Execution in Counterparts. This Supplemental Indenture may be executed in any number of counterparts, each of which shall be an original, but such counterparts shall together constitute but one and the same instrument. Delivery of an executed counterpart by facsimile, portable document format (pdf) or any other electronic means shall be effective as delivery of a manually executed counterpart thereof.
8. Severability. In the event any provision of this Supplemental Indenture shall be invalid, illegal or unenforceable, then (to the extent permitted by law) the validity, legality or enforceability of the remaining provisions shall not in any way be affected or impaired.
9. Waiver of Jury Trial. EACH OF THE COMPANY AND THE TRUSTEE HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS SUPPLEMENTAL INDENTURE, THE EXCHANGE NOTES OR THE TRANSACTION CONTEMPLATED HEREBY.
10. Concerning the Trustee. The Trustee makes no representation as to and shall not be responsible in any manner whatsoever for or in respect of the validity or sufficiency of this Supplemental Indenture or for or in respect of the recitals contained herein, all of which recitals are made solely by the Company. All of the provisions contained in the Indenture in respect of the rights, powers, privileges, and immunities of the Trustee shall be applicable in respect of this Supplemental Indenture as fully and with like force and effect as though fully set forth in full herein. The Trustee shall not be accountable for the use or application by the Company of the Exchange Notes or the proceeds thereof.
[Remainder of page intentionally left blank]
3
IN WITNESS WHEREOF, the parties hereto have caused this Supplemental Indenture to be duly executed as of the date first written above.
FEDNAT HOLDING COMPANY | ||
By: |
||
Name: | ||
Title: |
THE BANK OF NEW YORK MELLON, as Trustee | ||
By: |
||
Name: | ||
Title: |
4
Exhibit 4.5
FORM OF GLOBAL NOTE
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION (DTC), TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO.), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
THIS NOTE IS A GLOBAL NOTE WITHIN THE MEANING OF THE INDENTURE AND IS HELD BY THE DEPOSITARY (AS DEFINED IN THE INDENTURE GOVERNING THIS NOTE) OR ITS NOMINEE IN CUSTODY FOR THE BENEFIT OF THE BENEFICIAL OWNERS HEREOF. UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR NOTES IN DEFINITIVE FORM, THIS NOTE MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY THE DEPOSITARY TO A NOMINEE OF THE DEPOSITARY OR BY A NOMINEE OF THE DEPOSITARY TO THE DEPOSITARY OR ANOTHER NOMINEE OF THE DEPOSITARY OR BY THE DEPOSITARY OR ANY SUCH NOMINEE TO A SUCCESSOR DEPOSITARY OR A NOMINEE OF SUCH SUCCESSOR DEPOSITARY.
No. [ ]
Principal Amount $[ ]
as revised by the Schedule of Increases
or Decreases in the Global Note attached hereto
CUSIP: 31431B AC3
ISIN: US31431BAC37
FEDNAT HOLDING COMPANY
Senior Unsecured Notes due 2029
FedNat Holding Company, a corporation organized under the laws of Florida, for value received, hereby promises to pay to CEDE & CO., or registered assigns in accordance with the terms and conditions hereof, the initial principal amount set forth on the Schedule of Increases or Decreases in the Global Note attached hereto, as revised by the Schedule of Increases or Decreases in the Global Note attached hereto, on March 15, 2029, together with interest on the then outstanding principal amount of the Notes on each Payment Date at the rate per annum and terms specified herein.
Payment Dates: March 15 and September 15 of each year, commencing on March 15, 2020 and ending on March 15, 2029, or if any such day is not a Business Day, the next succeeding day that is a Business Day.
Record Dates: 15 calendar days immediately preceding such Payment Date.
Additional provisions of this Note are set forth on the reverse side of this Note. Capitalized terms used and not otherwise defined herein are defined in the Indenture dated as of March 5, 2019 (as hereafter amended, supplemented or otherwise modified and in effect from time to time, the Indenture), between the Company and The Bank of New York Mellon, as Trustee (in such capacity, the Trustee).
Unless the certificate of authentication hereon has been executed by the Trustee whose name appears below by manual signature, this Note shall not be entitled to any benefit under the Indenture referred to above and on the reverse side hereof, or be valid or obligatory for any purpose.
FEDNAT HOLDING COMPANY | ||
By: |
| |
Name: | ||
Title: |
[Note]
TRUSTEES CERTIFICATE OF AUTHENTICATION
This is one of the Notes designated as the Senior Unsecured Notes due 2029 referred to in the Indenture.
THE BANK OF NEW YORK MELLON, as Trustee, | ||
By: |
| |
Authorized Signatory |
Date:
[Note]
FORM OF REVERSE OF GLOBAL NOTE
Senior Unsecured Notes due 2029
1. Principal and Interest
FedNat Holding Company, a corporation organized under the laws of Florida (such corporation, and its successors and assigns under the Indenture hereinafter referred to, being herein called the Company), for value received, promises to pay (a) the outstanding principal amount of the Notes on March 15, 2029 and (b) interest on the then outstanding principal amount of the Notes on each Payment Date at the fixed rate per annum specified below.
The Company shall pay interest in arrears on the then-outstanding principal amount of Notes at a fixed rate per annum equal to the Interest Rate on March 15 and September 15 of each year, commencing on March 15, 2020 and ending on March 15, 2029 (each, a Payment Date). Interest on the Notes shall accrue from the most recent date to which interest has been paid on the Notes or, if no interest has been paid, from [], 2020 (each, an Interest Accrual Period). The Company shall pay interest on overdue principal or premium, if any (plus interest on such interest to the extent lawful), at the rate borne by the Notes to the extent lawful. Interest shall be computed on the basis of a 360-day year of twelve 30-day months.
Interest Rate means a per annum rate equal to (a) 7.5% for each Interest Accrual Period for which a Step-up Event is not in effect at all times during such Interest Accrual Period; or (b) for each Interest Accrual Period for which a Step-up Event is in effect at any point during such Interest Accrual Period, 7.5% plus an additional 50 basis points for each notch downgrade of the Company below BBB- (or its equivalent rating) by the Applicable Rating Agency.
Step-up Event shall occur and be in effect for any Interest Accrual Period or part thereof for which the Notes are rated BB+ or lower by the Applicable Rating Agency. The Company shall notify the Trustee in writing of any Step-up Event within three Business Days following such Step-up Event. The Trustee shall not be charged with knowledge of a Step-up Event unless and until it has received written notice of such Step-up from either (i) the Company or (ii) Holders representing a majority of the outstanding principal amount of the Notes.
Applicable Rating Agency means one of the following Rating Agencies at any given time: (i) in the case that there is only one Rating Agency rating the Notes, such Rating Agency, (ii) in the case that there are two Rating Agencies rating the Notes, such Rating Agency providing the lower rating, or (iii) in the case that there are three or more Rating Agencies rating the Notes, such Rating Agency providing the second lowest rating. The initial Rating Agency shall be Egan Jones.
2. Method of Payment
By no later than 10:00 a.m. (New York time) on the Business Day prior to which any principal of, premium, if any, or interest on any Note is due and payable, the Company shall irrevocably deposit with the Paying Agent money sufficient to pay such principal, premium, if any, and/or interest (other than Definitive Notes). Interest (except Defaulted Interest) shall be due and payable to the Persons who are registered Holders of Notes at the close of business on one Business Day immediately preceding the Record Date for such Payment Date unless Notes are cancelled, repurchased, or redeemed after the Record Date and before the Payment Date. Holders must surrender Notes to a Paying Agent to collect principal payments. The Company shall pay principal, premium, if any, and interest in money of the United States that at the time of payment is legal tender for payment of public and private debts. Payments in respect of
Notes represented by a Global Note (including principal, premium, if any, and interest) shall be made by the Company by the transfer of immediately available funds to the accounts specified by the Depositary. The Company shall make all payments in respect of a Definitive Note (including principal, premium, if any, and interest) by mailing a check to the registered address of each Holder thereof.
3. Paying Agent and Registrar
Initially, The Bank of New York Mellon shall act as Paying Agent and Registrar. The Company may appoint and change any Paying Agent, Registrar or co-registrar without notice to the Holders. The Company may act as Paying Agent, Registrar or co-registrar.
4. Indenture
The Company issued the Notes under the Indenture. The terms of the Notes include those stated in the Indenture, and all capitalized terms used herein without definition shall have the respective meanings ascribed to them in the Indenture. The Notes are subject to all such terms, and Holders are referred to the Indenture and the Securities Act for a statement of those terms. To the extent any provision of this Note conflicts with the express provisions of the Indenture, the provisions of the Indenture shall govern and be controlling.
The Notes are senior unsecured obligations of the Company. This Note is one of the Senior Unsecured Notes due 2029 referred to in the Indenture (herein called Notes). The Indenture, among other things, imposes certain covenants including as specified in Article III. The Indenture also imposes requirements with respect to the provision of financial information. The Indenture also contains certain exceptions to the foregoing, and this description is qualified in its entirety by reference to the Indenture.
5. Repurchase upon Change of Control.
The Notes may be the subject of a Change of Control Offer, as further described in the Indenture. The Company shall not be required to make sinking fund payments with respect to the Notes.
6. Denominations; Transfer; Exchange
The Notes are in registered form without coupons in initial denominations of $1,000 principal amount and integral multiples of $1,000 thereafter. A Holder may transfer or exchange Notes in accordance with the Indenture. The Trustee and the Registrar may require a Holder, among other things, to furnish appropriate endorsements or transfer documents and to pay any taxes and fees required by law or permitted by the Indenture. The Registrar need not register the transfer of or exchange any Notes for a period beginning three Business Days before a Payment Date and ending on such Payment Date.
7. Optional Redemption
(a) At any time prior to March 15, 2024, the Company may, at its option, redeem all or, from time to time, any part of the Notes, at a redemption price equal to 100.00% of the principal amount of the Notes redeemed, plus the Applicable Premium, plus accrued and unpaid interest and principal on such Notes, if any, on the Notes redeemed, to the applicable redemption date (subject to the right of Holders of record on the relevant Record Date to receive principal and interest due on the relevant Payment Date that is on or prior to the applicable redemption date).
(b) On or after March 15, 2024, the Company may, at its option, redeem all or, from time to time, any part of the Notes, at the following redemption prices (expressed as a percentage of outstanding principal amount of the Notes to be redeemed) plus accrued and unpaid interest and principal on such Notes, if any, to the applicable redemption date, if redeemed during the twelve-month period beginning on March 15 of the years indicated below (subject to the rights of Holders of record on the relevant Record Date to receive principal and interest due on the relevant Payment Date that is on or prior to the applicable redemption date):
Year |
Redemption Price | |||
2024 |
103.750 | % | ||
2025 |
101.875 | % | ||
2026 and thereafter |
100.00 | % |
(c) Any redemption pursuant to this Paragraph 7 shall be made pursuant to the provisions of Article V of the Indenture.
Applicable Premium means, with respect to any Note on any applicable redemption date, the greater of (1) 1.0% of the then outstanding principal amount of such Note and (2) the excess (if any) of:
(A) the present value at such redemption date of (i) the redemption price of such Note at March 15, 2024 (such redemption price being set forth in the table in Section 7(b) hereof) (excluding any accrued but unpaid interest), plus (ii) all required interest payments due on such Note through March 15, 2024 (excluding accrued but unpaid interest), computed using a discount rate equal to the Treasury Rate on such redemption date plus 50 basis points; over
(B) the then outstanding principal amount of such Note.
The Company will calculate the Applicable Premium and the Trustee will not be responsible for such calculation.
Treasury Rate means, as of any redemption date, the yield to maturity as of such redemption
date of United States Treasury securities with a constant maturity (as compiled and published in the most recent Federal Reserve Statistical Release H.15 (519) that has become publicly available at least two business days prior to the redemption date (or, if such Statistical Release is no longer published, any publicly available source of similar market data)) most nearly equal to the period from the redemption date to March 15, 2024; provided that if the period from the redemption date to such date is not equal to the constant maturity of a United States Treasury security for which a yield is given, the Treasury yield will be obtained by linear interpolation (calculated to the nearest one-twelfth of a year) from the yields of the nearest United States Treasury securities for which such yields are given, except that if the period from the redemption date to such date is less than one year, the weekly average yield on actually traded United States securities adjusted to a constant maturity of one year will be used.
8. Persons Deemed Owners
The registered Holder of this Note may be treated as the owner of it for all purposes.
9. Unclaimed Money
If money for the payment of the principal of or premium, if any, or interest remains unclaimed for two years, the Paying Agent shall pay the money back to the Company at its request unless an abandoned property law designates another Person. After any such payment, Holders entitled to the money must look only to the Company and not to the Trustee for payment.
10. Discharge and Defeasance
Subject to certain conditions set forth in the Indenture, the Company at any time may terminate some or all of its obligations under the Notes and the Indenture if the Company deposits with the Trustee money or U.S. Government Obligations sufficient for the payment of principal and interest on the Notes to redemption or maturity, as the case may be.
11. Amendment, Waiver
Subject to certain exceptions set forth in the Indenture, (i) the Indenture and the Notes may be amended or supplemented with the written consent of the Holders of at least a majority in principal amount of the Notes then outstanding (including without limitation, consents obtained in connection with a purchase of, or tender offer or exchange offer for Notes) and (ii) any default (other than (x) with respect to nonpayment or (y) in respect of a provision that cannot be amended without the written consent of each Holder affected) or noncompliance with any provision may be waived with the written consent of the Holders of a majority in principal amount of the Notes then outstanding (including without limitation, consents obtained in connection with a purchase of, or tender offer or exchange offer for, Notes). Subject to certain exceptions set forth in the Indenture, without the consent of any Holder, the Company and the Trustee may amend the Indenture or the Notes to cure any ambiguity, omission, defect or inconsistency, or to comply with Article IV of the Indenture in respect of the assumption by a Successor Company of an obligation of the Company under the Indenture and the Notes, or to provide for uncertificated Notes in addition to or in place of certificated Notes, or to add Guarantees with respect to the Notes, or to add to the covenants of the Company for the benefit of the Holders, add Events of Default or to surrender any right or power conferred by the Indenture upon the Company, or to comply with any requirement of the SEC in connection with the qualification of the Indenture under the Trust Indenture Act of 1939, as amended, if applicable, or to provide for the appointment of a successor trustee; provided that the successor trustee is otherwise qualified and eligible to act as such under the terms of the Indenture.
12. Defaults and Remedies
Under the Indenture, and subject to the terms and provisions of the Indenture, Events of Default include, without limitation: (i) default in payment of interest when due on the Notes continuing for 10 consecutive Business Days; (ii) default in payment of the principal of or premium, if any, on the Notes at its Stated Maturity, upon optional redemption, upon required repurchase, upon declaration of acceleration or otherwise; (iii) failure by the Company to comply with its obligations under certain provisions of Article III of the Indenture, (iv) failure by the Company to comply with certain other provisions or agreements in the Indenture and the Notes, in certain cases subject to notice and lapse of time; (v) default in other payment obligations of the Company or any of its Subsidiaries; (vi) certain events of bankruptcy or insolvency with respect to the Company or any Subsidiary; (vii) certain final judgments or decrees for the payment of money in excess of $1,000,000; and (viii) breach by the Company in any material respect of any representation or covenant made to the Holders in the Note Purchase Agreement, each subject to any applicable grace periods as set forth in the Indenture or Note Purchase Agreement, as applicable.
If an Event of Default occurs and is continuing, the Trustee or Holders of at least majority in aggregate principal amount of the outstanding Notes then outstanding may declare all the Notes to be due and payable immediately. Certain events of bankruptcy or insolvency with respect to the Company are Events of Default, which shall result in the Notes being due and payable immediately upon the occurrence of such Events of Default.
Holders may not enforce the Indenture or the Notes except as provided in the Indenture. The Trustee may refuse to enforce the Indenture or the Notes unless the Trustee receives indemnity and/or security satisfactory to the Trustee. Subject to certain limitations, Holders of a majority in principal amount of the then outstanding Notes may direct the Trustee in its exercise of any trust or power.
13. Trustee Dealings with the Company
Subject to certain limitations set forth in the Indenture, the Trustee under the Indenture, in its individual or any other capacity, may become the owner or pledgee of Notes, subject to the terms and conditions of the Indenture. Additionally, the Trustee may otherwise deal with and collect obligations owed to it by the Company or its Affiliates and may otherwise deal with the Company or its Affiliates with the same rights it would have if it were not Trustee.
14. No Recourse Against Others
An incorporator, director, officer, employee, stockholder or controlling Person of the Company or any Subsidiary shall not have any liability for any obligations of the Company or any Subsidiary under the Notes or the Indenture, or for any claim based on, in respect of, or by reason of, such obligations or their creation. By accepting a Note, each Holder waives and releases all such liability. The waiver and release shall be part of the consideration for the issuance of the Notes.
15. Authentication
This Note shall not be valid until an authorized signatory of the Trustee (or an authenticating agent acting on its behalf) manually signs the certificate of authentication on the other side of this Note.
16. Abbreviations
Customary abbreviations may be used in the name of a Holder or an assignee, such as TEN COM (=tenants in common), TEN ENT (=tenants by the entirety), JT TEN (=joint tenants with rights of survivorship and not as tenants in common), CUST (=custodian) and U/G/M/A (=Uniform Gift to Minors Act).
17. CUSIP and ISIN Numbers
The Company may cause one or more CUSIP and/or ISIN numbers to be printed on the Notes. No representation is made as to the accuracy of such numbers as printed on the Notes and reliance may be placed only on the other identification numbers placed thereon.
18. Successor Entity
When a successor entity assumes, in accordance with the Indenture, all the obligations of its predecessor under the Notes and the Indenture, and immediately before and thereafter no Default or Event of Default exists and all other conditions of the Indenture are satisfied, the predecessor entity will be released from those obligations.
19. Governing Law; Request for Indenture
This Note shall be governed by, and construed in accordance with, the laws of the State of New York.
The Company shall furnish to any Holder upon written request and without charge to the Holder a copy of the Indenture. Requests may be made to:
FedNat Holding Company
14050 N.W. 14th Street
Suite 180
Sunrise, FL 33323
Attention: Chief Financial Officer
SCHEDULE OF INCREASES OR DECREASES IN GLOBAL NOTE
The initial principal amount of the Note shall be $ [ ]. The following increases or decreases in this Global Note have been made:
Date of Exchange |
Amount of Decrease in Principal Amount of this Global Note |
Amount of Increase in Principal Amount of this Global Note |
Principal Amount of this Following such Decrease or Increase |
Signature of authorized signatory of Registrar or Depositary |
ASSIGNMENT FORM
To assign this Note, fill in the form below:
I or we assign and transfer this Note to
(Print or type assignees name, address and zip code)
(Insert assignees soc. sec. or tax I.D. No.)
and irrevocably appoint as agent to transfer this Note on the books of the Company. The agent may substitute another to act for him.
Date: | Your Signature: |
|
Signature Guarantee: |
|
(Signature must be guaranteed) |
Sign exactly as your name appears on the other side of this Note.
Exhibit 5.1
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NELSON MULLINS RILEY & SCARBOROUGH LLP ATTORNEYS AND COUNSELORS AT LAW
| |
One Biscayne Tower 2 S. Biscayne Boulevard | Suite 2100 Miami, FL 33131 T 305.373.9400 F 305.373.9443 nelsonmullins.com * In Florida, known as Nelson Mullins Broad and Cassel |
January 15, 2020
Board of Directors
FedNat Holding Company
14050 N.W. 14th Street, Suite 180
Sunrise, Florida 33323
Re: Registration Statement on Form S-4 of FedNat Holding Company
Dear Ladies and Gentlemen:
This opinion is furnished to you in connection with the above-referenced registration statement (the Registration Statement) filed with the Securities and Exchange Commission (the Commission) pursuant to the Securities Act of 1933, as amended (the Securities Act), relating to the registration of the offer by FedNat Holding Company (the Company) to exchange up to $100,000,000 in aggregate principal amount of its Senior Unsecured Notes due 2029 (the New Notes) for up to $100,000,000 in aggregate principal amount of its existing Senior Unsecured Notes due 2029 (the Old Notes). The New Notes are to be issued in accordance with the provisions of the Indenture dated as of March 5, 2019 (the Base Indenture), as amended by a First Supplemental Indenture to be dated as of the date the New Notes are issued (the First Supplemental Indenture, and together with the Base Indenture, the Indenture) by and between the Company, as issuer, and The Bank of New York Mellon, as trustee (the Trustee), as contemplated by the Registration Rights Agreements (the Registration Rights Agreements), each dated as of March 5, 2019, by and between the Company and the purchasers of the Old Notes.
We have acted as counsel for the Company in connection with its registered offering of the New Notes. This opinion is being furnished in accordance with the requirements of Item 601(b)(5) of Regulation S-K under the Securities Act.
In connection with the issuance of this opinion letter, we have examined originals or copies, certified or otherwise identified to our satisfaction of:
(a) | the Second Restated Articles of Incorporation of the Company filed with the Florida Secretary of State on November 7, 2018; |
(b) | the Second Amended and Restated Bylaws of the Company filed as Exhibit 3.2 to the Companys Form 10-Q filed with the Commission on November 7, 2018; |
(c) | the Registration Statement; |
(d) | the Old Notes; |
(e) | the New Notes; |
(f) | the Indenture; |
(g) | the Registration Rights Agreements; and |
CALIFORNIA | COLORADO | DISTRICT OF COLUMBIA | FLORIDA | GEORGIA | MARYLAND | MASSACHUSETTS | NEW YORK
NORTH CAROLINA | SOUTH CAROLINA | TENNESSEE | WEST VIRGINIA
FedNat Holding Company
January 15, 2020
Page 2
(h) | certain resolutions adopted by the Board of Directors of the Company with respect to the issuance of the Old Notes and the New Notes. |
We have also examined originals or copies, certified or otherwise identified to our satisfaction, of such records of the Company and such agreements, certificates of public officials, certificates of officers or other representatives of the Company and others, and such other documents, certificates and records, as we have deemed necessary or appropriate as a basis for the opinion set forth herein.
In our examination, we have assumed and have not verified (i) the legal capacity of all natural persons, (ii) the genuineness of all signatures, (iii) the authenticity of all documents submitted to us as originals, (iv) the conformity with the originals of all documents supplied to us as copies, (v) the accuracy and completeness of all corporate records and documents made available to us by the Company, and (vi) that the foregoing documents, in the form submitted to us for our review, have not been altered or amended in any respect material to our opinion stated herein. In addition, we have assumed that, as of the date of issuance of the New Notes, the Indenture will continue to be the valid and legally binding obligation of the Company and the Trustee.
Based upon and subject to the foregoing, we are of the opinion that, when the New Notes and First Supplemental Indenture (each in the form examined by us) are duly executed by the Company, and the New Notes are authenticated by the Trustee in accordance with the Indenture and issued and delivered upon consummation of the exchange offer (as described in the Registration Statement) against receipt of the Old Notes surrendered in exchange therefor in accordance with the terms of such exchange offer, the Registration Rights Agreements, the Registration Statement and the Indenture, the New Notes will be valid and binding obligations of the Company, enforceable against the Company in accordance with their terms.
We express no opinion (i) as to the laws of any jurisdiction other than the federal securities laws of the United States and the laws of the State of Florida and the State of New York (except with respect to state securities or blue sky laws), including as to whether, or the extent to which, the laws of any particular jurisdiction apply to the subject matter hereof or (ii) as to the validity, binding effect or enforceability of any provision in the New Notes or the Indenture to the extent it violates any applicable statute of limitations or relates to the choice of forum for resolving disputes. The opinions expressed above are subject to bankruptcy, insolvency, reorganization, fraudulent transfer, moratorium or other similar laws of general application affecting the rights and remedies of creditors and to general principles of equity.
This opinion is limited to the specific issues addressed herein, and no opinion may be implied or inferred beyond the opinion expressly stated above. Our opinion expressed herein is as of the date hereof, and we assume no obligation to revise or supplement the opinion rendered herein should the above-referenced laws be changed by legislative or regulatory action, judicial decision or otherwise.
We hereby consent to the filing of this opinion as Exhibit 5.1 to the Registration Statement and the references to our name therein, as well as under the heading Legal Matters in the related prospectus. In giving this consent, we do not thereby admit that we are within the category of persons whose consent is required by Section 7 of the Securities Act or the rules and regulations of the Commission thereunder.
Very truly yours,
|
/s/ NELSON MULLINS RILEY & SCARBOROUGH LLP |
Exhibit 23.1
Consent of Independent Registered Public Accounting Firm
We consent to the reference to our firm under the caption Experts in the Registration Statement (Form S-4) and related Prospectus of FedNat Holding Company for the offer to exchange $100,000,000 of Senior Notes due 2029 that FedNat Holding Company issued on March 5, 2019, and to the incorporation by reference therein of our report dated March 7, 2019, with respect to the consolidated financial statements and schedules of FedNat Holding Company, and the effectiveness of internal control over financial reporting of FedNat Holding Company, included in its Annual Report (Form 10-K) for the year ended December 31, 2018, filed with the Securities and Exchange Commission.
/s/ Ernst and Young, LLP |
Charlotte, NC |
January 15, 2020 |
Exhibit 25.1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM T-1
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939
OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE
☐ | CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A TRUSTEE PURSUANT TO SECTION 305(b)(2) |
THE BANK OF NEW YORK MELLON
(Exact name of trustee as specified in its charter)
New York | 13-5160382 | |
(Jurisdiction of incorporation if not a U.S. national bank) |
(I.R.S. employer identification no.) | |
240 Greenwich Street, New York, N.Y. | 10286 | |
(Address of principal executive offices) | (Zip code) |
FedNat Holding Company
(Exact name of obligor as specified in its charter)
Florida | 65-0248866 | |
(State or other jurisdiction of incorporation or organization) |
(I.R.S. employer identification no.) | |
14050 N.W. 14th Street, Suite 180 Sunrise, Florida |
33323 | |
(Address of principal executive offices) | (Zip code) |
7.50% Senior Unsecured Notes due 2029
(Title of the indenture securities)
1. | General information. Furnish the following information as to the Trustee: |
(a) | Name and address of each examining or supervising authority to which it is subject. |
Name |
Address | |
Superintendent of the Department of Financial Services of the State of New York | One State Street, New York, N.Y. 10004-1417, and Albany, N.Y. 12223 | |
Federal Reserve Bank of New York | 33 Liberty Street, New York, N.Y. 10045 | |
Federal Deposit Insurance Corporation | 550 17th Street, NW Washington, D.C. 20429 | |
The Clearing House Association L.L.C. | 100 Broad Street New York, N.Y. 10004 |
(b) | Whether it is authorized to exercise corporate trust powers. |
Yes.
2. | Affiliations with Obligor. |
If the obligor is an affiliate of the trustee, describe each such affiliation.
None.
16. | List of Exhibits. |
Exhibits identified in parentheses below, on file with the Commission, are incorporated herein by reference as an exhibit hereto, pursuant to Rule 7a-29 under the Trust Indenture Act of 1939 (the Act) and 17 C.F.R. 229.10(d).
1. | A copy of the Organization Certificate of The Bank of New York Mellon (formerly known as The Bank of New York, itself formerly Irving Trust Company) as now in effect, which contains the authority to commence business and a grant of powers to exercise corporate trust powers. (Exhibit 1 to Amendment No. 1 to Form T-1 filed with Registration Statement No. 33-6215, Exhibits 1a and 1b to Form T-1 filed with Registration Statement No. 33-21672, Exhibit 1 to Form T-1 filed with Registration Statement No. 33-29637, Exhibit 1 to Form T-1 filed with Registration Statement No. 333-121195 and Exhibit 1 to Form T-1 filed with Registration Statement No. 333-152735). |
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4. | A copy of the existing By-laws of the Trustee (Exhibit 4 to Form T-1 filed with Registration Statement No. 333-229494). |
6. | The consent of the Trustee required by Section 321(b) of the Act (Exhibit 6 to Form T-1 filed with Registration Statement No. 333-229519). |
7. | A copy of the latest report of condition of the Trustee published pursuant to law or to the requirements of its supervising or examining authority. |
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SIGNATURE
Pursuant to the requirements of the Act, the Trustee, The Bank of New York Mellon, a corporation organized and existing under the laws of the State of New York, has duly caused this statement of eligibility to be signed on its behalf by the undersigned, thereunto duly authorized, all in The City of New York, and State of New York, on the 9th day of January, 2020.
THE BANK OF NEW YORK MELLON | ||
By: | /s/ Francine Kincaid | |
Name: Francine Kincaid | ||
Title: Vice President |
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EXHIBIT 7
Consolidated Report of Condition of
THE BANK OF NEW YORK MELLON
of 240 Greenwich Street, New York, N.Y. 10286
And Foreign and Domestic Subsidiaries,
a member of the Federal Reserve System, at the close of business September 30, 2019, published in accordance with a call made by the Federal Reserve Bank of this District pursuant to the provisions of the Federal Reserve Act.
Dollar amounts in thousands |
||||
ASSETS |
||||
Cash and balances due from depository institutions: |
||||
Noninterest-bearing balances and currency and coin |
5,960,000 | |||
Interest-bearing balances |
91,499,000 | |||
Securities: |
||||
Held-to-maturity securities |
33,769,000 | |||
Available-for-sale securities |
86,659,000 | |||
Equity securities with readily determinable fair values not held for trading |
48,000 | |||
Federal funds sold and securities purchased under agreements to resell: |
||||
Federal funds sold in domestic offices |
0 | |||
Securities purchased under agreements to resell |
30,340,000 | |||
Loans and lease financing receivables: |
||||
Loans and leases held for sale |
0 | |||
Loans and leases held for investment |
25,722,000 | |||
LESS: Allowance for loan and lease losses |
101,000 | |||
Loans and leases held for investment, net of allowance |
25,621,000 | |||
Trading assets |
4,410,000 | |||
Premises and fixed assets (including capitalized leases) |
2,653,000 | |||
Other real estate owned |
2,000 | |||
Investments in unconsolidated subsidiaries and associated companies |
1,764,000 | |||
Direct and indirect investments in real estate ventures |
0 | |||
Intangible assets: |
6,997,000 | |||
Other assets |
14,374,000 | |||
|
|
|||
Total assets |
304,096,000 | |||
|
|
LIABILITIES |
||||
Deposits: |
||||
In domestic offices |
143,571,000 | |||
Noninterest-bearing |
53,707,000 | |||
Interest-bearing |
89,864,000 | |||
In foreign offices, Edge and Agreement subsidiaries, and IBFs |
111,933,000 | |||
Noninterest-bearing |
3,725,000 | |||
Interest-bearing |
108,208,000 | |||
Federal funds purchased and securities sold under agreements to repurchase: |
||||
Federal funds purchased in domestic offices |
3,578,000 | |||
Securities sold under agreements to repurchase |
1,375,000 | |||
Trading liabilities |
2,627,000 | |||
Other borrowed money: |
7,503,000 | |||
Not applicable |
||||
Not applicable |
||||
Subordinated notes and debentures |
0 | |||
Other liabilities |
7,506,000 | |||
|
|
|||
Total liabilities |
278,093,000 | |||
|
|
|||
EQUITY CAPITAL |
||||
Perpetual preferred stock and related surplus |
0 | |||
Common stock |
1,135,000 | |||
Surplus (exclude all surplus related to preferred stock) |
11,107,000 | |||
Retained earnings |
15,167,000 | |||
Accumulated other comprehensive income |
-1,406,000 | |||
Other equity capital components |
0 | |||
Total bank equity capital |
26,003,000 | |||
Noncontrolling (minority) interests in consolidated subsidiaries |
0 | |||
Total equity capital |
26,003,000 | |||
|
|
|||
Total liabilities and equity capital |
304,096,000 | |||
|
|
I, Michael Santomassimo, Chief Financial Officer of the above-named bank do hereby declare that this Report of Condition is true and correct to the best of my knowledge and belief.
Michael Santomassimo Chief Financial Officer |
We, the undersigned directors, attest to the correctness of this statement of resources and liabilities. We declare that it has been examined by us, and to the best of our knowledge and belief has been prepared in conformance with the instructions and is true and correct.
Thomas P. Gibbons Samuel C. Scott Joseph J. Echevarria |
Directors |
Exhibit 99.1
FEDNAT HOLDING COMPANY
14050 N.W. 14th Street, Suite 180
Sunrise, Florida 33323
LETTER OF TRANSMITTAL
FOR 7.50% SENIOR UNSECURED NOTES DUE 2029
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON , , UNLESS EXTENDED (THE EXPIRATION DATE). TENDERS MAY BE WITHDRAWN PRIOR TO 5:00 P.M., NEW YORK CITY TIME, ON THE EXPIRATION DATE.
Exchange Agent:
THE BANK OF NEW YORK MELLON
By Facsimile:
732-667-9408
Confirm by telephone:
315-414-3034
By Mail, Hand or Courier:
The Bank of New York Mellon, as Exchange Agent
c/o The Bank of New York Mellon Corporation
Corporate Trust OperationsReorganization Unit
111 Sanders Creek Parkway
East Syracuse, NY 13057
Attn: Tiffany Castor
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE DOES
NOT CONSTITUTE A VALID DELIVERY.
The undersigned acknowledges receipt of the Prospectus dated , (the Prospectus) of FedNat Holding Company, a Florida corporation (Company), and this Letter of Transmittal for 7.50% Senior Unsecured Notes due 2029, which may be amended from time to time (this Letter), which together constitute Companys offer (the Exchange Offer) to exchange, in minimum denominations of $1,000 and integral multiples of $1,000 in excess thereof, its outstanding 7.50% Senior Unsecured Notes due 2029 (the Original Notes) issued and sold in a transaction exempt from registration under the Securities Act of 1933, as amended (the Securities Act), for 7.50% Senior Unsecured Notes due 2029 (the Exchange Notes), which have been registered under the Securities Act.
The undersigned has completed, executed and delivered this Letter to indicate the action he, she or it desires to take with respect to the Exchange Offer.
All holders of Original Notes who wish to tender their Original Notes must, prior to the Expiration Date: (1) complete, sign, date and mail or otherwise deliver this Letter to the Exchange Agent, in person or to the address set forth above; and (2) tender his or her Original Notes or, if a tender of Original Notes is to be made by book-entry transfer to the account maintained by the Exchange Agent at The Depository Trust Company (the Book-Entry Transfer Facility), confirm such book-entry transfer (a Book-Entry Confirmation), in each case in accordance with the procedures for tendering described in the Instructions to this Letter. Holders of Original Notes whose certificates are not immediately available, or who are unable to deliver their certificates or Book-Entry Confirmation and all other documents required by this Letter to be delivered to the Exchange Agent on or prior to the Expiration Date, must tender their Original Notes according to the guaranteed delivery procedures set forth under the caption The Exchange OfferGuaranteed Delivery Procedures in the Prospectus. (See Instruction 1).
The Instructions included with this Letter must be followed in their entirety. Questions and requests for assistance or for additional copies of the Prospectus or this Letter may be directed to the Exchange Agent, at the address listed above.
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PLEASE READ THE ENTIRE LETTER OF TRANSMITTAL, INCLUDING
THE INSTRUCTIONS TO THIS LETTER OF TRANSMITTAL, CAREFULLY
BEFORE CHECKING ANY BOX BELOW
Capitalized terms used in this Letter and not defined herein shall have the respective meanings ascribed to them in the Prospectus.
List in Box 1 below the Original Notes of which you are the holder. If the space provided in Box 1 is inadequate, list the certificate numbers and principal amount of Original Notes on a separate SIGNED schedule and affix that schedule to this Letter.
BOX 1 TO BE COMPLETED BY ALL TENDERING HOLDERS
NAME(S) AND ADDRESS(ES) OF REGISTERED HOLDER(S) (PLEASE FILL IN IF BLANK) |
CERTIFICATE NUMBER(S)(1) |
PRINCIPAL AMOUNT OF ORIGINAL NOTES |
PRINCIPAL AMOUNT OF ORIGINAL NOTES TENDERED(2) | |||
TOTALS: |
(1) | Need not be completed if Original Notes are being tendered by book-entry transfer. |
(2) | Unless otherwise indicated, the entire principal amount of Original Notes represented by a certificate or Book-Entry Confirmation delivered to the Exchange Agent will be deemed to have been tendered. |
Ladies and Gentlemen:
Upon the terms and subject to the conditions of the Exchange Offer, the undersigned tenders to Company the principal amount of Original Notes indicated above. Subject to, and effective upon, the acceptance for exchange of the Original Notes tendered with this Letter, the undersigned exchanges, assigns and transfers to, or upon the order of, Company all right, title and interest in and to the Original Notes tendered.
The undersigned constitutes and appoints the Exchange Agent as his, her or its agent and attorney-in-fact (with full knowledge that the Exchange Agent also acts as Companys agent) with respect to the tendered Original Notes, with full power of substitution, to: (a) deliver certificates for such Original Notes; (b) deliver Original Notes and all accompanying evidence of transfer and authenticity to or upon Companys order upon receipt by the Exchange Agent, as the undersigneds agent, of the Exchange Notes to which the undersigned is entitled upon Companys acceptance of the Original Notes tendered under the Exchange Offer; and (c) receive all benefits and otherwise exercise all rights of beneficial ownership of the Original Notes, all in accordance with the terms of the Exchange Offer. The power of attorney granted in this paragraph shall be deemed irrevocable and coupled with an interest.
The undersigned hereby represents and warrants that he, she or it has full power and authority to tender, exchange, assign and transfer the Original Notes tendered hereby and that Company will acquire good and unencumbered title thereto, free and clear of all liens, restrictions, charges and encumbrances and not subject to any adverse claim. The undersigned will, upon request, execute and deliver any additional documents Company deems necessary or desirable to complete the assignment and transfer of the Original Notes tendered.
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The undersigned agrees that Companys acceptance of any tendered Original Notes and the issuance of Exchange Notes in exchange therefor shall constitute Companys performance in full of its obligations under the registration rights agreements (as described in the Prospectus) and that, upon the issuance of the Exchange Notes, Company will have no further obligations or liabilities thereunder (except in certain limited circumstances set forth therein). By tendering Original Notes, the undersigned certifies that (i) any Exchange Notes received by the undersigned will be acquired in the ordinary course of its business, (ii) at the time of commencement of the Exchange Offer, the undersigned had no arrangements or understanding with any person to participate in the distribution of the Original Notes or the Exchange Notes within the meaning of the Securities Act, (iii) the undersigned is not an affiliate, as defined in Rule 405 of the Securities Act, of Company or if it is an affiliate, the undersigned will comply with the registration and prospectus delivery requirements of the Securities Act to the extent applicable, (iv) if the undersigned is not a broker-dealer, it is not engaged in, and does not intend to engage in, the distribution of the Exchange Notes, and (v) if the undersigned is a broker-dealer, it will receive Exchange Notes for its own account in exchange for Original Notes that were acquired for its own account as a result of market-making activities or other trading activities and it will deliver a prospectus meeting the requirements of the Securities Act in connection with any resale of such Exchange Notes; however, by so acknowledging and by delivering a prospectus, the undersigned will not be deemed to admit that it is an underwriter within the meaning of the Securities Act.
☐ CHECK HERE IF YOU ARE A BROKER-DEALER WHO ACQUIRED THE ORIGINAL NOTES FOR YOUR OWN ACCOUNT AS A RESULT OF MARKET-MAKING ACTIVITIES OR OTHER TRADING ACTIVITIES AND WISH TO RECEIVE 10 ADDITIONAL COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS THERETO.
☐ CHECK HERE IF YOU ARE NOT SUCH A BROKER-DEALER BUT ARE A QUALIFIED INSTITUTIONAL BUYER OR OTHERWISE RECEIVED THE ORIGINAL NOTES IN A TRANSACTION OR SERIES OF TRANSACTIONS EXEMPT FROM REGISTRATION UNDER THE SECURITIES ACT AND WISH TO RECEIVE 10 ADDITIONAL COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS THERETO.
If you checked one of the boxes above, please provide the name and address to which the 10 copies of the Prospectus and 10 copies of any amendments or supplements thereto should be sent:
Name: |
| |
Address: |
| |
|
The undersigned understands that Company may accept the undersigneds tender by delivering written notice of acceptance to the Exchange Agent, at which time the undersigneds right to withdraw such tender will terminate.
All authority conferred or agreed to be conferred by this Letter shall survive the death or incapacity of the undersigned, and every obligation of the undersigned under this Letter shall be binding upon the undersigneds heirs, personal representatives, successors and assigns. Tenders may be withdrawn only in accordance with the procedures set forth in the Instructions contained in this Letter.
Unless otherwise indicated under Special Delivery Instructions below, the Exchange Agent will deliver Exchange Notes (and, if applicable, a certificate for any Original Notes not tendered but represented by a certificate also encompassing Original Notes which are tendered) to the undersigned at the address set forth in Box 1.
The undersigned acknowledges that the Exchange Offer is subject to the more detailed terms set forth in the Prospectus and, in case of any conflict between the terms set forth in the Prospectus and this Letter, the terms set forth in the Prospectus shall prevail.
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☐ CHECK HERE IF TENDERED ORIGINAL NOTES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER MADE TO THE ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH THE BOOK-ENTRY TRANSFER FACILITY AND COMPLETE THE FOLLOWING:
Name of Tendering Institution: |
| |
Account Number: |
| |
Transaction Code Number: |
|
☐ CHECK HERE IF TENDERED ORIGINAL NOTES ARE BEING DELIVERED PURSUANT TO A NOTICE OF GUARANTEED DELIVERY PREVIOUSLY SENT TO THE EXCHANGE AGENT AND COMPLETE THE FOLLOWING:
Name(s) of Registered Owner(s): |
| |
Date of Execution of Notice of Guaranteed Delivery: |
| |
Window Ticket Number (if available): |
| |
Name of Institution which Guaranteed Delivery: |
|
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PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
BOX 2
PLEASE SIGN HERE
WHETHER OR NOT ORIGINAL NOTES ARE BEING
PHYSICALLY TENDERED HEREBY
X |
|
| ||
X |
|
| ||
(SIGNATURE(S) OF OWNER(S) OR AUTHORIZED SIGNATORY) |
(DATE) |
Area Code and Telephone Number: |
|
This box must be signed by registered holder(s) of Original Notes as their name(s) appear(s) on certificate(s) for Original Notes, or by person(s) authorized to become registered holder(s) by endorsement and documents transmitted with this Letter. If signature is by a trustee, executor, administrator, guardian, officer or other person acting in a fiduciary or representative capacity, such person must set forth his or her full title below. (See Instruction 3)
Name(s): |
| |
(PLEASE PRINT) | ||
Capacity: |
| |
Address: |
| |
(INCLUDE ZIP CODE) |
Signature(s) Guaranteed by an Eligible Institution: (If required by Instruction 3) |
| |
(AUTHORIZED SIGNATURE) | ||
(TITLE)
| ||
(NAME OF FIRM) |
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BOX 3
SPECIAL ISSUANCE INSTRUCTIONS
(See Instructions 3 and 4)
To be completed ONLY if certificates for Original Notes in a principal amount not exchanged, or Exchange Notes, are to be issued in the name of someone other than the person whose signature appears in Box 2, or if Original Notes delivered by book-entry transfer which are not accepted for exchange are to be returned by credit to an account maintained at the Book-Entry Transfer Facility other than the account indicated above.
Issue and deliver:
(check appropriate boxes)
☐ |
Original Notes not tendered | |
☐ |
Exchange Notes, to: |
Name(s): |
| |
(PLEASE PRINT) | ||
Address: |
|
BOX 4
SPECIAL DELIVERY INSTRUCTIONS
(See Instructions 3 and 4)
To be completed ONLY if certificates for Original Notes in a principal amount not exchanged, or Exchange Notes, are to be sent to someone other than the person whose signature appears in Box 2 or to an address other than shown in Box 1.
Deliver:
(check appropriate boxes)
☐ |
Original Notes not tendered | |
☐ |
Exchange Notes, to: |
Name: |
| |
(PLEASE PRINT) | ||
Address: |
| |
|
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INSTRUCTIONS
Forming Part of the Terms and
Conditions of the Exchange Offer
1. Delivery of this Letter and Certificates. Certificates for Original Notes or a Book-Entry Confirmation, as the case may be, as well as a properly completed and duly executed copy of this Letter and any other documents required by this Letter, must be received by the Exchange Agent at one of its addresses set forth herein on or before the expiration of the Exchange Offer on the Expiration Date. The method of delivery of this Letter, certificates for Original Notes or a Book-Entry Confirmation, as the case may be, and any other required documents is at the election and risk of the tendering holder, but except as otherwise provided below, the delivery will be deemed made when actually received by the Exchange Agent. If delivery is by mail, the use of registered mail with return receipt requested, properly insured, is suggested.
Holders whose Original Notes are not immediately available or who cannot deliver their Original Notes or a Book-Entry Confirmation, as the case may be, and all other required documents to the Exchange Agent on or before the Expiration Date may tender their Original Notes pursuant to the guaranteed delivery procedures set forth in the Prospectus. Pursuant to such procedure: (i) tender must be made by or through an Eligible Institution (as defined in the Prospectus under the caption The Exchange OfferGuaranteed Delivery Procedures); (ii) prior to the expiration of the Exchange Offer on the Expiration Date, the Exchange Agent must have received from the Eligible Institution a properly completed and duly executed Notice of Guaranteed Delivery (by facsimile transmission, mail or hand delivery) (x) setting forth the name and address of the holder, the description of the Original Notes and the principal amount of Original Notes tendered, (y) stating that the tender is being made thereby and (z) guaranteeing that, within three business days after the date of execution of such Notice of Guaranteed Delivery, this Letter together with the certificates representing the Original Notes or a Book-Entry Confirmation, as the case may be, and any other documents required by this Letter will be deposited by the Eligible Institution with the Exchange Agent; and (iii) this Letter, the certificates for all tendered Original Notes or a Book-Entry Confirmation, as the case may be, as well as all other documents required by this Letter, must be received by the Exchange Agent within three business days after the date of execution of such Notice of Guaranteed Delivery, all as provided in the Prospectus under the caption The Exchange OfferGuaranteed Delivery Procedures.
All questions as to the validity, form, eligibility (including time of receipt), acceptance and withdrawal of tendered Original Notes will be determined by Company, whose determination will be final and binding. Company reserves the absolute right to reject any or all tenders that are not in proper form or the acceptance of which, in the opinion of Companys counsel, would be unlawful. Company also reserves the right to waive any irregularities or defects or conditions of tender as to particular Original Notes. All tendering holders, by execution of this Letter, waive any right to receive notice of acceptance of their Original Notes.
Neither Company, the Exchange Agent nor any other person shall be obligated to give notice of defects or irregularities in any tender, nor shall any of them incur any liability for failure to give any such notice.
2. Partial Tenders; Withdrawals. If less than the entire principal amount of any Original Note evidenced by a submitted certificate or by a Book-Entry Confirmation is tendered, the tendering holder must fill in the principal amount tendered in the fourth column of Box 1 above. All of the Original Notes represented by a certificate or by a Book-Entry Confirmation delivered to the Exchange Agent will be deemed to have been tendered unless otherwise indicated. A certificate for Original Notes not tendered will be sent to the holder, unless otherwise provided in Box 4, as soon as practicable after the Expiration Date, in the event that less than the entire principal amount of Original Notes represented by a submitted certificate is tendered (or, in the case of Original Notes tendered by book-entry transfer, such non-exchanged Original Notes will be credited to an account maintained by the holder with the Book-Entry Transfer Facility).
If not yet accepted, a tender pursuant to the Exchange Offer may be withdrawn prior to the Expiration Date. To be effective with respect to the tender of Original Notes, a written or facsimile transmission of notice of withdrawal must: (i) be received by the Exchange Agent at the address indicated above before Company notifies the Exchange Agent that it has accepted the tender of Original Notes pursuant to the Exchange Offer; (ii) specify the name of the person named in this Letter as having tendered the Original Notes; (iii) contain a description of the
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Original Notes to be withdrawn, the certificate numbers shown on the particular certificates evidencing such Original Notes and the principal amount (which must be an authorized denomination) of Original Notes represented by such certificates; (iv) a statement that such holder is withdrawing his, her or its election to have such Original Notes exchanged; (v) the name of the registered holder of such Original Notes; and (vi) be signed by the holder in the same manner as the original signature on this Letter (including any required signature guarantee) or be accompanied by evidence satisfactory to the Company that the person withdrawing the tender has succeeded to the beneficial ownership of the Original Notes being withdrawn.
3. Signatures on this Letter; Assignments; Guarantee of Signatures. If this Letter is signed by the holder(s) of Original Notes tendered hereby, the signature must correspond with the name(s) as written on the face of the certificate(s) for such Original Notes, without alteration, enlargement or any change whatsoever.
If any of the Original Notes tendered hereby are owned by two or more joint owners, all owners must sign this Letter. If any tendered Original Notes are held in different names on several certificates, it will be necessary to complete, sign and submit as many separate copies of this Letter as there are names in which certificates are held.
If this Letter is signed by the holder of record and (i) the entire principal amount of the holders Original Notes are tendered and/or (ii) untendered Original Notes, if any, are to be issued to the holder of record, then the holder of record need not endorse any certificates for tendered Original Notes, nor provide a separate bond power. In any other case, the holder of record must transmit a separate bond power with this Letter.
If this Letter or any certificate or assignment is signed by trustees, executors, administrators, guardians, attorneys-in-fact, officers of corporations or others acting in a fiduciary or representative capacity, such persons should so indicate when signing and proper evidence satisfactory to Company of their authority to so act must be submitted, unless waived by Company.
Signatures on this Letter must be guaranteed by an Eligible Institution, unless Original Notes are tendered: (i) by a holder who has not completed the Box entitled Special Issuance Instructions or Special Delivery Instructions on this Letter; or (ii) for the account of an Eligible Institution. In the event that the signatures in this Letter or a notice of withdrawal, as the case may be, are required to be guaranteed, such guarantees must be by an eligible guarantor institution which is a member of The Securities Transfer Agents Medallion Program (STAMP), The New York Stock Exchanges Medallion Signature Program (MSP) or The Stock Exchanges Medallion Program (SEMP) (collectively, Eligible Institutions). If Original Notes are registered in the name of a person other than the signer of this Letter, the Original Notes surrendered for exchange must be endorsed by, or be accompanied by a written instrument or instruments of transfer or exchange, in satisfactory form as determined by the Company, in its sole discretion, duly executed by the registered holder with the signature thereon guaranteed by an Eligible Institution.
4. Special Issuance and Delivery Instructions. Tendering holders should indicate, in Box 3 or 4, as applicable, the name and address to which the Exchange Notes or certificates for Original Notes not exchanged are to be issued or sent, if different from the name and address of the person signing this Letter. Holders tendering Original Notes by book-entry transfer may request that Original Notes not exchanged be credited to such account maintained at the Book-Entry Transfer Facility as such holder may designate.
5. Transfer Taxes. Company will pay all transfer taxes, if any, applicable to the transfer of Original Notes to it pursuant to the Exchange Offer. If, however, the Exchange Notes or certificates for Original Notes not exchanged are to be delivered to, or are to be issued in the name of, any person other than the record holder, or if tendered certificates are recorded in the name of any person other than the person signing this Letter, or if a transfer tax is imposed by any reason other than the transfer of Original Notes to Company pursuant to the Exchange Offer, then the amount of such transfer taxes (whether imposed on the record holder or any other person) will be payable by the tendering holder. If satisfactory evidence of payment of taxes or exemption from taxes is not submitted with this Letter, the amount of transfer taxes will be billed directly to the tendering holder.
6. Waiver of Conditions. Company reserves the absolute right to amend or waive any of the specified conditions of the Exchange Offer in the case of any Original Notes tendered.
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7. Mutilated, Lost, Stolen or Destroyed Certificates. Any holder whose certificates for Original Notes have been mutilated, lost, stolen or destroyed should contact the Exchange Agent at the address indicated above, for further instructions.
8. Requests for Assistance or Additional Copies. Questions relating to the procedure for tendering, as well as requests for additional copies of the Prospectus or this Letter, may be directed to the Exchange Agent.
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Important: This Letter (together with certificates representing tendered Original Notes or a Book-Entry Confirmation and all other required documents) must be received by the Exchange Agent, or the guaranteed delivery procedures must be complied with, on or before the Expiration Date.
PLEASE READ THE ENTIRE LETTER OF TRANSMITTAL, INCLUDING THE INSTRUCTIONS TO
THIS LETTER OF TRANSMITTAL, CAREFULLY BEFORE CHECKING ANY BOX HEREIN.
BOX 1 TO BE COMPLETED BY ALL TENDERING HOLDERS
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Exhibit 99.2
FEDNAT HOLDING COMPANY
EXCHANGE OFFER
TO HOLDERS OF ITS
7.50% SENIOR UNSECURED NOTES DUE 2029
NOTICE OF GUARANTEED DELIVERY
As set forth in the Prospectus dated , (the Prospectus) of FedNat Holding Company (Company) under the headings The Exchange OfferProcedures for Tendering Old Notes and The Exchange OfferGuaranteed Delivery Procedures and in the Letter of Transmittal (the Letter of Transmittal) relating to the offer (the Exchange Offer) by Company to exchange up to $100,000,000 in principal amount of its 7.50% Senior Unsecured Notes due 2029 (the Exchange Notes) for all of its outstanding 7.50% Senior Unsecured Notes due 2029, issued and sold in a transaction exempt from registration under the Securities Act of 1933, as amended (the Original Notes), this form or one substantially equivalent hereto must be used to accept the Exchange Offer of Company if: (i) certificates for the Original Notes are not immediately available; or (ii) time will not permit all required documents to reach the Exchange Agent (as defined below) on or prior to the expiration date of the Exchange Offer set forth in the Prospectus. Such form may be delivered by hand or transmitted by facsimile transmission, letter or courier to the Exchange Agent as follows:
Exchange Agent:
THE BANK OF NEW YORK MELLON
By Facsimile:
732-667-9408
Confirm by telephone:
315-414-3034
By Mail, Hand or Courier:
The Bank of New York Mellon, as Exchange Agent
c/o The Bank of New York Mellon Corporation
Corporate Trust OperationsReorganization Unit
111 Sanders Creek Parkway
East Syracuse, NY 13057
Attn: Tiffany Castor
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR TRANSMITTAL OF THIS INSTRUMENT TO A FACSIMILE NUMBER OTHER THAN AS SET FORTH ABOVE DOES NOT CONSTITUTE A VALID DELIVERY.
Ladies and Gentlemen:
The undersigned hereby tenders to Company, upon the terms and conditions set forth in the Prospectus and the Letter of Transmittal (which together constitute the terms and conditions of the Exchange Offer), receipt of which are hereby acknowledged, the principal amount of Original Notes set forth below pursuant to the guaranteed delivery procedure described in the Prospectus and the Letter of Transmittal.
Principal Amount of Original Notes Tendered:
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Certificate Nos. (if available):
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Total Principal Amount Represented by Original Notes Certificate(s): |
Account Number: |
| |
Dated: |
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Sign Here |
||
Signature(s): |
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Please Print the Following Information: | ||
Name(s): |
| |
Address: |
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Area Code and Tel. No(s): |
|
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GUARANTEE
The undersigned, a member of a recognized signature guarantee medallion program within the meaning of Rule 17Ad-15 under the Securities Exchange Act of 1934, as amended, hereby guarantees that delivery to the Exchange Agent of certificates tendered hereby, in proper form for transfer, or delivery of such certificates pursuant to the procedure for book-entry transfer, in either case with delivery of a properly completed and duly executed Letter of Transmittal (or facsimile thereof) and any other required documents, is being made within three business days after the date of execution of a Notice of Guaranteed Delivery of the above-named person.
Name of Firm: |
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Authorized Signature: |
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Number and Street or P.O. Box: |
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City: |
State: |
Zip Code: |
Area Code and Tel. No.: |
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Dated: |
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Exhibit 99.3
FEDNAT HOLDING COMPANY
OFFER TO EXCHANGE
UP TO $100,000,000 IN AGGREGATE PRINCIPAL AMOUNT OF
7.50% SENIOR UNSECURED NOTES DUE 2029
FOR
ALL OF ITS OUTSTANDING
7.50% SENIOR UNSECURED NOTES DUE 2029
SOLD IN A TRANSACTION EXEMPT FROM REGISTRATION
UNDER THE SECURITIES ACT OF 1933, AS AMENDED
To Our Clients:
Enclosed for your consideration is a Prospectus dated , (as the same may be amended or supplemented from time to time, the Prospectus) and a form of Letter of Transmittal (the Letter of Transmittal) relating to the offer (the Exchange Offer) by FedNat Holding Company (Company) to exchange up to $100,000,000 in aggregate principal amount of its 7.50% Senior Unsecured Notes due 2029 (the Exchange Notes) for all of its outstanding 7.50% Senior Unsecured Notes due 2029 (the Original Notes), issued and sold in a transaction exempt from registration under the Securities Act of 1933, as amended.
The material is being forwarded to you as the beneficial owner of Original Notes carried by us for your account or benefit but not registered in your name. A tender of any Original Notes may be made only by us as the registered holder and pursuant to your instructions. The accompanying Letter of Transmittal is furnished to you for informational purposes only and may not be used by you to exchange the Original Notes held by us and registered in our name for your account or benefit. Therefore, Company urges beneficial owners of Original Notes registered in the name of a broker, dealer, commercial bank, trust company or other nominee to contact such registered holder promptly if they wish to tender Original Notes in the Exchange Offer.
Accordingly, we request instructions as to whether you wish us to tender any or all of your Original Notes, pursuant to the terms and conditions set forth in the Prospectus and Letter of Transmittal. We urge you to read carefully the Prospectus and Letter of Transmittal before instructing us to tender your Original Notes.
YOUR INSTRUCTIONS TO US SHOULD BE FORWARDED AS PROMPTLY AS POSSIBLE IN ORDER TO PERMIT US TO TENDER ORIGINAL NOTES ON YOUR BEHALF IN ACCORDANCE WITH THE PROVISIONS OF THE EXCHANGE OFFER. The Exchange Offer will expire at 5:00 p.m., New York City time, on , , unless extended (the Expiration Date). Original Notes tendered pursuant to the Exchange Offer may be withdrawn, subject to the procedures described in the Prospectus, at any time prior to the Expiration Date.
If you wish to have us tender any or all of your Original Notes held by us for your account or benefit, please so instruct us by completing, executing and returning to us the instruction form that appears below. Please note that the accompanying Letter of Transmittal is furnished to you for informational purposes only and may not be used by you to tender Original Notes held by us and registered in our name for your account or benefit.
INSTRUCTIONS
The undersigned acknowledge(s) receipt of your letter and the enclosed material referred to therein relating to the Exchange Offer of FedNat Holding Company.
THIS WILL INSTRUCT YOU TO TENDER THE PRINCIPAL AMOUNT OF ORIGINAL NOTES INDICATED BELOW HELD BY YOU FOR THE ACCOUNT OR BENEFIT OF THE UNDERSIGNED, PURSUANT TO THE TERMS AND CONDITIONS OF THE EXCHANGE OFFER SET FORTH IN THE PROSPECTUS AND THE LETTER OF TRANSMITTAL.
Box 1 ☐ | Please tender my Original Notes held by you for my account or benefit. I have identified on a signed schedule attached hereto the principal amount of Original Notes to be tendered if I wish to tender less than all of my Original Notes. | |
Box 2 ☐ | Please do not tender any Original Notes held by you for my account or benefit. | |
Date: |
Signature(s)
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Please print name(s) here
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Address and Telephone Number |
Unless a specific contrary instruction is given in a signed schedule attached hereto, your signature(s) hereon shall constitute an instruction to us to tender all of your Original Notes.
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Exhibit 99.4
FEDNAT HOLDING COMPANY
OFFER TO EXCHANGE
UP TO $100,000,000 IN AGGREGATE PRINCIPAL AMOUNT OF
7.50% SENIOR UNSECURED NOTES DUE 2029
FOR
ALL OF ITS OUTSTANDING
7.50% SENIOR UNSECURED NOTES DUE 2029
SOLD IN A TRANSACTION EXEMPT FROM REGISTRATION
UNDER THE SECURITIES ACT OF 1933, AS AMENDED
To Securities Dealers, Commercial Banks
Trust Companies And Other Nominees:
Enclosed for your consideration is a Prospectus dated , (as the same may be amended or supplemented from time to time, the Prospectus) and a form of Letter of Transmittal (the Letter of Transmittal) relating to the offer (the Exchange Offer) by FedNat Holding Company (Company) to exchange up to $100,000,000 in aggregate principal amount of its 7.50% Senior Unsecured Notes due 2029 (the Exchange Notes) for all of its outstanding 7.50% Senior Unsecured Notes due 2029 (the Original Notes), issued and sold in a transaction exempt from registration under the Securities Act of 1933, as amended. Capitalized terms used in this letter and not defined herein shall have the respective meanings ascribed to them in the Prospectus.
We are asking you to contact your clients for whom you hold Original Notes registered in your name or in the name of your nominee. In addition, we ask you to contact your clients who, to your knowledge, hold Original Notes registered in their own name. Company will not pay any fees or commissions to any broker, dealer or other person in connection with the solicitation of tenders pursuant to the Exchange Offer. You will, however, be reimbursed by Company for customary mailing and handling expenses incurred by you in forwarding any of the enclosed materials to your clients. Company will pay all transfer taxes, if any, applicable to the tender of Original Notes to it or its order, except as otherwise provided in the Prospectus and the Letter of Transmittal.
Enclosed are copies of the following documents:
1. The Prospectus;
2. A Letter of Transmittal for your use in connection with the tender of Original Notes and for the information of your clients;
3. A form of letter that may be sent to your clients for whose accounts you hold Original Notes registered in your name or the name of your nominee, with space provided for obtaining the clients instructions with regard to the Exchange Offer; and
4. A form of Notice of Guaranteed Delivery.
Your prompt action is requested. The Exchange Offer will expire at 5:00 p.m., New York City time, on , , unless extended (the Expiration Date). Original Notes tendered pursuant to the Exchange Offer may be withdrawn, subject to the procedures described in the Prospectus, at any time prior to the Expiration Date.
To tender Original Notes, certificates for Original Notes or a Book-Entry Confirmation, a duly executed and properly completed Letter of Transmittal or a facsimile thereof, and any other required documents, must be received by the Exchange Agent as provided in the Prospectus and the Letter of Transmittal.
Additional copies of the enclosed material may be obtained from The Bank of New York Mellon, the Exchange Agent, by calling (315) 414-3034.
Very truly yours,
FedNat Holding Company
NOTHING HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU OR ANY PERSON AS AN AGENT OF COMPANY OR THE EXCHANGE AGENT, OR AUTHORIZE YOU OR ANY OTHER PERSON TO MAKE ANY STATEMENTS ON BEHALF OF EITHER OF THEM WITH RESPECT TO THE EXCHANGE OFFER, EXCEPT FOR STATEMENTS EXPRESSLY MADE IN THE PROSPECTUS AND THE LETTER OF TRANSMITTAL.
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