Item 1.01. Entry into a Material Definitive Agreement.
As part of the previously announced strategy of 1347 Property Insurance
Holdings, Inc. (the "Company"), on March 31, 2020, the Company entered into a
Shared Services Agreement and a joint venture agreement with affiliates of
Fundamental Global Investors, LLC ("FGI"), the beneficial owner of approximately
45% of the Company's outstanding common stock. D. Kyle Cerminara, Chairman of
the Company's Board, serves as Chief Executive Officer, Co-Founder and Partner
of FGI, and Lewis M. Johnson, Co-Chairman of the Company's Board, serves as
President, Co-Founder and Partner of FGI.
Shared Services Agreement
On March 31, 2020, the Company entered into a Shared Services Agreement (the
"Shared Services Agreement") with Fundamental Global Management, LLC ("FGM")
pursuant to which FGM will provide the Company with certain services related to
the day-to-day management of the Company, including assisting with regulatory
compliance, evaluating the Company's financial and operational performance,
providing a management team to supplement the executive officers of the Company,
and such other services consistent with those customarily performed by executive
officers and employees of a public company (collectively, the "Services"). In
exchange for the Services, the Company will pay FGM a fee of $456,250 per
quarter (the "Shared Services Fee"), commencing in the second quarter of 2020,
plus reimbursement of expenses incurred by FGM in connection with the
performance of the Services, subject to certain limitations approved by the
Company's Board of Directors or Compensation Committee from time to time.
The Shared Services Agreement has an initial term of three years, and thereafter
renews automatically for successive one-year terms unless terminated in
accordance with its terms. The Shared Services Agreement may be terminated by
FGM or by the Company, by a vote of the Company's independent directors, at the
end of the initial or automatic renewal term upon 120 days' notice, subject to
payment by the Company of certain costs incurred by FGM to wind down the
provision of Services and, in the case of a termination by the Company without
cause, payment of a termination fee equal to the Shared Services Fee paid for
the two quarters preceding termination.
The foregoing description of the Shared Services Agreement does not purport to
be complete and is qualified in its entirety by reference to the complete Shared
Services Agreement, a copy of which is filed as Exhibit 10.1 to this Current
Report on Form 8-K and is incorporated herein by reference.
Joint Venture Agreement
On March 31, 2020, the Company entered into the Limited Liability Company
Agreement (the "LLC Agreement") of Fundamental Global Asset Management, LLC
("FGAM"), a newly-formed joint venture owned 50% by each of the Company and FGI
Funds Management, LLC, an affiliate of FGI ("FGIFM" and together with the
Company, each a "Member" and collectively, the "Members"). The purpose of FGAM
is to sponsor, capitalize and provide strategic advice to investment managers
("Underlying Managers") in connection with the launch and/or growth of their
asset management business and the investment products they sponsor (each, a
"Sponsored Fund").
FGAM is governed by a Board of Managers consisting of four managers, two of
which will be appointed by each Member. It is the current intent of the Company
to appoint two of its independent directors to the Board of Managers of FGAM.
Certain major actions, including any decision to sponsor a new investment
manager, will require the prior consent of both Members.
The LLC Agreement provides that each Member will contribute its proportionate
interest of the amount of capital determined by the Board of Managers to be
required to operate FGAM ("Operating Capital"). Unless otherwise agreed, the
Company will contribute the capital required to be contributed to a Sponsored
Fund ("Seed Capital"), as well as any amounts required to be contributed to an
Underlying Manager for working capital purposes ("Working Capital"). Proceeds
attributable to a contribution, directly or indirectly through an Underlying
Manager, to a Sponsored Fund will be distributed to the Members in proportion to
their capital contributions in respect of Seed Capital. All other proceeds
received by FGAM attributable to a Sponsored Fund, including proceeds from
revenue shares or ownership interests in Underlying Managers, will be
distributed as follows: (i) first, to the Members until they have received
cumulative distributions up to an amount of the Operating Capital funded by
them; (ii) second, to the Members until they have received cumulative
distributions up to an amount of Working Capital previously funded by them, plus
a return of 5% per annum; and (iii) third, to the Members in proportion to their
percentage interests.
In addition, neither FGIFM nor any of affiliates may participate in a Sponsored
Fund Transaction other than through FGAM unless FGIFM has first presented the
opportunity to FGAM and either the Board of Managers or the Company has rejected
such opportunity. Notwithstanding the foregoing, if such opportunity requires in
excess of $5 million, FGIFM may offer amounts in excess of $5 million to a third
party, subject to certain conditions.
The foregoing description of the LLC Agreement does not purport to be complete
and is qualified in its entirety by reference to the complete LLC Agreement, a
copy of which is filed as Exhibit 10.2 to this Current Report on Form 8-K and is
incorporated herein by reference.
Item 9.01 Financial Statements and Exhibits
(d) Exhibits
Exhibit No. Description
10.1 Shared Services Agreement, dated March 31, 2020, by and between
1347 Property Insurance Holdings, Inc. and Fundamental Global
Management, LLC
10.2 Limited Liability Company Agreement of Fundamental Global Asset
Management, LLC, dated March 31, 2020
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FUNDAMENTAL GLOBAL INC. 
