Item 1.02 Termination of a Material Definitive Agreement.
On January 26, 2023, the United States Bankruptcy Court in the Southern District
of Florida, Ft. Lauderdale Division, entered an order (the "Order") granting a
motion from the debtors (including FNU, as defined below) pursuant to Section
365(a) of the Bankruptcy Code authorizing such debtors to reject that certain
Management Advisory Services Agreement dated and effective as of July 1, 2022
(the "Advisory Services Agreement") between a wholly-owned subsidiary of HG
Holdings, Inc. (the "Company"), HG Managing Agency, LLC, a North Carolina
limited liability company ("HGMA") and FedNat Underwriters, Inc. ("FNU"). Based
on the Order, the Advisory Services Agreement is deemed rejected as of December
12, 2022.
The description of the Advisory Services Agreement and the relationships between
the Company, its affiliates and the parties to the Advisory Services Agreement
contained in the Company's Current Report on Form 8-K filed on July 7, 2022 is
hereby incorporated by reference hereto.
As background, on December 11, 2022, FedNat Holding Company ("FedNat") and
certain of its wholly owned subsidiaries, including FNU, filed voluntary
petitions under Chapter 11 of the Bankruptcy Code in the United States
Bankruptcy Court for the Southern District of Florida for the stated reason to
maximize value for all stakeholders. As part of the Chapter 11 process, based on
its voluntary petitions, FedNat said it will evaluate all strategic alternatives
to maximize value for stakeholders, whether that be a reorganization of its
business or a sale of its assets.
Effective with the rejection of the Advisory Services Agreement, the Company
will no longer earn compensation for the remaining duration of the agreement.
The Company is exploring all measurers regarding the recovery of any lost
compensation.
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