Slide 1: Time For a Better Board and Vision
Time For a Better Board and Vision April 13, 2020 A BETTER HC2 | 1
Slide 2: Disclaimer
DISCLAIMER THIS PRESENTATION IS FOR DISCUSSION AND GENERAL INFORMATIONAL PURPOSES ONLY. IT DOES NOT HAVE REGARD TO THE SPECIFIC INVESTMENT OBJECTIVE, FINANCIAL SITUATION, SUITABILITY, OR THE PARTICULAR NEED OF ANY SPECIFIC PERSON WHO MAY RECEIVE THIS PRESENTATION, AND SHOULD NOT BE TAKEN AS ADVICE O
Slide 3: Table of Contents
TABLE OF CONTENTS Executive Summary (Page 4) The Case for Wholesale Change (Page 15) Philip Falcone: Not a Viable Leader (Page 49) A Better Board (Page 54) A Better Strategy (Page 64) Conclusion: A Better HC2 (Page 84) A BETTER HC2 | 3
Slide 4: Executive Summary
Executive Summary A BETTER HC2 | 4
Slide 5: MG Capital Is a Major Stockholder of HC2
MG CAPITAL IS A MAJOR STOCKHOLDER OF HC2 Firm overview and background ▪ MG Capital (together with its affiliated entities, including Percy Rockdale) is a privately-held investment firm based in New York City that focuses on investing in complex, event-driven opportunities. o Based on extensive analy
Slide 6: HC2 Is a Poorly-Run Investment Holding Company in Need of New Leadership
HC2 IS A POORLY-RUN INVESTMENT HOLDING COMPANY IN NEED OF NEW LEADERSHIP AND A CREDIBLE VISION Under the consistently destructive leadership of Philip Falcone, HC2 has exhibited no operational discipline and no portfolio synergies The holding company has not been a good steward of these assets, whic
Slide 7: HC2 Has Been Run for the Primary Benefit of Mr. Falcone Since Day 1
HC2 HAS BEEN RUN FOR THE PRIMARY BENEFIT OF MR. FALCONE SINCE DAY 1 In our view, HC2 was built out by Mr. Falcone to circumvent his securities industry ban and extract value on the backs of public stockholders ▪ In Aug. 2013, Mr. Falcone and Harbinger HC2’s Board Has Never Been Capital Partners (“Ha
Slide 8: HC2 Stockholders Have Been Forced to Endure Consistent Value Destruction
HC2 STOCKHOLDERS HAVE BEEN FORCED TO ENDURE CONSISTENT VALUE DESTRUCTION Despite operating during one of the greatest bull markets and periods of economic growth in history, HC2 has underperformed its peers and all relevant indices Total Stockholder Return (“TSR”) Performance 1 Year 3 Year 5 Year Fa
Slide 9: The Case for Wholesale Change Is Clear
THE CASE FOR WHOLESALE CHANGE IS CLEAR Six years of blunders and self-serving initiatives has led HC2 to the brink of financial ruin – with potential bankruptcy in sight as significant debt matures PERFORMANCE, PERFORMANCE STOCKHOLDER & GOVERNANCE & ISSUES OPERA STRATEGIC TIONAL ISSUES & OPERATIONAL
Slide 10: The Case for Wholesale Change Is Clear (Cont.)
THE CASE FOR WHOLESALE CHANGE IS CLEAR (CONT.) The losses and waste associated with HC2’s issues are staggering for a small public company with an equity market capitalization of ~$100 million ~$59 Million in $400+ Million in 11.5% Borrowing Falcone Comp HoldCo Debt Rate HC2’s Board has rewarded Mr.
Slide 11: We Have Nominated a Slate of Director Candidates
WE HAVE NOMINATED A SLATE OF DIRECTOR CANIDATES WITH THE QUALIFICATIONS TO TURN AROUND HC2 Each member of our slate has been recruited because he or she possesses specific expertise and skills that can help address HC2’s needs and enhance value George R. Brokaw Kenneth S. Courtis Michael Gorzynski P
Slide 12: Our Slate Has a Credible Strategic Vision for Enhancing Stockholder Value
OUR SLATE HAS A CREDIBLE STRATEGIC VISION FOR ENHANCING STOCKHOLDER VALUE Our nominees have developed a comprehensive strategy to help HC2 avert financial ruin and unlock the potential of core, EBITDA-positive assets If elected to the Board, our world-class nominees will work to: Improve Governance
Slide 13: Our Nominees Are Focused on Tangible Results
OUR NOMINEES ARE FOCUSED ON TANGIBLE RESULTS We believe executing on our plan’s priorities can produce ~$9 per share of value Reduce go-forward annual Generate up to $500 million in Re-focus the portfolio on core overhead by 75% right away liquidity over 3-12 months assets within 12 months We are pr
Slide 14: We Are Ready to Hit the Ground Running on Day 1
WE ARE READY TO HIT THE GROUND RUNNING ON DAY 1 We have a transition plan to focus on near-term and long-term priorities OVERVIEW OF 100-DAY PLAN LONG-TERM VISION CORPORATE PRIORITIES PORTFOLIO PRIORITIES Enhance value and return capital to stockholders by: ▪ Establish legal and financial ▪ Meet wit
Slide 15: The Case for Wholesale Change
The Case for Wholesale Change A BETTER HC2 | 15
Slide 16: The Board Has Presided Over an Extended Period of Underperformance
THE BOARD HAS PRESIDED OVER AN EXTENDED PERIOD OF UNDERPERFORMANCE HC2’s Board has presided over dismal TSR figures over several relevant time horizons ▪ Since Mr. Falcone took control of HC2 six years ago, there has been a steady erosion of stockholder value. ▪ Based on its returns, HC2 has consist
Slide 17: The Board Has Never Articulated a Strategy
THE BOARD HAS NEVER ARTICULATED A STRATEGY While HC2 claims to prioritize a diversified portfolio of high-quality assets, Mr. Falcone has executed a haphazard and disjointed spending spree Construction – High-potential steel company with fabrication, modeler, detailer and erection capabilities ▪ DBM
Slide 18: HC2's Portfolio Is Comprised of Highly-Regulated Assets
HC2’S PORTFOLIO IS COMPRISED OF HIGHLY-REGULATED ASSETS Despite various regulatory bans and restrictions, including in the insurance sector, Mr. Falcone has invested in many highly-regulated businesses ▪ DBM operates in a heavily regulated industry with substantial exposure to large scale projects a
Slide 19: Immediate Action Is Needed to Avoid Financial Ruin
IMMEDIATE ACTION IS NEEDED TO AVOID FINANCIAL RUIN It seems the impact of the Board’s mismanagement and self-dealing has finally pushed the Company to the brink of bankruptcy ▪ The Board has not only failed to articulate and execute a credible strategy over the years, but it has been unable – or unw
Slide 20: Debt and Expenses Have Been Allowed to Explode
DEBT AND EXPENSES HAVE BEEN ALLOWED TO EXPLODE Under the watch of Mr. Falcone and the incumbent Board, we feel HC2 has taken on excessive levels of debt at the holding company level ▪ HC2 has substantial consolidated debt of approximately $728 million. ▪ Most urgently, HC2 has approximately $393 mil
Slide 21: Holding Company Debt Soared as Value Eroded
HOLDING COMPANY DEBT SOARED AS VALUE ERODED Under the current Board’s stewardship, debt has risen to dangerous levels HC2’s Exploding Debt/Equity $300 18.0x 16.0x $250 15.3x 14.0x Equity Value (MIllions USD) Debt & Preferred/Equity $200 12.0x 10.3x 10.0x $150 8.0x $100 7.4x 6.0x 4.0x $50 2.8x 2.0x 2
Slide 22: Expenses Swelled as Stagnation Set In
EXPENSES SWELLED AS STAGNATION SET IN High holding company expenses have accelerated the erosion of stockholder value High Holding Company Overhead in the Face of Declining Stockholder Value $300 40% 37% 35% Holding Company Expenses as a % of Equity $250 30% Equity Value (MIllions USD) $200 28% 25%
Slide 23: Deteriorating Performance Has Not Stopped the Board from Rewarding Mr. Falcone
DETERIORATING PERFORMANCE HAS NOT STOPPED THE BOARD FROM REWARDING MR. FALCONE HANDSOMELY Mr. Falcone has earned outsized income even as value has vanished Value Has Declined as Aggregate Compensation Swells $310 $71 $59 $61 $260 Cumulative Compensation (Millions USD) $51 Equity Value (MIllions USD)
Slide 24: The Board's Prioritization of Mr. Falcone's Compensation Dates Back to 2014
THE BOARD’S PRIORITIZATION OF MR. FALCONE’S SIZABLE COMPENSATION DATES BACK TO 2014 In 2014, the HC2 Board approved and recommended FOR an Equity Award Plan for Mr. Falcone that diluted stockholders by almost 25% ▪ As part of his employment agreement, the HC2 Board approved an anti-dilution adjustme
Slide 25: Bonus Distributions to Mr. Falcone Have Been Excessive
BONUS DISTRIBUTIONS TO MR. FALCONE HAVE BEEN EXCESSIVE FOR AN UNDERPERFORMING SMALL CAP CEO The Board has rewarded Mr. Falcone with millions in bonus payouts over the years for “accomplishments” that include: ▪ HC2’s receipt of dividends from subsidiaries. ▪ The broadening and strengthening of the C
Slide 26: Proxy Advisory Firms Have Recommended Against HC2's Say-on-Pay Proposal
PROXY ADVISORY FIRMS HAVE RECOMMENDED AGAINST HC2’S SAY-ON-PAY PROPOSAL MORE OFTEN THAN NOT More evidence of HC2’s excessive compensation for its underperforming leaders Philip Falcone’s Bonus Distribution Regarding HC2 Say-on-Pay Proposals 2014 2015 2016 2017 2018 2019 Glass Lewis AGAINST AGAINST A
Slide 27: In 2019, the Board Even Rewarded Themselves by Almost Doubling Board Pay
IN 2019, THE BOARD EVEN REWARDED THEMSELVES BY ALMOST DOUBLING BOARD PAY How can the Board justify giving itself a steep raise given HC2’s performance? 2018 DIRECTOR CASH FEES STOCK AWARDS OTHER COMP TOTAL Wayne Barr, Jr. $45,000 $59,996 $25,000 $129,996 Warren H. Gfeller $74,000 $59,996 $12,500 $14
Slide 28: The "Independent" Members Do Not Have Significant "Skin in the Game"
THE “INDEPENDENT” MEMBERS DO NOT HAVE SIGNIFICANT “SKIN IN THE GAME” We believe the Board has insufficient alignment with stockholders HC2 DIRECTOR HC2 SHARES AWARDED OPEN MARKET PURCHASES Wayne Barr, Jr.* 90,681 1,000 Warren H. Gfeller 71,478 5,000 Lee S. Hillman 71,000 0 Robert Leffler, Jr. 86,097
Slide 29: It Is Clear That the Board's Top Priority Has Been Its Compensation
IT IS CLEAR THAT THE BOARD’S TOP PRIORITY HAS BEEN ITS COMPENSATION Why has the Board been focusing more on compensation than other priority areas in recent years? Compensation Audit Nom / Governance Year Committee Meetings Committee Meetings Committee Meetings 2014 4 4 1 2015 6 6 1 2016 7 11 1 2017
Slide 30: Falcone Focused on Bizarre and Opaque Investments
AS THE BOARD FOCUSED ON MR. FALCONE’S PAY, HE FOCUSED ON BIZZARE AND OPAQUE INVESTMENTS The Board appeared to be asleep at the wheel while capital was placed into businesses that have fallen off the radar screen Miscellaneous investments that HC2 just stopped discussing…or never discussed at all… Co
Slide 31: Case Study: Highly-Questionable Arcot Deal
CASE STUDY: HIGHLY-QUESTIONABLE ARCOT DEAL HC2’s incumbent Board endorsed what MG Capital believes to be a haphazard investment strategy ▪ Investment strategy has focused more on enhancing Mr. Falcone’s lifestyle than on generating shareholder returns. ▪ Arcot “Finance” – is a collectible fine gem a
Slide 32: Bottom Line: HC2 Has Lacked a Truly Independent and Qualified Board
BOTTOM LINE: HC2 HAS LACKED A TRULY INDEPENDENT AND QUALIFIED BOARD We believe that Mr. Falcone has spun a protective web of directors around himself so that his harmful actions to stockholders remain un-checked ▪ Mr. Falcone is the primary catalyst of the Board’s ineffectiveness and hands-off overs
Slide 33: We Believe HC2's Board Is More Loyal to Mr. Falcone Than Stockholders
WE BELIEVE HC2’s BOARD IS MORE LOYAL TO MR. FALCONE THAN STOCKHOLDERS ▪ Mr. Barr has failed to check Mr. Falcone’s actions for the past six years. ▪ HC2 paid Wayne Barr a consulting fee in 2016 and 2017. ▪ Mr. Barr was appointed to the Board concurrent with Mr. Wayne Barr, Jr. Falcone in 2014. Rober
Slide 34: Meet Your New Independent Chairman
MEET YOUR NEW INDEPENDENT CHAIRMAN The problems in HC2’s boardroom obviously begin—but do not end—with Mr. Falcone Warren H. Gfeller Interim Non-Executive Chairman, Chairperson Audit Committee ▪ Mr. Gfeller, as Chairperson of the Audit Committee, has enabled management to engage in aggressive accoun
Slide 35: An Ineffective, Highly-Questionable Lead Director
AN INEFFECTIVE, HIGHLY-QUESTIONABLE LEAD DIRECTOR We believe Lead Director Wayne Barr, Jr. is unfit to serve in his role Director Wayne Barr, Jr. Lead Director ▪ Mr. Barr has not only failed to check Mr. Falcone’s actions, but he lost the support of Glass Lewis & Co in 2019. ▪ Mr. Barr lacks any sta
Slide 36: Mr. Barr Has Helped Mr. Falcone Put Himself First
MR. BARR HAS HELPED MR. FALCONE PUT HIMSELF FIRST Shorty after taking control of HC2 in 2014, Mr. Falcone and Mr. Barr introduced an amendment in the Company’s 2014 Proxy Statement that sought to reduce Board- level accountability Corporate Opportunities Amendment “The Company may from time to time
Slide 37: Major Proxy Advisory Firms Took Note
MAJOR PROXY ADVISORY FIRMS TOOK NOTE ISS and Glass Lewis weighed in on the anti-stockholder amendment “ …the amendment would provide different standards of director accountability and could permit Overlap “ ISS Persons (as defined) to choose the best interests of recommended other entities over the
Slide 38: HC2 Stockholders Rejected Attempts to Deprioritize Stockholders
ATTEMPTS TO DEPRIORITIZE STOCKHOLDERS PERSISTED In 2016, Mr. Falcone and his incumbent Board tried to institute ANOTHER anti- stockholder proposal ▪ In HC2’s 2016 Proxy Statement, the Board introduced and recommended FOR a proposal that would have eliminated the rights of its common stockholders to
Slide 39: We Have No Confidence in Any Other Directors
WE HAVE NO CONFIDENCE IN ANY OTHER DIRECTORS None of the incumbent directors appear to have the ability or will to curtail Mr. Falcone’s actions Director Robert V. Leffler, Jr. Lead Director June 2016 – February 2020 Chairperson Compensation Committee, Chairperson Governance & Nominating Committee ▪
Slide 40: The Board Has Let Mr. Falcone Misuse HC2 Resources
THE BOARD HAS LET MR. FALCONE MISUSE HC2 RESOURCES HC2’s incumbent Board endorsed Mr. Falcone’s use of HC2 resources for his own benefit and legal issues ▪ In a deposition on July 23, 2019 in a sworn deposition in the case of Dontzin, Nagy v. Philip A. Falcone, Mr. Falcone admitted to mis- using HC2
Slide 41: The Board Has Let Mr. Falcone Misuse HC2 Resources
THE BOARD HAS LET MR. FALCONE MISUSE HC2 RESOURCES HC2’s incumbent Board enabled Mr. Falcone’s use of capital for his and his family’s personal benefit ▪ Everest Entertainment is Lisa Marie Falcone’s personal film and entertainment company. ▪ There is no publicly disclosed relationship between Evere
Slide 42: The Board Has Had Accounting Issues Dating Back to 2014
THE BOARD HAS HAD ACCOUNTING ISSUES DATING BACK TO 2014 In 2014, the incumbent Board reported a material weakness in internal controls in its 10-K ▪ “We have identified a material weakness in our internal control over financial reporting related to the preparation and review of our income tax provis
Slide 43: Accounting Issues Came to the Surface Once Again in 2016
ACCOUNTING ISSUES CAME TO THE SURFACE ONCE AGAIN IN 2016 Again in 2016, the Board failed to properly account for a similar Bargain Purchase Gain – when Wayne Barr was still Chairman of the Audit Committee ▪ “We have identified a material weakness in our internal control over financial reporting rela
Slide 44: The Audit Committee Is Still Failing
THE AUDIT COMMITTEE IS STILL FAILING HC2’s Board endorsed what we view as a highly-questionable revaluation of the insurance business from $10,000 by $116.5 million ▪ In 2017 HC2 bought KMG America for $10,000. On closing the transaction they revalued the asset by $116.5 million. ▪ The Board and man
Slide 45: The Audit Committee Is Still Failing (Cont.)
THE AUDIT COMMITTEE IS STILL FAILING (CONT.) HC2’s inappropriate response to our letter to Warren Gfeller, Chairman of the Audit Committee ▪ MG Capital sought to engage with the Chairman of the Audit Committee, Warren Gfeller, and sent him a letter voicing our concerns on March 2, 2020. ▪ Instead of
Slide 46: Was CGI's Chairman Fired During an Audit?
WAS CGI’S CHAIRMAN FIRED DURING AN AUDIT? Turmoil at HC2’s largest subsidiary is not limited to a recent regulatory investigation – recent leadership changes were not disclosed James Corcoran is no longer Chairman Stockholders had to find out on LinkedIn – yet remains on the CGI website. who the new
Slide 47: A Weak Board Has Perpetuated Dysfunctional Stockholder Engagement
A WEAK BOARD HAS ALSO PERPETUATED DYSFUNCTIONAL STOCKHOLDER ENGAGEMENT Our effort to engage with management since January 2020 ▪ Since January, MG Capital has attempted to privately engage with Mr. Falcone and the Board’s independent directors on several occasions. ▪ When we attempted to correspond
Slide 48: Analyst Perspectives
ANALYST PERSPECTIVES Leading sell-side analyst also sees the need for significant change “ Besides reducing debt at the HoldCo level, “ However, we […] contemplate if recent shareholder activism has triggered the shift we have previously expressed the view that mgmt. should reduce corporate-level in
Slide 49: Philip Falcone: Not a Viable Leader
Philip Falcone: Not a Viable Leader A BETTER HC2 | 49
Slide 50: We Believe Mr. Falcone Is Unfit to Lead HC2
WE BELIEVE MR. FALCONE IS UNFIT TO LEAD HC2 In addition to systematically mismanaging HC2, Mr. Falcone has faced a raft of highly-public and unquestionably distracting legal actions that further call into question his fitness to lead a public company A barrage of distractions has persisted throughou
Slide 51: Mr. Falcone's Legal and Financial Issues Impact HC2
MR. FALCONE’S LEGAL AND FINANCIAL ISSUES IMPACT HC2 Mr. Falcone’s most recent financial problems have revealed his misuse of Company resources for personal legal affairs ▪ Mr. Falcone has failed to pay more than $13 Assets frozen million in fees to his long-time personal over legal fees attorneys at
Slide 52: Mr. Falcone's Long History of Regulatory Issues
MR. FALCONE’S LONG HISTORY OF REGULATORY ISSUES ALSO CONTINUES TO RAISE RED FLAGS Mr. Falcone’s regulatory bans and issues create unnecessary risks for stockholders ▪ Mr. Falcone entered into a settlement agreement with the SEC in 2013 after admitting Banned by the wrongdoing and agreeing to a ban f
Slide 53: His Blatant Contradictions Are Equally Troubling
HIS BLATANT CONTRADICTIONS ARE EQUALLY TROUBLING Mr. Falcone’s communications have been inconsistent and misleading “ If… RBC falls below 400 percent, then within five business days, HC2 Holdings, Inc., […] “ As a reminder, this is a highly regulated industry and the liabilities are ring-fenced. agr
Slide 54: A Better Board
A Better Board A BETTER HC2 | 54
Slide 55: The Solution: Our Highly-Qualified Nominees
THE SOLUTION: OUR HIGHLY-QUALIFIED NOMINEES Our slate possess the relevant experience, expertise and ownership perspectives to clean up the incumbent Board’s mess and revive HC2 ▪ We believe HC2 has six viable assets and each of our six nominees would help harness their value in a strategic, stockho
Slide 56: Our Slate Has the Diverse Qualifications HC2 Needs
OUR SLATE HAS THE DIVERSE QUALIFACTIONS THAT A HOLDING COMPANY IN HC2’S POSITION NEEDS George R. Brokaw Kenneth S. Courtis Michael Gorzynski Private Investor Starfort Investment Holdings MG Capital Management, Ltd. Mr. Brokaw’s extensive investing, Mr. Courtis’ investing expertise, Mr. Gorzynski’s i
Slide 57: Our Slate Has the Diverse Qualifications HC2 Needs (Cont.)
OUR SLATE HAS THE DIVERSE QUALIFACTIONS THAT A HOLDING COMPANY IN HC2’S POSITION NEEDS (CONT.) Robin Greenwood Liesl Hickey Jay Newman Harvard Business School Ascent Media Ginzan Management Ltd. Mr. Greenwood’s business strategy Ms. Hickey’s strategic consulting Mr. Newman’s vast experience in exper
Slide 58: Endorsement for Our Nominees
ENDORSEMENT FOR OUR NOMINEES “ Ken Courtis served on the board of CapitaLand, one of the largest real estate groups in Asia Pacific, for some 9 years where I was the founding President and CEO. He also served on our International Advisory Board of the company. I had known Ken Courtis for several yea
Slide 59: Endorsement for Our Nominees
ENDORSEMENT FOR OUR NOMINEES “ Ken is an outstanding director for the following reasons: ▪ he has unparalleled depth of experience in all parts of the world; ▪ he is a rigorous and strategic thinker; Kenneth S. Courtis ▪ he is punctilious about governance standards; ▪ he is among the most original a
Slide 60: Endorsement for Our Nominees
ENDORSEMENT FOR OUR NOMINEES “ Mike is one of my first calls for advice on complex strategic and financial issues. “ Mike would make an excellent CEO. Alexander Jorov, Partner & Managing Director, Michael Gorzynski Boston Consulting Group “ Mike took what looked like a near bankrupt Puerto Rican ins
Slide 61: Endorsement for Our Nominees
ENDORSEMENT FOR OUR NOMINEES “ Robin is a first rate finance scholar, and he is especially wise about practical matters as well, which is why he is the first person I look to for advice. “ He would be an excellent board member. Robin Greenwood Mark Kritzman, President and CEO, Windham Capital Manage
Slide 62: Endorsement for Our Nominees
ENDORSEMENT FOR OUR NOMINEES “ Liesl has an incredible sense for the political and policy making process. “ She is an expert strategist, easy to work with and would make a great contribution to any board. Liesl Hickey Ryan Costello, Former US Congressman (PA-6) “ Liesl is one of the best political s
Slide 63: Endorsement for Our Nominees
ENDORSEMENT FOR OUR NOMINEES “ Having worked with Jay for more than 20 years, I can attest to his exceptional thought leadership. That, combined with his proven ability to address collaboratively complex business and legal issues, resulting in a long string of memorable successes, “ make him an idea
Slide 64: A Better Strategy
A Better Strategy A BETTER HC2 | 64
Slide 65: We Have a Strong Vision for Value Creation
WE HAVE A STRONG VISION FOR VALUE CREATION Based on an exhaustive analysis of HC2’s current corporate structure and present portfolio, we have developed a pragmatic, systematic strategy for enhancing stockholder value Improve Governance and Enhance Holding Company Monetize Non-Core Assets to Elimina
Slide 66: Three Pillars of the Path to ~$9 per Share of Value
THREE PILLARS OF THE PATH TO ~$9 PER SHARE OF VALUE Executing on our pillars will allow us to expeditiously pay down holding company debt and beginning returning cash to stockholders 1 2 3 Reducing go-forward annual Generating up to $500 million in Re-focusing the portfolio on overhead by 75% right
Slide 67: Establish a Strong Board Committee Structure
ESTABLISH A STRONG BOARD COMMITTEE STRUCTURE Our slate has already devised how to best structure committees that will immediately address the issues plaguing HC2 Kenneth S. Courtis Chairman of the Board George Brokaw Robin Greenwood Chairperson, Audit & Finance Chairperson, Governance, Committee Com
Slide 68: Install Interim Chief Executive Officer
INSTALL INTERIM CHIEF EXECUTIVE OFFICER In addition to serving on the Board, nominee Michael Gorzynski would assume the role of interim CEO during transition period ▪ Mr. Gorzynski is well equipped to manage HC2 o Brings extensive knowledge of HC2 from multiple years of analysis and diligence. o Has
Slide 69: Identify and Hire a Permanent CEO
IDENTIFY AND HIRE A PERMANENT CEO We have already engaged with a leading executive search firm about helping supply a reconstituted Board with premier candidates ▪ Ultimately, we believe the right CEO for HC2 will: o Have demonstrated experience in the investment management world and knowledge of th
Slide 70: Priority #1: Substantially Cut Corporate Overhead
PRIORITY #1: SUBSTANTIALLY CUT CORPORATE OVERHEAD High annual overhead has crushed HC2, representing nearly a $4 per share headwind today ▪ Reduce holding company operating expenses substantially: o 2021 estimate is $25 million at a 10% capitalization rate that is $250 million of value destruction o
Slide 71: Priority #2: Identify Non-Core Sources of Liquidity
PRIORITY #2: IDENTIFY NON-CORE SOURCES OF LIQUIDITY Rolling the dice has failed, with approximately $400 million of holding company debt due at the end of 2021 (paying $45 million of interest) ▪ The reconstituted Board will focus on monetizing non-core assets that: o Are easily monetizable, like clo
Slide 72: Priority #3: Focus on the Crown Jewels
PRIORITY #3: FOCUS ON THE CROWN JEWELS Stop “rolling the dice” – HC2 should not sell the performing cash flowing crown jewels ▪ Stop “rolling the dice” and focus on businesses with little capital need and the ability to generate free cash flow. ▪ Fix broken relationships with regulators (Continental
Slide 73: Asset Spotlight: DBM
ASSET SPOTLIGHT: DBM Independent Slate sees opportunity to participate in growth of attractive engineering and construction market The North American Structural Steel Market Is About DBM projected to grow at a 3.4% CAGR DBM Global offers integrated steel The Global Steel Fabrication Market is constr
Slide 74: Asset Spotlight: DBM (Cont.)
ASSET SPOTLIGHT: DBM (CONT.) DBM is an excellent business stifled by current HC2 management. DBM’s assets are global leaders particularly in the Issues to be resolved by new management steel erection market ▪ Bidding for large scale projects ▪ DBM is publicly listed, 92.5% owned by particularly larg
Slide 75: Asset Spotlight: CGI
ASSET SPOTLIGHT: CGI We see opportunity to participate in consolidation of the Long-Term Care Market As insurance carriers exit the market it creates an Continental has a strong claims & administration opportunity for Continental to consolidate blocks platform Number of Insurers Offering LTC ▪ Oppor
Slide 76: Asset Spotlight: CGI (Cont.)
ASSET SPOTLIGHT: CGI (CONT.) Independent Slate sees opportunity to participate in consolidation of the Long-Term Care Market Continental has a strong claims & administration Issues to be resolved by new management platform ▪ Continental is under investigation by the Continental Insurance Group provi
Slide 77: Asset Spotlight: ANG
ASSET SPOTLIGHT: ANG Independent Slate sees opportunity to participate in growth of the compressed natural gas market ANG should enjoy tailwinds from affordable, The CNG market is growing at a CAGR of 14.1% cleaner gas Compressed Natural Gas Market ▪ Company is a leading operator of 40 compressed na
Slide 78: Asset Spotlight: ANG
ASSET SPOTLIGHT: ANG Independent Slate sees opportunity to participate in growth of the compressed natural gas market Issues to be resolved by new management Overview ▪ With $39 million of revenue and $17 American Natural Gas designs, builds, owns, million of EBITDA in 2019, of which $10.6 operates
Slide 79: Asset Spotlight: PTGI
ASSET SPOTLIGHT: PTGI Independent Slate sees opportunity to continue to generate cash from runoff telecommunications business Runoff free cash flow generation Overview ▪ With revenues close to $700 million and PTGi-ICS is an international wholesale razor thin EBITDA margins of $3.4 telecom service c
Slide 80: Asset Spotlight: Pansend
ASSET SPOTLIGHT: PANSEND Independent Slate sees opportunity for secondary sale or partial monetization of Pansend Potential Monetization Opportunity Pansend Well Positioned For Secondary Market ▪ Monetizing Pansend’s portfolio could ▪ Pansend’s growth and access to capital generate an immediate $200
Slide 81: Asset Spotlight: HC2 Broadcasting
ASSET SPOTLIGHT: HC2 BROADCASTING Independent Slate sees opportunity for sale, partial monetization of HC2 Broadcasting Potential Monetization Opportunity HC2 Broadcasting Has Real Asset Value ▪ We understand that Mr. Falcone has had ▪ While it’s easy to fall in love with the a long term “love affai
Slide 82: Longer-Term Focus: Recover Waste and Potentially Inappropriate Expenditures
LONGER-TERM FOCUS: RECOVER WASTE AND POTENTIALLY INAPPROPRIATE EXPENDITURES Investigate potentially inappropriate related-party payments, compensation and questionable transactions ▪ In order to further assess compensation and related party payment issues that we have identified, we intend to establ
Slide 83: Overview of Our 100-Day Transition Plan
OVERVIEW OF OUR 100-DAY TRANSITION PLAN Recognizing the importance of a responsible and well-executed transition amidst a change-in-control, our nominees have assembled a detailed plan SUMMARY OF 100-DAY PLAN CORPORATE PRIORITIES PORTFOLIO PRIORITIES ▪ Establish legal and financial ▪ Meet with the m
Slide 84: Conclusion: A Better HC2
Conclusion: A Better HC2 A BETTER HC2 | 84
Slide 85: We Stand for a Better HC2
WE STAND FOR A BETTER HC2 Our slate believes there is a clear, practical path to averting financial ruin and unlocking stockholder value at HC2 If elected, our nominees will pursue this path and catalyze meaningful change by: ▪ Adding true expertise, independence and ownership perspectives to the Bo
Slide 86: Appendix: Nominee Biographies
Appendix: Nominee Biographies A BETTER HC2 | 86
Slide 87: George R. Brokaw
GEORGE R. BROKAW GEORGE R. BROKAW George R. Brokaw, 52, currently serves as a Managing Partner of Trail Creek Partners LLC, which he joined in 2019. Mr. Brokaw is a private investor through several private and public investment vehicles. Prior to Trail Creek Partners, from October 2013 to November 2
Slide 88: Kenneth S. Courtis
KENNETH S. COURTIS KENNETH S. COURTIS Kenneth S. Courtis, 64, is a financial executive with over 30 years of investment banking and board of directors experience. Since January 2009, Mr. Courtis has served as the Chairman of Starfort Investment Holdings. Previously, he served as Vice Chairman and Ma
Slide 89: Michael Gorzynski
MICHAEL GORZYNSKI MICHAEL GORZYNSKI Michael Gorzynski, 42, is the Managing Member of MG Capital Management, Ltd. a family office focused on complex value oriented investments, which he joined in 2012. From 2006- 2011, he invested in special situations globally at Third Point LLC, a large asset manag
Slide 90: Robin Greenwood
ROBIN GREENWOOD ROBIN GREENWOOD Robin Greenwood, 43, has been the George Gund Professor of Finance and Banking at Harvard Business School, or HBS, since 2013 and began serving as Head of the Finance Unit in 2018. At HBS he is the faculty director of the Behavioral Finance and Financial Stability pro
Slide 91: Liesl Hickey
LIESL HICKEY LIESL HICKEY Liesl Hickey, 46, is a veteran political strategist who has worked at the highest levels of politics and issue advocacy. She has extensive experience dealing with regulatory, political and public policy issues related to government and the private sector. She has directed l
Slide 92: Jay Newman
JAY NEWMAN JAY NEWMAN Jay Newman, 68, currently serves as the Managing Member of Ginzan Management Ltd., a family office he founded in 2016. He has over 40 years of experience working in the finance industry as a lawyer, investment banker and principal investor. Immediately prior to establishing Gin
Slide 93: Appendix: A Brief History of HC2
Appendix: A Brief History of HC2 A BETTER HC2 | 93
Slide 94: A Brief History of HC2
A BRIEF HISTORY OF HC2 HC2 was built by Mr. Falcone to circumvent his securities industry ban and extract value on the back of stockholders 2014 ▪ Mr. Falcone settles with the SEC, admitting wrongdoing, and is banned from the Securities Industry, paying substantial penalties in 2013. ▪ January 2014,
Slide 95: A Brief History of HC2
A BRIEF HISTORY OF HC2 2015 ▪ January 2015, DMi subsidiary acquires NASCAR‐related assets and exclusive licensing rights to build interactive games. ▪ March 2015, Completes $50MM tack‐on to senior secured notes. ▪ April 2015, Forms Continental Insurance Group, HCHC’s insurance company platform. ▪ Ju
Slide 96: A Brief History of HC2
A BRIEF HISTORY OF HC2 2017 ▪ January 2017, HC2 Holdings refinances Senior Secured Notes with net proceeds from a $55 million Senior Secured Notes offering. ▪ May 2017, HC2 Holdings transfers the listing of its common stock from the NYSE MKT to the NYSE. ▪ June 2017, HC2 Holdings closes a private pl
Slide 97: A Brief History of HC2
A BRIEF HISTORY OF HC2 2019 ▪ June 2019, HC2 portfolio company American Natural Gas acquires ampCNG, a natural gas fuel provider, for $41 million. ▪ July 2019, HC2 portfolio company MediBeacon announces $30 Million investment from Huadong Medicine and an exclusive commercialization partnership in Gr