MASTER AGREEMENT
EXHIBIT
10.6
EXECUTION
COPY
This
Agreement (“Agreement”) is made this 3rd day of July, 2007 by and between
AmTrust Financial Services, Inc., a Delaware Corporation (“AmTrust”), and Maiden
Holdings, Ltd., a Bermuda corporation (“Maiden Holdings”).
RECITALS
WHEREAS,
Maiden Holdings plans to capitalize Maiden Insurance Company, Ltd., a
reinsurance company to be domiciled in Bermuda (“Maiden Insurance”) and wholly
owned by Maiden Holdings; and
WHEREAS,
AmTrust, directly or indirectly, owns Rochdale Insurance Company, a New York
corporation (“Rochdale”), Technology Insurance Company, Inc., a New Hampshire
corporation (“TIC”), Wesco Insurance Company, a Delaware corporation (“Wesco”),
AmTrust International Underwriters, Ltd., a Irish corporation (“AIU”), and IGI
Insurance Company, a United Kingdom corporation (“IGI,” together with Rochdale,
TIC, Wesco, AIU and any additional companies that write direct insurance
business as to which AmTrust acquires a majority interest that Maiden Insurance
desires to reinsure as contemplated hereby, the “AmTrust Ceding Insurers”), and
intends to enter into a strategic reinsurance arrangement with Maiden Insurance;
and
WHEREAS,
when AmTrust completes its acquisition of Associated Industries Insurance
Company, Inc., a Florida corporation (“Associated”), Associated will become an
AmTrust Ceding Insurer; and
WHEREAS,
concurrently with the execution and delivery of this Agreement, Maiden Insurance
is entering into a quota share reinsurance agreement with AIU and IGI, pursuant
to which agreement Maiden Insurance will, effective as of 12:01 a.m. on July
1,
2007 (the “Effective Time”) and subject to the licensing and capitalization of
Maiden Insurance, reinsure 40% of all ultimate net loss each of AIU and IGI
incurs as a result of losses under all of their respective workers’
compensation, general liability, commercial automobile liability, specialty
risk
and extended warranty policies and such other types of policies that Maiden
Insurance desires to reinsure pursuant to the provisions of any such quota
share
reinsurance agreement as contemplated by Article I therein; and
WHEREAS,
after the Effective Time and the licensing and capitalization of Maiden
Insurance, subject to the receipt of regulatory approval, Maiden Holdings plans
to cause Maiden Insurance to reinsure 40% of all ultimate net loss each such
AmTrust Ceding Insurer incurs as a result of losses under all of its respective
workers’ compensation, general liability, commercial automobile liability,
specialty risk and extended warranty policies (the “Covered Business”), and such
other types of policies that Maiden Insurance desires to reinsure pursuant
to
the provisions of any such quota share reinsurance agreement as contemplated
by
Article I therein, pursuant to a reinsurance quota share agreement to be entered
into by Maiden Insurance and the AmTrust Ceding Insurers; and
WHEREAS,
effective as of the Effective Time, but subject to the licensing and
capitalization of Maiden Insurance and receipt of all required U.S. state
insurance regulatory approvals, Maiden Holdings plans to cause Maiden Insurance
to reinsure 40% of all ultimate net loss each of Rochdale, TIC and Wesco incurs
as a result of losses pursuant to policies issued by those insurers that cover
the Covered Business and such other types of policies that Maiden Insurance
desires to reinsure pursuant to the provisions of the such quota share
reinsurance agreement as contemplated by Article I therein;
WHEREAS,
in connection with such reinsurance agreements, where necessary for an AmTrust
Ceding Company to receive credit for reinsurance under applicable law) each
of
AmTrust and Maiden Holdings intend to cause such AmTrust Ceding Insurers
(initially Rochdale, TIC and Wesco) and Maiden Insurance, respectively, to
enter
into reinsurance trust agreements for the purpose of providing collateral
security for the performance by Maiden Insurance of its obligation to the
AmTrust Ceding Insurers under the applicable reinsurance agreement;
and
WHEREAS,
concurrently with the execution and delivery of this Agreement, (i) AII
Insurance Management Ltd. and Maiden Insurance are entering into an Asset
Management Agreement pursuant to which AmTrust will provide asset management
services to Maiden Insurance, and (ii) AII Reinsurance Broker Ltd. and Maiden
Insurance are entering into a Reinsurance Brokerage Agreement pursuant to which
Maiden Insurance will appoint AII Reinsurance Broker Ltd. as a broker of
reinsurance and will pay it a fee in connection with reinsurance ceded to Maiden
Insurance by AmTrust’s insurance company subsidiaries; and
WHEREAS,
Maiden Holdings and AmTrust would like to establish a procedure to provide
for
the conduct of business with regard to any future opportunities presented to
both AmTrust and Maiden Holdings to insure, reinsure or acquire the same book
of
business;
NOW,
THEREFORE, in consideration of the mutual agreements described in this
Agreement, AmTrust and Maiden Holdings agree as follows:
ARTICLE
I
PURPOSE
AND OVERVIEW
1.1 Overview.
As a
result of the contemplated transactions set forth herein, whereby AmTrust is
an
intended strategic business partner with Maiden Holdings, it is intended that
Maiden Holdings will be an organization that on fair and reasonable terms (a)
can provide a stable source of reinsurance to the AmTrust Ceding Insurers,
and
(b) can have a steady source of profitable reinsurance business from the AmTrust
Ceding Insurers in its initial years as it establishes itself in the
marketplace.
1.2 Purpose
of Agreement.
The
purpose of this Agreement is to set forth duties and covenants of AmTrust and
Maiden Holdings including:
(a) Duties
and covenants of AmTrust and Maiden Holdings to each other after the Effective
Time; and
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(b) Duties
and covenants of AmTrust and Maiden Holdings to each other regarding the
establishment of appropriate corporate governance principles to address
conflicts of interest and the pursuit of corporate opportunities by each in
connection with any opportunities that may be presented to both AmTrust and
its
subsidiaries and Maiden Holdings and its subsidiaries to insure, reinsure or
acquire the same book of business.
1.3 Agreements
Contemplated.
This
Agreement contemplates that, in order to effectuate the business goals set
forth
herein, (a) quota share reinsurance agreements between Maiden Insurance and
the
AmTrust Ceding Insurers, substantially in the same form as the agreements
attached hereto as Exhibit
A-1
(applying to Rochdale; TIC; Wesco, upon the closing of AmTrust’s acquisition of
Associated, Associated and potentially other AmTrust Ceding Insurers from time
to time, the “U.S. Reinsurance Agreement”) and A-2
(applying to AIU, IGI and potentially other AmTrust Ceding Insurers over time,
the “International Reinsurance Agreement”) (collectively, the “Reinsurance
Agreements”), shall be executed and delivered by the parties and (b) reinsurance
trust agreements among Rochdale, TIC and Wesco, as beneficiaries, Maiden
Insurance, as grantor, and a trustee, substantially in the same form as the
agreements attached hereto as Exhibits
X-0,
X-0
and
B-3
(the
“Reinsurance Trust Agreements”) shall be executed and delivered by the parties.
If AmTrust acquires a majority equity interest in any other insurance company
that writes direct business (an “Additional AmTrust Ceding Insurer”) and such
company writes direct business of a type constituting Covered Business,
1.4 it
will
cause such Additional AmTrust Ceding Insurer to enter into one of the
Reinsurance Agreements (the U.S. Reinsurance Agreement if such Additional
AmTrust Ceding Insurer is organized under the laws of the United States, any
state thereof, the District of Columbia or any territory or possession of the
United States and the International Reinsurance Agreement if such Additional
AmTrust Ceding Insurer is organized under the laws of any other jurisdiction).
If the direct business written by such Additional AmTrust Ceding Insurer is
not
of a type constituting Covered Business, AmTrust shall cause such Additional
AmTrust Ceding Insurer to offer Maiden Insurance the opportunity to reinsure
such business pursuant to the terms of the applicable Reinsurance Agreement,
and, if Maiden accepts such offer, will cause such Additional AmTrust Ceding
Insurer to enter into one of the Reinsurance Agreements (the U.S. Reinsurance
Agreement if such Additional AmTrust Ceding Insurer is organized under the
laws
of the United States, any state thereof, the District of Columbia or any
territory or possession of the United States and International Reinsurance
Agreement if such Additional AmTrust Ceding Insurer is organized under the
laws
of any other jurisdiction).
It
is
expressly understood by all parties that the parties will act with diligence
to
cause the U.S. Reinsurance Agreement to become effective as soon as practicable
after the Effective Time but that it will require submission to and approval
or
non-disapproval by all applicable U.S. state insurance regulators before it
becomes effective.
1.5 Good
Faith.
Each
party agrees that it will negotiate and act in good faith and will take all
steps reasonably necessary to carry out the intent of this Agreement and
preserve the economic arrangements contemplated hereby, including modifying
the
Reinsurance Agreements and the Reinsurance Trust Agreements to the extent
required to comply with the laws, orders or directives of any insurance
regulator having jurisdiction over the parties thereto or negotiating and
entering into any other agreements that are reasonable and necessary in order
to
carry out the intent of the parties.
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1.6 Term.
This
Agreement shall be effective upon the Effective Time.
ARTICLE
II
TRANSACTIONS
CONTEMPLATED BY THIS AGREEMENT
2.1 Duties
of the Parties after the Effective Time.
Maiden
Holdings shall cause Maiden Insurance to enter into the Reinsurance Agreements
and the Reinsurance Trust Agreements and AmTrust shall cause the AmTrust Ceding
Insurers to enter into the Reinsurance Agreements and each of the AmTrust Ceding
Insurers contemplated as being parties to a Reinsurance Trust Agreement to
enter
into the applicable Reinsurance Trust Agreement. If AmTrust acquires a majority
equity interest in an Additional AmTrust Ceding Insurer, Maiden Holdings will
cause Maiden Insurance, and AmTrust will cause such Additional AmTrust Ceding
Insurer, to enter into(i) an amendment to the applicable Reinsurance Agreement
to provide for the inclusion of such Additional AmTrust Ceding Insurer and
(ii)
if a Reinsurance Trust Agreement is required for such Additional AmTrust Ceding
Insurer to be given credit for such reinsurance under applicable law, a
Reinsurance Trust Agreement in form substantially consistent with the other
Reinsurance Trust Agreements but with such modifications as shall be reasonably
necessary to comply with the laws of the jurisdiction under which such AmTrust
Ceding Company is organized.
2.2 Corporate
Governance Considerations.
Both
AmTrust and Maiden Holdings are committed to good corporate governance,
compliance with Securities and Exchange Commission and stock exchange listing
requirements, adherence to the applicable governing corporate laws, and
satisfaction of state regulatory laws regarding insurance holding company
structure and related party transactions.
Both
AmTrust and Maiden Holdings recognize that because they have large shareholders
in common and because AmTrust and Maiden Holdings will initially share members
of executive management and boards of directors, activities of each that impact
the other will attract special scrutiny from interested parties and demand
special scrutiny from AmTrust’s and Maiden Holdings’ management and boards of
directors. Accordingly, each of AmTrust and Maiden Holdings shall require that
on any occasion where a business opportunity to insure, reinsure or acquire
the
same book of business is presented to both AmTrust and Maiden Holdings, each
company shall refer such opportunity to a committee of its independent directors
to decide whether that company shall pursue the opportunity. A director of
Maiden Holdings or AmTrust shall not be considered “independent” unless the
board of directors of Maiden Holdings or AmTrust, respectively, determines
that
such director is independent with respect to both Maiden Holdings and AmTrust
under the applicable standards for director independence under the rules of
the
principal stock exchange on which any securities of Maiden Holdings or AmTrust,
respectively, are listed (or, if no securities of such party are listed on
any
stock exchange, the rules of the NASDAQ Stock Market).
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ARTICLE
III
REPRESENTATIONS
AND WARRANTIES OF AMTRUST
AmTrust
hereby represents and warrants to Maiden Holdings the following:
3.1 Organization
and Corporate Power.
AmTrust
is a corporation duly organized, validly existing and in good standing under
the
laws of the State of Delaware having all corporate power and authority necessary
to own its property and operate its businesses as now conducted. It has all
corporate power, authority and legal right necessary to execute and deliver
this
Agreement and, subject to receipt of the requisite approvals or non-disapprovals
of the U.S. Reinsurance Agreement and the Reinsurance Trust Agreements from
the
applicable insurance regulators, to
perform
and carry out the transactions contemplated hereby pursuant to the terms and
conditions of this Agreement.
3.2 Authorization
and Effect.
This
Agreement and the performance of the actions provided for herein have been
duly
and validly authorized by all necessary corporate action on the part of AmTrust.
This Agreement has been executed and delivered by duly authorized and acting
officers of AmTrust, and assuming the due authorization, execution and delivery
of this Agreement by Maiden Holdings, constitutes a legal, valid and binding
obligation of AmTrust enforceable in accordance with its terms, subject to
(i)
laws relating to bankruptcy, fraudulent conveyances, reorganization,
liquidation, moratorium and other similar laws affecting creditor’s rights
generally, (ii) general principles of equity (regardless whether enforceability
is considered in a proceeding in equity or at law), (iii) standards of
commercial reasonableness and good faith, (iv) public policy and (v) concepts
of
comity.
ARTICLE
IV
REPRESENTATIONS
AND WARRANTIES OF MAIDEN HOLDINGS
Maiden
Holdings hereby represents and warrants to AmTrust the following:
4.1 Organization
and Corporate Power.
Maiden
Holdings is a corporation duly organized, validly existing and in good standing
under the laws of Bermuda having all corporate power and authority necessary
to
own its property and operate its businesses as now conducted. It has all
corporate power, authority and legal right necessary to execute and deliver
this
Agreement and, subject to receipt of the requisite approvals or non-disapprovals
of the U.S. Reinsurance Agreement and the Reinsurance Trust Agreements from
the
applicable insurance regulators, to
perform
and carry out the transactions contemplated hereby pursuant to the terms and
conditions of this Agreement.
4.2 Authorization
and Effect.
This
Agreement and the performance of the actions provided for herein have been
duly
and validly authorized by all necessary corporate action on the part of Maiden
Holdings. This Agreement has been executed and delivered by duly authorized
and
acting officers of Maiden Holdings, and assuming the due authorization,
execution and delivery of this Agreement by AmTrust, constitutes a legal, valid
and binding obligation of Maiden Holdings enforceable in accordance with its
terms, subject to (i) laws relating to bankruptcy, fraudulent conveyances,
reorganization, liquidation, moratorium and other similar laws affecting
creditor’s rights generally, (ii) general principles of equity (regardless
whether enforceability is considered in a proceeding in equity or at law),
(iii)
standards of commercial reasonableness and good faith, (iv) public policy and
(v) concepts of comity.
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ARTICLE
V
ADDITIONAL
COVANENTS OF THE PARTIES
5.1 Regulatory
Matters.
The
parties hereto will cooperate with each other in the preparation and submission
of those filings and documents necessary to obtain the permits, consents,
approvals, non-disapprovals and authorizations of governmental bodies necessary
to consummate the transactions contemplated by this Agreement. AmTrust and
Maiden Holdings will furnish the other all information concerning itself and
its
subsidiaries and such other matters and things as may be necessary, prudent
or
advisable in connection with any statement or application made by or on behalf
of AmTrust or Maiden Holdings to any governmental body in connection with the
transactions contemplated herein.
5.2 Further
Assurances.
Subject
to the terms and conditions hereof, each of the parties hereto agrees to use
all
reasonable efforts to take, or cause to be taken, all actions and to do or
cause
to be done all things necessary, proper or advisable under applicable laws
and
regulations to consummate and make effective the transactions contemplated
by
this Agreement as expeditiously as possible. If at any time further action
is
necessary or desirable to carry out the purposes of this Agreement, the proper
officers and directors of the parties hereto shall take all such reasonably
necessary action.
ARTICLE
VI
CONDITIONS
TO THE CONSUMMATION OF TRANSACTIONS
6.1 General
Conditions.
The
obligations of the parties to complete the various transactions contemplated
by
this Agreement shall be subject to the satisfaction of the following terms
and
conditions, except as otherwise specifically provided herein:
(a) receipt
of all necessary regulatory approvals or non-disapprovals, without material
or
substantial qualification or condition, as are required to consummate the
transaction contemplated hereby (except where the failure to obtain any such
approval would not render the transaction contemplated hereby illegal or
otherwise deprive either party of the material benefits of this Agreement or
be
materially inconsistent with the conditions set forth above), and such shall
remain in full force and effect, and all statutory waiting periods in respect
thereof shall have expired; and
(b) neither
AmTrust or any of the AmTrust Ceding Insurers, on one hand, nor Maiden Holdings
or Maiden Insurance, on the other hand, shall be subject to any order, decree
or
injunction of a court or agency of competent jurisdiction which enjoins or
prohibits the consummation of the transaction contemplated hereby, nor shall
there be pending a suit or proceeding by any governmental authority which seeks
injunctive or other relief in connection with the transaction contemplated
hereby.
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ARTICLE
VII
TERMINATION
AND AMENDMENT
7.1 Termination.
This
Agreement may be terminated at any time prior to its expiration:
(a) by
the
written consent of AmTrust and Maiden Holdings;
(b) by
AmTrust if there shall have been any material misrepresentation in this
Agreement by Maiden Holdings or any material breach of any covenant of Maiden
Holdings hereunder and such breach shall not have been remedied within 30 days
after receipt by Maiden Holdings of notice in writing from AmTrust specifying
the nature of the breach and requesting such be remedied; and
(c) by
Maiden
Holdings if there shall have been any material misrepresentation in this
Agreement by AmTrust or any material breach of any covenant of AmTrust hereunder
and such breach shall not have been remedied within 30 days after receipt by
AmTrust of notice in writing from Maiden Holdings specifying the nature of
the
breach and requesting such be remedied;
provided
that the
provisions of Section 2.2 shall survive such termination, if, and for so long
as, (i) any member of the executive management or board of directors of AmTrust
or any person or group of persons acting in concert who beneficially owns (as
defined below) voting securities having 10% or more of the voting power of
all
outstanding voting securities of AmTrust is a member of the executive management
or board of directors of Maiden Holdings, (ii) any member of the executive
management or board of directors of Maiden Holdings or Maiden Insurance or
any
person or group of persons acting in concert who beneficially owns voting
securities having 10% or more of the voting power of all outstanding voting
securities of Maiden Holdings is a member of the executive management of
AmTrust, or (iii) any person or group of persons acting in concert beneficially
owns voting securities having 10% or more of the voting power of all outstanding
voting securities of both Maiden Holdings and AmTrust. “Beneficially owns” shall
have the meaning ascribed to such term in Rule 13d-3 under the United States
Securities Exchange Act of 1934, as amended.
7.2 Effect
of Termination.
In
the
event that this Agreement is terminated as provided in Section 7.1 above, this
Agreement shall forthwith become void (other than this Section 7.2, and Sections
8.1, 9.1 through 9.3, and 9.5 through 9.11, hereof which shall remain in full
force and effect) and there shall be no further liability on the part of AmTrust
or Maiden Holdings. Nothing contained in this Section 7.2 shall relieve any
party hereto from liability for its breach of this Agreement.
7.3 Amendment.
At any
time during the term of this Agreement, the parties hereto may amend this
Agreement. This Agreement may not be amended except by an instrument in writing
signed on behalf of each of the parties hereto.
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ARTICLE
VIII
INDEMNIFICATION
8.1 Indemnification.
Each
party to this Agreement shall indemnify the other party against, and hold it
harmless from, all losses, damages, and liabilities incurred by such party
arising from any material breach of any representation or warranty made herein
or of any material failure to fulfill its obligations as set forth in this
Agreement by the party against which such indemnification is sought. All
representations and warranties and indemnification obligations made in this
Agreement shall survive the implementation of the transactions contemplated
hereby.
ARTICLE
IX
MISCELLANEOUS
9.1 Expenses.
All
costs
and expenses incurred in connection with this Agreement and the transactions
contemplated hereby shall be paid by the party incurring such costs and
expenses.
9.2 Notices.
Except
as
may be otherwise provided herein, any notice or other communication or delivery
required or permitted hereunder shall be in writing and shall be delivered
personally or sent by certified mail, postage prepaid, by a nationally
recognized overnight courier service or by facsimile as follows, and shall
be
deemed given when actually received.
(a) if
to
AmTrust:
AmTrust
Financial Services, Inc.
00
Xxxxxx
Xxxx, 0xx Xxxxx
Xxx
Xxxx,
Xxx Xxxx 10038
Attention:
Xxxxxxx Xxxxx
Facsimile:
(000) 000-0000
(b) if
to
Maiden Holdings:
0
Xxxx
Xxxxxx
Xxxxxxxx
XX 00 Xxxxxxx
Xxxxxxxxx:
Xxx Xxxxx
Facsimile:
(000) 000-0000
With
a
copy (which shall not constitute notice) to:
LeBoeuf,
Lamb, Xxxxxx & XxxXxx LLP
000
Xxxx
00xx
Xxxxxx
Xxx
Xxxx,
Xxx Xxxx 00000
Attention:
Xxxxxxx X. Xxxxxxxxx, Esq.
Facsimile:
(000) 000-0000
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9.3 Parties
in Interest.
This
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and assigns.
9.4 Survival
of Covenants, Representations and Warranties.
The
representations and warranties contained herein shall survive throughout the
course of the transactions contemplated hereby and may be enforced by the
parties hereto. The covenants shall survive according to their individual
terms.
9.5 Counterparts.
This
Agreement may be executed in one or more counterparts, all of which shall be
considered one and the same agreement, and each of which shall be deemed an
original.
9.6 Headings.
The
article and section headings used in this Agreement have been inserted for
convenience of reference only and shall not be construed to affect the meaning
or interpretation of any provision, term or condition hereof.
9.7 Governing
Law.
This
Agreement shall be construed and enforced in accordance with the laws and
decisions of the State of New York without giving effect to the principles
of
conflicts of laws thereof.
9.8 Entire
Agreement; No Third Party Beneficiaries.
This
Agreement represents the entire agreement between the parties and supersedes
all
prior written or oral agreements relating to the transactions contemplated
hereby and is not intended to confer upon any person other than the parties
any
rights or remedies hereunder.
9.9 Severability
of Invalid Provision.
If any
one
or more covenants or agreements provided in this Agreement should be contrary
to
law, then such covenant or covenants, agreement or agreements shall be null
and
void and shall in no way affect the validity of the other provisions of this
Agreement.
9.10 Assignment
of Agreement.
This
Agreement may not be assigned without the written consent of all parties to
it.
This Agreement shall insure to the benefit of, and be binding upon, the
successors of each party. This Agreement shall be for the sole benefit of the
parties to this Agreement and their respective heirs, successors, assigns and
legal representatives and is not
intended, nor shall be construed, to give any person, other than the parties
hereto and their respective heirs, successors, assigns and legal
representatives, any legal or equitable right, remedy or claim
hereunder.
9.11 Waiver.
No
party
to this Agreement shall be deemed to have waived any rights or remedies under
this Agreement unless such waiver is expressly made in writing and signed by
such party. Failure of any party to exercise any right or remedy under this
Agreement or otherwise, or delay by a party in exercising such right or remedy,
shall not operate as a waiver thereof. No single waiver or failure to exercise
any right or remedy shall be construed as a waiver of any other right or
remedy.
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IN
WITNESS WHEREOF, the parties to this Agreement have caused it to be executed
by
their respective undersigned officers, each thereunto duly
authorized.
AMTRUST
FINANCIAL
SERVICES, INC.
By:_
/s/
Xxxxxxx Ungar______________
Name: Xxxxxxx
Xxxxx
Title: Secretary
By:__ /s/ Xxxxxxxx X. Turin____________
Name: Xxxxxxxx
X. Xxxxx
Title: Chief
Operating Officer,
General
Counsel and Assistant
Secretary
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