TAX ALLOCATION AGREEMENT
EXHIBIT
10.5
This
Agreement, dated July 1, 2002, is made for 2002 and future calendar years
between AmTrust Financial Services, Inc. (“AmTrust”), a Delaware corporation,
and Rochdale Insurance Company (“Rochdale”), a New York
corporation.
WITNESSETH
WHEREAS,
AmTrust and Rochdale are affiliates;
WHEREAS,
AmTrust and Rochdale are part of a consolidated tax filing group (the “Group”)
in accordance with the relevant Internal Revenue Service regulations;
and
WHEREAS,
AmTrust is the agent of Rochdale for the purpose of filing the consolidated
tax
return on behalf of the Group; and
WHEREAS,
AmTrust and Rochdale wish to set forth their obligations to each other as
members of the Group in accordance with New York’s insurance laws and
regulations.
NOW,
THEREFORE, AmTrust and Rochdale agree as follows:
A. Determination
of Tax Liability
Rochdale’s
liability for federal income tax payments or entitlement to federal income
tax
refunds shall be based on the amount of its tax liability or entitlement to
a
refund calculated on a separate return basis.
B. Tax
Payments
Rochdale
shall remit to AmTrust any amounts determined to be due in accordance with
Section A of this Agreement at such time that the Group is legally obligated
to
make estimated or final tax payments.
C. Credits
| 1. |
AmTrust
shall pay Rochdale an amount equal to the amount of tax savings to
the
Group generated by foreign credits, investment credits, losses or
any loss
carry overs (“Credits”) available to Rochdale. Rochdale shall record any
such payment as contributed
surplus.
|
| 2. |
Once
Rochdale receives payment from AmTrust for Credits, Rochdale cannot
utilize such Credits in the calculation of its tax liabilities under
Section A of this Agreement.
|
D. Escrow
In
the
event that amounts paid by Rochdale to AmTrust for its tax liability determined
in accordance with Section A exceeds the amount that AmTrust pays to the
Internal Revenue Service, AmTrust shall establish and maintain an escrow account
or accounts for Rochdale’s benefit in an amount equal to Rochdale’s excess
payment or payments, as the case may be, funded by assets eligible as an
investment under the New York insurance law. The purpose of the escrow accounts
shall be to permit Rochdale to recoup federal income taxes in the event of
future net losses. Escrow assets may be released to AmTrust from such escrow
accounts at such time as the permissible period for loss carrybacks has
expired.
E. Tax
Refunds
Upon
receipt, AmTrust shall remit to Rochdale that part of any tax refund received
by
the Group that results from Credits generated by Rochdale for which Rochdale
has
not received payment pursuant to Section C.
F. Scope
This
Agreement shall apply only to the parties’ federal tax liability.
IN
WITNESS WHEREOF, the parties have caused this Agreement to be executed on the
date set forth above.
By:_________________________________
Xxxxx
X.
Xxxxxxx, President
ROCHDALE
INSURANCE COMPANY
By:_________________________________
Xxxxx
X.
Xxxxxxx, President
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