EXHIBIT 10.7
ADMINISTRATIVE SERVICES AGREEMENT
THIS AGREEMENT is made as of the 1st day of January, 2006 among (1)
ALLIED WORLD ASSURANCE COMPANY, LTD, a company organized under the laws of
Bermuda (the "Operating Company"), (2) ALLIED WORLD ASSURANCE HOLDINGS, LTD, a
company organized under the laws of Bermuda (the "Holding Company"), which owns
all the issued shares of the Operating Company, (3) ALLIED WORLD ASSURANCE
HOLDINGS (IRELAND) LTD, a company organized under the laws of Bermuda ("AWAH
IRE"), and (4) AMERICAN INTERNATIONAL COMPANY LIMITED, a company organized under
the laws of Bermuda ("AICL").
W I T N E S S E T H
WHEREAS, the Operating Company, the Holding Company and AWAH
IRE (collectively, the "Companies" and each individually a "Company"); and
WHEREAS, the Companies desire that AICL provide the Companies
with certain services, and AICL is willing to provide such services, all subject
to the terms and conditions hereinafter provided.
NOW, THEREFORE, it is agreed as follows:
1. Services to be Provided
1.1 AICL shall, in Bermuda only, provide the services described in paragraph 1
of Schedule 1 hereto, and for the avoidance of doubt the services
described in paragraph 2 of Schedule 1 hereto are specifically excluded
and AICL shall not be required to provide any such excluded services.
To the fullest extent practicable, AICL shall provide the services
described in paragraph 1 of Schedule 1 hereto through consultants and/or
temporary staff in either case acting under the supervision and direction
of AICL and the costs and expenses incurred by AICL relating thereto shall
be reimbursed to AICL by the Companies as provided in Section 2.2 below.
The number and experience of such consultants and temporary employees
shall be mutually agreed between AICL and the Companies.
Without prejudice to the rights of AICL under this Agreement (including
under Section 2.1 hereof), the Companies shall not be required to obtain
any services, including those described above, from AICL or be prohibited
from obtaining such services from parties other than AICL, provided that
the Companies shall obtain the prior written consent of AICL to retain any
party other than AICL to provide any services that require access to
AICL's facilities or network and that are the subject of this Agreement,
such consent not to be unreasonably withheld or delayed.
1.2 During the term of this Agreement, AICL shall perform all of its
obligations under this Agreement: (i) to the best of its professional
ability; and (ii) with that degree of knowledge, skill and judgment which
is exercised by it with respect to its own business and the business of
its parent and insurance and reinsurance affiliates.
1.3 AICL shall comply with all applicable laws, rules and regulations in
respect of all activities conducted by it under this Agreement.
1.4 AICL leases premises in Sophia House at Church Street, Hamilton, Bermuda,
The Perry Building at Church Street, Hamilton, Bermuda and Chevron House
at Church Street, Hamilton, Bermuda, which the Companies currently occupy.
During the term of this Agreement, the Companies shall be entitled to
continue to occupy those premises and in consideration therefor shall
reimburse AICL for all rents, costs and expenses paid or incurred by AICL
in respect of such premises. AICL shall invoice the Companies for such
rents, costs and expenses on a monthly basis and the Companies shall
promptly reimburse AICL upon receipt of any such invoice. If, during the
term of this Agreement the Companies wish to vacate the said premises, the
Companies shall give AICL not less than ninety (90) days prior written
notice of their intention to do so.
2. Payment and Reimbursement of Service Fees and Costs
2.1 As remuneration for the services provided under this Agreement, the
Companies shall (in addition to the reimbursement of the costs and
expenses described in Sections 1.1, 1.4, and 2.2 hereof) pay to AICL a fee
of $20,000 per month to be payable monthly in advance on the first
business day (that is a day that banks in Bermuda are open for business)
of each calendar month, provided that if the term of this Agreement is
extended beyond September 30, 2006 in accordance with the provisions of
Section 3.1 below, the Companies shall (in addition to the costs and
expenses described in Sections 1.1, 1.4 and 2.2 hereof) pay to AICL a
monthly fee of $50,000 payable in the same manner described above.
2.2 In addition to monthly invoices for fees and in addition to invoices for
the rents, fees and expenses payable pursuant to section 1.4, AICL shall
issue, each month, a separate invoice for any of the following costs and
expenses incurred by AICL:
(a) the actual costs of telephone calls;
(b) the applicable fees charged by Quantum Communications Limited;
(c) any and all fees and expenses incurred in connection with the
engagement of consultants and/or the employment of temporary
employees by AICL as contemplated by section 1.1 above; and
(d) such additional fees and expenses agreed between the parties.
The Companies shall pay the amount of or otherwise reimburse AICL for any
such costs promptly upon receipt of any such invoice therefor.
3. Term and Termination of Agreement
3.1 The term of this Agreement (the "Term") shall commence effective as of
January 1, 2006 and shall continue in force until September 30, 2006,
provided that the Companies may on not less than 30 days' prior written
notice to AICL extend the term of this Agreement
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for an additional period not to extend beyond December 31, 2006.
Notwithstanding the foregoing, the Companies may terminate this Agreement
(i) upon 30 days' prior written notice to AICL (save in respect of Section
1.4 in which case the notice provisions of that Section shall apply in
respect of the matters the subject thereof) and (ii) at any time for
Company Cause (as defined in Section 3.2(a) of this Agreement), and AICL
may terminate this Agreement at any time for AICL Cause (as defined in
Section 3.2(b) of this Agreement).
3.2 (a) This Agreement may be terminated by the Companies, immediately upon
the lapse of any applicable cure period, by notice served on AICL if: (i)
AICL commits a material breach of its obligations under this Agreement,
which breach shall have continued without having been cured for a period
of 60 days after notice thereof from the Companies; (ii) AICL or any of
its principals is engaging or has engaged during the term of this
Agreement in fraud or dishonesty or any act involving moral turpitude;
(iii) a distress, execution, sequestration or other process is levied or
enforced upon the property of AICL which is not discharged within 30 days;
(iv) AICL is unable to pay its debts in the normal course of business,
which inability shall have continued for a period of 30 days; (v) AICL
ceases or threatens to cease, wholly or substantially, to carry on its
business; (vi) an encumbrancer takes possession of, or a receiver or
trustee is appointed over the whole or any part of the undertaking,
property or assets of AICL; (vii) an order is made or a resolution is
passed for the winding-up of AICL; or (viii) American International Group,
Inc. ceases to own, directly or indirectly, interests representing more
than 50% of the voting interests in AICL (any of the foregoing (i) -
(viii) of this paragraph (a), "Company Cause").
(b) This Agreement may be terminated by AICL, immediately upon the lapse of
any applicable cure period, by notice served on the Holding Company if:
(i) any of the Companies commits a material breach of its obligations
under this Agreement, which breach shall have continued without having
been cured for a period of 60 days after notice thereof from AICL; (ii) a
distress, execution, sequestration or other process is levied or enforced
upon any of the properties of the Companies which is not discharged within
30 days; (iii) any of the Companies are unable to pay their debts in the
normal course of business, which inability shall have continued for a
period of 30 days; (iv) the Operating Company ceases or threatens to
cease, wholly or substantially, to carry on its business; (v) an
encumbrancer takes possession of, or a receiver or trustee is appointed
over the whole or any part of the undertaking, property or assets of
either the Holding Company or the Operating Company; (vi) an order is made
or a resolution is passed for the winding-up of either the Holding Company
or the Operating Company; or (vii) the shareholders of the Holding Company
as of the date hereof, taken together, cease to own, directly or
indirectly, interests representing more than 50% of the voting interests
in the Holding Company (except in the case of an initial public offering)
(any of the foregoing (i) - (vii) of this paragraph (b), "AICL Cause").
3.3 If this Agreement is terminated, any fees and/or expenses payable under
Sections 1.4 and/or 2 of this Agreement shall be prorated to the effective
date of termination.
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4. Representations and Warranties
4.1 Representations and Warranties of AICL
AICL represents and warrants as of the date hereof as follows: (i) AICL is
a company duly incorporated, validly existing and in good standing under
the laws of Bermuda; (ii) the execution, delivery and performance by AICL
of this Agreement are within AICL's corporate powers, have been duly
authorized by all necessary corporate action, do not contravene (a) AICL's
memorandum of association or bye-laws; or (b) law or any regulation or
contractual restriction binding on or affecting AICL; (iii) no
authorization or approval or other action by, and no notice to or filing
with, any governmental authority is required for the due execution,
delivery and performance by AICL of this Agreement except for such filings
with, and approvals of such governmental authorities as will have been
made and obtained prior to the date of this Agreement; and (iv) this
Agreement is the legal, valid and binding obligation of AICL enforceable
against AICL in accordance with its terms.
4.2 Representations and Warranties of the Companies
Each of the Companies represents and warrants as of the date hereof as
follows: (i) it is a company duly formed, validly existing and in good
standing under the laws of Bermuda; (ii) the execution, delivery and
performance by it of this Agreement are within its corporate powers, have
been duly authorized by all necessary corporate action, do not contravene
(a) its memorandum of association or bye-laws; or (b) law or any
regulation or contractual restriction binding on or affecting it; (iii) no
authorization or approval or other action by, and no notice to or filing
with, any governmental authority is required for the due execution,
delivery and performance by it of this Agreement except for such filings
with, and approvals of such governmental authorities as will have been
made and obtained prior to the date of this Agreement; and (iv) this
Agreement is its legal, valid and binding obligation enforceable against
it in accordance with the terms of this Agreement.
5. Right of the Companies to Inspect Records
5.1 AICL shall keep, in a manner and form approved by or acceptable to the
Operating Company, true and complete books and records of all the
Operating Company's business conducted under and pursuant to this
Agreement.
5.2 AICL shall maintain all Books and Records with regard to the Operating
Company's business separately from the records of its other businesses,
provided that AICL may use identical computer and other systems so long as
information with regard to the Operating Company is maintained separately
and in an identifiable manner. The Operating Company shall have the right
at all times during AICL's business hours, and at its own expense, to
inspect the Books and Records of AICL (or any entity employed by AICL for
any such purpose) relating to the services provided hereunder. The term
"Books and Records" shall mean all materials, books and records and data
in whatever form or medium (i) furnished by the Companies to AICL in
connection with the performance by
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AICL of its obligations under this Agreement; (ii) generated by AICL in
connection with the performance by AICL of its obligations under this
Agreement; or (iii) that in any way pertain to the performance of the
obligations of AICL under this Agreement, including books of account,
insurance and reinsurance policies and contracts entered into by any of
the Companies and all correspondence related thereto, underwriting files,
claim and reserving files, data on premium and claim payments and any and
all materials, books and records and data relating to Companies' business.
6. Ownership of Books and Records by the Companies
6.1 All Books and Records kept by AICL in connection with the Operating
Company's business managed by AICL shall be and remain the sole property
of the Companies and will remain the property of the Companies following
termination of this Agreement, including all databases maintained by AICL
relating to the Companies' accounting, insurance or other records and
whether or not such data is maintained on information systems owned by
AICL or the Companies or neither. All such Books and Records shall be
delivered to the Companies upon termination of this Agreement.
6.2 The Companies shall maintain such Books and Records for a period of ten
(10) years or for the period as may be required under their respective
records retention policies if longer or for such longer period of time as
may be required by law or any applicable court order and AICL shall have
reasonable access to and the right to inspect and copy at its own expense,
such Books and Records during such period for (i) AICL's preparation of
tax returns, including, but not limited to, any inquiries by any
governmental or regulatory authority in respect of the taxes of AICL, (ii)
AICL's response to any claims, lawsuits, legal proceedings or
investigations or (iii) any audit purposes.
6.3 Notwithstanding any other provision of this Section 6 or this Agreement
generally, AICL shall have the right to retain, at its own expense, a copy
of any Books and Records and any original computer back-up tapes which
contain information relating to both the business and operations of AICL
or its affiliates and the Companies; provided that AICL shall maintain
such Books and Records and tapes for a period of ten (10) years or for the
period as may be required under its records retention policy if longer or
for such longer period of time as may be required by law or any applicable
court order and further provided that the Companies, at their own expense,
shall have reasonable access to and the right to inspect and make a copy
of such copy of the Books and Records and original tapes to the extent
they relate to the business and operations of any of the Companies or to
respond to any tax matters, claims, lawsuits, legal proceedings,
investigations or audit matters.
7. Confidentiality
7.1 AICL hereby acknowledges that, as a result of its performance of services
for the Companies under this Agreement, it may acquire non-public
information with respect to the Companies and their respective affairs,
including: (a) information relating to the business, finances, methods of
operation, business plans, marketing strategies and other information
relating to the Companies and customers of the Companies; and (b) other
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trade secrets and proprietary information of the Companies (hereinafter
collectively referred to as "Confidential Information").
7.2 During the Term and at all times thereafter, AICL shall, and shall cause
each of its directors, officers, employees and agents (such persons,
collectively "Covered Persons") to, keep confidential (to the extent
required hereby) all Confidential Information that any of them may obtain
and to not use such Confidential Information for any purpose other than in
the course of the performance of this Agreement.
7.3 The foregoing restrictions shall not apply with respect to any
Confidential Information (i) previously known to AICL through a source not
bound by any obligation to keep the Confidential Information confidential,
(ii) lawfully obtained by AICL, other than in its capacity as the provider
of services to the Companies under this Agreement, from sources not bound
by any obligation to keep such Confidential Information confidential, or
(iii) the disclosure of which to any Covered Person is necessary to carry
out the purposes of this Agreement, provided, however, that such
disclosure referred to in this clause (iii) shall be limited to the extent
reasonably necessary to protect the rights of the Companies with respect
to its Confidential Information, and that as a condition to disclosing any
Confidential Information to any person who is not bound by a duty of
confidentiality to AICL and its clients, AICL shall require that such
person enter into a confidentiality agreement with the Companies on terms
satisfactory to the Companies. In addition, notwithstanding anything to
the contrary provided in this Agreement, the restrictions upon use and
disclosure of information under this Section 7 shall not apply to any
information developed by, and/or provided to the Companies or AICL by,
American International Group, Inc. (to the extent that American
International Group, Inc. is not subject to any confidentiality obligation
to the Companies with respect thereto) or any of its affiliates (to the
same extent) other than information generated by AICL in connection with
the performance by AICL of its obligations under this Agreement.
7.4 AICL may disclose any Confidential Information if and as required as a
result of any governmental investigation, court order, subpoena,
deposition, interrogatory, request for documents, civil investigative
demand, or similar legal duress, and to the extent reasonably necessary
for AICL or any of its affiliates to comply with applicable securities
laws and regulations and stock exchange requirements and the applicable
regulations of other regulatory agencies having jurisdiction over AICL or
any of its affiliates.
7.5 Notwithstanding anything provided in this Section 7, Confidential
Information may be disclosed with the prior written consent of the Board
of Directors of the Holding Company or the Operating Company, as the case
may be.
8. Indemnification
8.1 The Companies hereby, jointly and severally, indemnify and hold AICL and
each of its directors, officers, servants, agents and employees
(collectively, "AICL Indemnitees"), harmless from and agree to defend each
of them from and against all and any manner of liabilities, suits, claims,
damages and expenses ("Losses") arising out of or in connection with the
performance by AICL of its obligations hereunder (other than those Losses
that
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are the result of willful misconduct, bad faith or gross negligence on the
part of any of the AICL Indemnitees, with respect to which AICL shall
remain liable).
8.2 Indemnification Procedures
(a) In the case of any claim asserted by a third party against a party
entitled to indemnification under this Section 8 (the "Indemnified
Party"), notice shall be given by the Indemnified Party to the party
required to provide indemnification (the "Indemnifying Party") promptly
after such Indemnified Party has actual knowledge of any claim as to which
indemnity may be sought, and the Indemnified Party shall permit the
Indemnifying Party (at the expense of such Indemnifying Party) to assume
the defense of any claim or any Litigation resulting therefrom, provided
that: (i) counsel for the Indemnifying Party who shall conduct the defense
of such claim or litigation shall be satisfactory to the Indemnified
Party, and the Indemnified Party may participate in such defense at such
Indemnified Party's expense; and (ii) the failure of any Indemnified Party
to give notice as provided herein shall not relieve the Indemnifying Party
of its indemnification obligation under this Agreement except to the
extent that such failure results in a lack of actual notice to the
Indemnifying Party and such Indemnifying Party is materially prejudiced by
way of any forfeiture of rights or defenses or otherwise as a result of
such failure to give notice.
(b) Except with the prior written consent of the Indemnified Party, no
Indemnifying Party, in the defense of any such claim or litigation, shall
consent to entry of any judgment or enter into any settlement that
provides for injunctive or other non-monetary relief affecting the
Indemnified Party or that does not include as an unconditional term
thereof the giving by each claimant or plaintiff to such Indemnified Party
of a release from all liability with respect to such claim or litigation.
The parties shall cooperate in the defense of any claim or litigation
brought under this Section 8.2 and the records of each shall be available
to the other with respect to such defense.
8.3 The Companies shall maintain insurance coverage of the kinds and in the
amounts that is appropriate for their businesses. AICL shall be an
additional named insured on the Companies' comprehensive liability
insurance. The Companies shall deliver to AICL a certificate of insurance
with respect thereto. Said insurance shall provide that it cannot be
amended or canceled without the insurer first giving AICL not less than 60
days' prior written notice thereof.
8.4 AICL shall maintain insurance coverage of the kinds and in the amounts
that is appropriate for its business, including errors and omissions
liability insurance coverage.
9. Arbitration
Any controversy or claim arising out of or relating to this Agreement, or
the breach thereof, shall be submitted to a panel of three arbitrators.
Each party shall appoint an arbitrator and the two arbitrators so
appointed will appoint a third arbitrator who shall act as the umpire of
the panel. Each such arbitrator shall be a current or former senior
business or company manager but shall not be associated with any of the
parties to this
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Agreement. Any arbitration hereunder shall take place in Bermuda, and
shall be conducted in accordance with the Rules of The Bermuda
International Conciliation and Arbitration Xxx 0000, as it may be amended
or re-enacted from time to time. The decision of a majority of the
arbitrators shall be in writing, shall state the reasons for the award,
and shall be final and not subject to appeal, and judgment upon the award
or determination rendered by the arbitrators may be entered in any court
having jurisdiction thereof or having jurisdiction over the parties or
their assets.
10. Notices
All communications provided for hereunder shall be in writing, and if to
the Companies, mailed or delivered to each of the Companies at The Bermuda
Commercial Bank Building, 00 Xxxxxxxx Xxxxxx, Xxxxxxxx, XX 00, Xxxxxxx,
Xxxxxxxxx: President, or if to AICL, mailed or delivered to AICL at its
office at American Xxxxxxxxxxxxx Xxxxxxxx, 00 Xxxxxxxx Xxxx, Xxxxxxxx,
Xxxxxxx XX 00, Attention: President, or addressed to either party at any
address that such party may hereafter designate by written notice to the
other party.
11. Entire Agreement; Amendment
This Agreement constitutes the entire agreement between the parties with
respect to the provision of administrative services to the Companies by
AICL and supersedes and extinguishes any warranty, representation or
arrangement previously given or made with respect thereto, other than
those expressly set out herein. The express terms hereof supersede any
course of performance or usage of the trade. This Agreement may not be
amended except in writing signed by each of the parties hereto.
12. No Waiver
Neither the failure nor delay on the part of any party in exercising any
right, remedy, power or privilege under this Agreement shall operate as a
waiver thereof, nor shall any single or partial exercise of any right,
remedy, power or privilege preclude any other or further exercise of the
same or of any other right, remedy, power or privilege, nor shall any
waiver of any right or remedy, power or privilege with respect to any
occurrence be construed as a waiver of such right, remedy, power or
privilege with respect to any other occurrence. No waiver hereunder shall
be effective unless it is in writing and is signed by the party asserted
to have granted such waiver.
13. Successors and Assigns
13.1 The provisions of this Agreement shall be binding upon and shall inure to
the benefit of and be enforceable by each of the parties hereto and their
respective successors and assigns. Except to the extent expressly provided
for in this Agreement, AICL shall not have the right to assign any of its
right, powers and obligations under this Agreement without the prior
written consent of the Companies.
13.2 AICL shall not delegate or subcontract any of its obligations to be
performed hereunder other than those obligations the delegation or
subcontracting of which is expressly
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contemplated by this Agreement, without the prior consent of the Operating
Company, provided that the Companies at all times shall have the right (to
be exercised in a reasonable manner) to disapprove any delegate or
subcontractor (including delegations or subcontracting expressly
contemplated hereby) to which AICL has delegated or sub-contracted, or to
which AICL proposes to delegate or subcontract, such obligations, and
provided, further, that AICL shall remain responsible for the prudent
selection of delegates or sub-contractors to which its obligations are
delegated pursuant to this Agreement.
14. Governing Law; Submission to Jurisdiction
This Agreement shall be governed by and construed in accordance with the
laws of Bermuda, without reference to the principles of conflicts of law
thereof. If any suit is instituted by any of the parties to enforce any of
the terms or conditions of this Agreement, each of the parties hereby
submits to the exclusive jurisdiction of and venue in the courts of
Bermuda.
15. Relationship of the Parties
Each of the Companies and AICL are independent of one another. Nothing in
this Agreement shall be deemed to create: (i) a joint venture or
partnership between the parties; (ii) a relationship of employer and
employee; (iii) a relationship of principal and agent; or (iv) any
relationship other than independent parties contracting with each other
solely for the purpose of carrying out the provisions of this Agreement.
16. Counterparts
This Agreement may be executed in any number of counterparts, each of
which shall be an original with the same effect as if the signatures
thereto and hereto were upon the same instrument, and such counterparts
together shall constitute one and the same instrument.
17. Headings
The section headings contained herein are for convenience only and shall
not alter or limit or define the provisions hereof.
18. Severability
In the event that any word, sentence, paragraph, provision, section,
subsection or article of this Agreement is found to be void or voidable,
the remainder of this Agreement shall nevertheless be legal and binding
with the same force and effect as though the void or voidable parts were
deleted.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed in Pembroke, Bermuda on the date first written above.
ALLIED WORLD ASSURANCE HOLDINGS, LTD
By: /s/ Xxxxx Xxxxxxxxx
---------------------------------
Name: Xxxxx Xxxxxxxxx
Title: President and Chief Executive Officer
ALLIED WORLD ASSURANCE COMPANY, LTD
By: /s/ Xxxxx Xxxxxxxxx
---------------------------------
Name: Xxxxx Xxxxxxxxx
Title: President and Chief Executive Officer
ALLIED WORLD ASSURANCE HOLDINGS (IRELAND) LTD
By: /s/ Xxxxx Xxxxxxxxx
---------------------------------
Name: Xxxxx Xxxxxxxxx
Title: Director
AMERICAN INTERNATIONAL COMPANY LIMITED
By: /s/ S. Xxxxxx Xxxxxx
---------------------------------
Name: S. Xxxxxx Xxxxxx
Title: President
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