UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

(Mark One)

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE

 ACT OF 1934

 

For the quarterly period ended September 30, 2010

 

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE

 ACT OF 1934

 

For the transition period from __________ to __________

 

Commission File No. 001-34042

 

MAIDEN HOLDINGS, LTD.

(Exact name of registrant as specified in its charter)

Bermuda		98-0570192
(State or other jurisdiction of incorporation or organization)		(IRS Employer Identification No.)
131 Front Street, Hamilton, Bermuda		HM12
(Address of principal executive offices)		(Zip Code)
(441) 298-4900
(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes  o No  o

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer  o		Accelerated filer  x
Non-accelerated filer  o  (Do not check if a smaller reporting company)		Smaller reporting company  o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Securities Exchange Act).

 Yes o No x

 

As of November 8, 2010, the Registrant had one class of Common Shares ($.01 par value),

of which 72,105,885 shares were issued and outstanding.

 

 

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INDEX

 

				Page
PART I - Financial Information
Item 1.		Financial Statements
		Condensed Consolidated Balance Sheets as of September 30, 2010 (unaudited) and December 31, 2009		3
		Condensed Consolidated Statement of Income and Comprehensive Income for the three and nine months ended September 30, 2010 and 2009 (unaudited)		4
		Condensed Consolidated Statement of Changes in Shareholders’ Equity for the nine months ended September 30, 2010 and 2009 (unaudited)		5
		Condensed Consolidated Statement of Cash Flows for the nine months ended September 30, 2010 and 2009 (unaudited)		6
		Notes to Unaudited Condensed Consolidated Financial Statements		7
Item 2.		Management’s Discussion and Analysis of Financial Condition and Results of Operations		31
Item 3.		Quantitative and Qualitative Disclosures About Market Risk		53
Item 4.		Controls and Procedures		54
PART II - Other Information
Item 6.		Exhibits		55
		Signatures		56

 

 

2

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PART I - FINANCIAL INFORMATION

 

Item 1.  Financial Statements

 

 

MAIDEN HOLDINGS, LTD.

Notes to Unaudited Condensed Consolidated Financial Statements

(In Thousands of United States Dollars, Except Par Value and Per Share Data)

(Unaudited)

 

9. Share Based Compensation (continued)

 

The following tables show all options granted, exercised, expired and exchanged under the Plan for the three and nine months ended September 30, 2009:

Three Months Ended   September 30, 2009		Number of Share Options				Weighted Average Exercise Price				Weighted Average Remaining Contractual Term
Outstanding, June 30, 2009			1,503,834			$	5.54			9.08 years
Granted			200,000				4.54			9.40 years
Exercised			–				–				–
Cancelled			(10,500	)			3.28				–
Outstanding, September 30, 2009			1,693,334			$	5.47			8.90 years

Nine Months Ended September 30, 2009		Number of Share Options				Weighted Average Exercise Price				Weighted Average Remaining Contractual Term
Outstanding, December 31, 2008			1,519,834			$	10.00			9.44 years
Granted			384,000				4.51			9.40 years
Exercised			`				–				–
Cancelled			(210,500	)			8.07				–
Outstanding, September 30, 2009			1,693,334			$	5.47			8.90 years

 

The weighted average grant date fair value was $1.79 and $1.50 for all options outstanding at September 30, 2010 and 2009, respectively. There was approximately $2,324 and $1,466 of total unrecognized compensation cost related to non-vested share-based compensation arrangements as of September 30, 2010 and 2009, respectively.

 

10. Dividends Declared

 

On August 5, 2010, the Company’s Board of Directors approved a quarterly cash dividend of $0.065 per common share. This dividend was paid on October 15, 2010 to shareholders of record on October 1, 2010.

 

11. Related Party Transactions

 

The Founding Shareholders of Maiden, Michael Karfunkel, George Karfunkel and Barry Zyskind, are also the principal shareholders, and, respectively, the Chairman of the Board of Directors, a Director, and the President, Chief Executive Officer and Director of AmTrust Financial Services, Inc. (“AmTrust”).  In January 2009, Barry Karfunkel was hired as a managing director of capital investments of Maiden Re Insurance Services, LLC. Barry Karfunkel is the son of Michael Karfunkel and the brother-in-law of Barry D. Zyskind. Barry Karfunkel’s employment ended in March 2010. The following describes transactions between the Company and AmTrust.

 

AmTrust Quota Share Reinsurance Agreement

 

Effective July 1, 2007, the Company and AmTrust entered into a master agreement, as amended (the “Master Agreement”), by which they caused AmTrust’s Bermuda reinsurance subsidiary, AmTrust International Insurance, Ltd. (“AII”) and Maiden Insurance Company Ltd. (“Maiden Insurance” or “Maiden Bermuda”) to enter into the Reinsurance Agreement by which (a) AII retrocedes to Maiden Insurance an amount equal to 40% of the premium written by subsidiaries of AmTrust, net of the cost of unaffiliated inuring reinsurance (and in the case of AmTrust’s U.K. insurance subsidiary, IGI Insurance Company Limited (“IGI”), net of commissions) and 40% of losses and (b) AII transferred to Maiden Insurance 40% of the AmTrust subsidiaries’ unearned premium reserves, effective as of July 1, 2007, with respect to the current lines of business, excluding risks for which the AmTrust subsidiaries’ net retention exceeds $5,000 (“Covered Business”). AmTrust also has agreed to cause AII, subject to regulatory requirements, to reinsure any insurance company which writes Covered Business in which AmTrust acquires a majority interest to the extent required to enable AII to cede to Maiden Insurance 40% of the premiums and losses related to such Covered Business. The Agreement further provides that AII receives a ceding commission of 31% of ceded written premiums. The Reinsurance Agreement had an initial term of three years, which has been extended for three years through June 30, 2013, and will automatically renew for successive three year terms thereafter, unless either AII or Maiden Insurance notifies the other of its election not to renew not less than nine months prior to the end of any such three year term. In addition, either party is entitled to terminate on thirty days notice or less upon the occurrence of certain early termination events, which include a default in payment, insolvency, change in control of AII or Maiden Insurance, run-off, or a reduction of 50% or more of the shareholders’ equity of Maiden Insurance or the combined shareholders’ equity of AII and the AmTrust subsidiaries.

 

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MAIDEN HOLDINGS, LTD.

Notes to Unaudited Condensed Consolidated Financial Statements

(In Thousands of United States Dollars, Except Par Value and Per Share Data)

(Unaudited)

11. Related Party Transactions (continued)

 

 On June 11, 2008, the Company and AmTrust amended the Reinsurance Agreement to add Retail Commercial Package Business to the Covered Business as a consequence of AmTrust’s acquisition of Unitrin Business Insurance (“UBI”). Under the amendment, AmTrust’s subsidiaries cede, upon collection, to Maiden 100% of $82.2 million of unearned premium (net of inuring reinsurance) from the acquisition of UBI’s in-force book of business. Additionally, AmTrust cedes to Maiden 40% of net premium written, effective as of June 1, 2008. Maiden will pay to AmTrust a ceding commission of 34.375% on the unearned premium cession and the Retail Commercial Package Business. The $2,000 maximum liability for a single loss provided in the Quota Share Reinsurance Agreement shall not be applicable to Retail Commercial Package Business.

 

On February 9, 2009, AII and Maiden Insurance amended the Reinsurance Agreement to clarify that (i) AII would offer Maiden Insurance the opportunity to reinsure Excess Retention Business, which is defined as a policy issued by an AmTrust insurance subsidiary with respect to which the insurance subsidiary’s retention is greater than $5 million and (ii) the deduction for the cost of inuring reinsurance from Affiliate Subject Premium (as defined in the Reinsurance Agreement) retroceded to Maiden Insurance is net of ceding commission.

 

The Company recorded approximately $37,501 and $104,085 of ceding commission expense for the three and nine months ended September 30, 2010, respectively (2009 – $28,132 and $85,005, respectively) as a result of this transaction.

 

Other Reinsurance Agreements

 

Effective January 1, 2008 the Company and AmTrust entered into an agreement to reinsure a 45% participation in the $9 million in excess of $1 million layer of AmTrust’s workers’ compensation excess of loss program. This layer provides reinsurance to AmTrust for losses per occurrence in excess of $1 million up to $10 million, subject to an annual aggregate deductible of $1.25 million. This participation was sourced through a reinsurance intermediary via open market placement in which competitive bids were solicited by an independent broker. The remaining 55% participation was placed with a single carrier.

 

 This coverage expired on January 1, 2010; as a result, under the Master Agreement the Company therefore now reinsures 40% of the subject workers’ compensation business up to $10 million, subject to certain additional inuring reinsurance protection AmTrust has purchased.

 

As of January 1, 2008, the Company had a 50% participation in a $4 million in excess of $1 million specialty transportation program written by AmTrust. Starting January 1, 2009, we had a 30% participation in a $4 million in excess of $1 million specialty transportation program written by AmTrust. This program provides primarily commercial auto coverage and, to a lesser extent, general liability coverage to private non-emergency para-transit and school bus service operators. This participation was sourced through a reinsurance intermediary via open market placement in which competitive bids were solicited by an independent broker. Several other broker market reinsurers hold the other 50% and 70% participation for 2008 and 2009 policies, respectively. The agreement was not renewed as of January 1, 2010.

Effective September 1, 2010, the Company through its wholly-owned subsidiary, Maiden Specialty Insurance Company (“Maiden Specialty”), entered into a quota share reinsurance agreement with Technology Insurance Company, Inc., a subsidiary of AmTrust (“Technology”).  Under the agreement, Maiden Specialty will cede 90% of its gross liability under all policies, certificates, contracts, binders and contracts of insurance, issued or renewed during the term of the agreement by or on behalf of Maiden Specialty under this program which is part of a larger program underwritten by Technology.  Maiden Specialty’s involvement is limited to certain states where Technology is not fully licensed.  The agreement also provides that Maiden Specialty receives a ceding commission of 5% of ceded written premiums.  The reinsurance agreement has a term of three years and will remain continuously in force until terminated in accordance to the provisions set forth in the contract.  To date, no business has been ceded under this quota share reinsurance agreement.

 

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MAIDEN HOLDINGS, LTD.

Notes to Unaudited Condensed Consolidated Financial Statements

(In Thousands of United States Dollars, Except Par Value and Per Share Data)

(Unaudited)

11. Related Party Transactions (continued)

Collateral provided to AmTrust

 

In order to provide AmTrust’s U.S. insurance subsidiaries with credit for reinsurance on their statutory financial statements, AII, as the direct reinsurer of the AmTrust’s insurance subsidiaries, has established trust accounts (“Trust Accounts”) for their benefit. Maiden Insurance has agreed to provide appropriate collateral to secure its proportional share under the Quota Share Agreement of AII’s obligations to the AmTrust subsidiaries to whom AII is required to provide collateral. This collateral may be in the form of (a) assets loaned by Maiden Insurance to AII, for deposit into the Trust Accounts, pursuant to a loan agreement between those parties, (b) assets transferred by Maiden Insurance, for deposit into the Trust Accounts, (c) a letter of credit obtained by Maiden Insurance and delivered to an AmTrust subsidiary on AII’s behalf (a “Letter of Credit”), or (d) premiums withheld by an AmTrust subsidiary at Maiden Insurance’s request in lieu of remitting such premiums to AII (“Withheld Funds”). Maiden Insurance may provide any or a combination of these forms of collateral, provided that the aggregate value thereof equals Maiden Insurance’s proportionate share of its obligations under the Quota Share Agreement with AII. If collateral is required to be provided to any AmTrust subsidiary under applicable law or regulatory requirements, Maiden Insurance will provide collateral to the extent required, although Maiden Insurance does not expect that such collateral will be required unless an AmTrust subsidiary is domiciled in the United States.

 

Maiden Insurance satisfied its collateral requirements under the Quota Share Agreement with AII as follows:

 

·

by lending funds in the amount of $167,975 as at September 30, 2010 and December 31, 2009 to AII pursuant to a loan agreement entered into between those parties. This loan is carried at cost. The amount of collateral Maiden Insurance is required to maintain, which is determined quarterly, equals its proportionate share of (a) the amount of ceded paid losses for which AII is responsible to such AmTrust subsidiaries but has not yet paid, (b) the amount of ceded loss reserves (including ceded reserves for claims reported but not resolved and losses incurred but not reported) for which AII is responsible to AmTrust subsidiaries, and (c) the amount of ceded reserves for unearned premiums ceded by AmTrust subsidiaries to AII. Pursuant to the Master Agreement, AmTrust has agreed to cause AII not to commingle Maiden Insurance’s assets with AII’s other assets and to cause the AmTrust subsidiaries not to commingle Maiden Insurance’s assets with the AmTrust subsidiaries’ other assets if an AmTrust subsidiary withdraws those assets. AII has agreed that, if an AmTrust subsidiary returns to AII excess assets withdrawn from a Trust Account, drawn on a Letter of Credit or maintained by such AmTrust subsidiary as Withheld Funds, AII will immediately return to Maiden Insurance its proportionate share of such excess assets. AII has further agreed that if the aggregate fair market value of the amount of Maiden Insurance’s assets held in the Trust Account exceeds Maiden Insurance’s proportionate share of AII’s obligations, or if an AmTrust subsidiary misapplies any such collateral, AII will immediately return to Maiden Insurance an amount equal to such excess or misapplied collateral, less any amounts AII has paid to Maiden Insurance. In addition, if an AmTrust subsidiary withdraws Maiden Insurance’s assets from a Trust Account and maintains those assets on its books as withheld funds, AII has agreed to pay to Maiden Insurance interest at the rate equivalent to the one-month London Interbank Offered Rate (“LIBOR”) plus 90 basis points per annum computed on the basis of a 360-day year on the loan (except to the extent Maiden Insurance’s proportionate share of AII’s obligations to that AmTrust subsidiary exceeds the value of the collateral Maiden Insurance has provided), and net of unpaid fees Maiden Insurance owes to AIIM and its share of fees owed to the trustee of the Trust Accounts.

 

·

effective December 1, 2008, the Company entered into a Reinsurer Trust Assets Collateral agreement to provide to AII sufficient collateral to secure its proportional share of AII’s obligations to the U.S. AmTrust subsidiaries. The amount of the collateral, as at September 30, 2010 was approximately $333,761 (December 31, 2009 – $206,960) and the accrued interest was $3,393 (December 31, 2009 – $1,956).

 

Reinsurance Brokerage Agreements

 

Effective July 1, 2007, the Company entered into a reinsurance brokerage agreement with AII Reinsurance Broker Ltd., a subsidiary of AmTrust. Pursuant to the brokerage agreement, AII Reinsurance Broker Ltd. provides brokerage services relating to the Quota Share Reinsurance Agreement for a fee equal to 1.25% of the premium reinsured from AII. The brokerage fee is payable in consideration of AII Reinsurance Broker Ltd’s brokerage services. AII Reinsurance Broker Ltd. is not the Company’s exclusive broker.  AII Reinsurance Broker Ltd. may, if mutually agreed, also produce reinsurance for the Company from other ceding companies, and in such cases the Company will negotiate a mutually acceptable commission rate. The Company recorded approximately $1,509 and $4,163 of reinsurance brokerage expense for the three and nine months ended September 30, 2010, respectively (2009 – $1,118 and $3,369, respectively) and deferred reinsurance brokerage of $3,364 and $3,265 as at September 30, 2010 and December 31, 2009, respectively, as a result of this agreement.

 

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MAIDEN HOLDINGS, LTD.

Notes to Unaudited Condensed Consolidated Financial Statements

(In Thousands of United States Dollars, Except Par Value and Per Share Data)

(Unaudited)

11. Related Party Transactions (continued)

 

Effective April 1, 2008, the Company entered into brokerage services agreements with IGI Intermediaries Limited and IGI Inc. (“IGI”), both subsidiaries of AmTrust. Pursuant to the brokerage services agreements, IGI provides marketing services to us which includes providing marketing material to potential policyholders, providing us with market information on new trends and business opportunities and referring new brokers and potential policyholders to us. A fee equal to IGI’s costs in providing such services plus 8% is payable in consideration of IGI’s marketing services. The Company recorded approximately $31 and $86 of IGI fees, which is included in commission and other acquisition expenses, for the three and nine months ended September 30, 2010, respectively (2009 – $55 and $325, respectively).

 

Asset Management Agreement

 

Effective July 1, 2007 and as amended, the Company entered into an asset management agreement with AII Insurance Management Limited (“AIIM”), an AmTrust subsidiary, pursuant to which AIIM has agreed to provide investment management services to the Company.  Pursuant to the asset management agreement, AIIM provides investment management services for an annual fee equal to 0.35% of average invested assets plus all costs incurred.  Effective April 1, 2008, the investment management services annual fee has been reduced to 0.20% if the average value of the account is less than $1 billion and 0.15% if the average value of the account is greater than $1 billion.  The Company recorded approximately $650 and $1,968 of investment management fees for the three and nine months ended September 30, 2010, respectively (2009 – $721 and $1,937, respectively), as a result of this agreement.

 

ACAC Quota Share Reinsurance Agreement

 

On March 1, 2010, the Company entered into a three year 25% quota share reinsurance agreement with American Capital Acquisition Corporation (“ACAC”).

 

ACAC is an insurance holding company owned by the 2005 Michael Karfunkel Grantor Retained Annuity Trust (the “Trust”), which in turn is controlled by Michael Karfunkel (“Karfunkel”), Karfunkel individually, and AmTrust.  ACAC, on March 1, 2010, acquired from GMAC Insurance Holdings, Inc. and Motors Insurance Corporation (collectively, “GMAC”), GMAC’s personal lines automobile business. Karfunkel is a Founding Shareholder of the Company. In addition, Karfunkel is the chairman of the board of directors of ACAC.

 

The Company, effective March 1, 2010, reinsures 25% of the net premiums of the GMAC personal lines business, pursuant to a 50% quota share reinsurance agreement (“ACAC Quota Share”) with the GMAC personal lines insurance companies, as cedents, and the Company, MK Re, Ltd., a Bermuda reinsurer which is a wholly-owned indirect subsidiary of the Trust, and AmTrust, as reinsurers. The Company has a 50% participation in the ACAC Quota Share, by which it receives 25% of net premiums of the personal lines business. The ACAC Quota Share provides that the reinsurers, severally, in accordance with their participation percentages, shall receive 50% of the net premium of the GMAC personal lines insurance companies and assume 50% of the related net losses. The ACAC Quota Share has an initial term of three years and shall renew automatically for successive three year terms unless terminated by written notice not less than nine months prior to the expiration of the current term. Notwithstanding the foregoing, the Company’s participation in the Personal Lines Quota Share may be terminated by ACAC on 60 days written notice in the event the Company becomes insolvent, is placed into receivership, its financial condition is impaired by 50% of the amount of its surplus at the inception of the ACAC Quota Share or latest anniversary, whichever is greater, is subject to a change of control, or ceases writing new and renewal business. ACAC also may terminate the agreement on nine months written notice following the effective date of initial public offering or private placement of stock by ACAC or a subsidiary. The Company may terminate its participation in the ACAC Quota Share on 60 days written notice in the event ACAC is subject to a change of control, cease writing new and renewal business, effects a reduction in their net retention without the Company’s consent or fails to remit premium as required by the terms of the ACAC Quota Share. The ACAC Quota Share provides that the reinsurers pay a provisional ceding commission equal to 32.5% of ceded earned premium, net of premiums ceded by the personal lines companies for inuring reinsurance, subject to adjustment. The ceding commission is subject to adjustment to a maximum of 34.5% if the loss ratio for the reinsured business is 60.5% or less and a minimum of 30.5% if the loss ratio is 64.5% or higher. We believe that the terms, conditions and pricing of the ACAC Quota Share have been determined by arm’s length negotiations and reflect current market terms and conditions.

 

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MAIDEN HOLDINGS, LTD.

Notes to Unaudited Condensed Consolidated Financial Statements

(In Thousands of United States Dollars, Except Par Value and Per Share Data)

(Unaudited)

 

11. Related Party Transactions (continued)

 

The Company recorded approximately $15,089 and $22,379 of ceding commission expense for the three and nine months ended September 30, 2010 as a result of this transaction.

Warrant Exchange

Please see Note 7 to the consolidated financial statements.

 

 12. Segments

 

The Company currently operates three business segments, Diversified Reinsurance, AmTrust Quota Share and ACAC Quota Share. The Company evaluates segment performance based on segment profit separately from the results of our investment portfolio. Other operating expenses allocated to the segments are called General and Administrative expenses which are allocated on an actual basis except salaries and benefits where management’s judgment is applied; the Company does not allocate general corporate expenses to the segments. In determining total assets by segment the Company identifies those assets that are attributable to a particular segment such as reinsurance receivable, deferred commissions and acquisition cost, loans, goodwill and intangibles, and restricted cash and investments. All remaining assets are allocated to Corporate.

 

The following tables summarize the underwriting results of our operating segments:

 

For the Three Months Ended September 30, 2010		Diversified Reinsurance				AmTrust Quota Share				ACAC Quota Share				Total
Net premiums written		$	104,452			$	110,313			$	58,670			$	273,435
Net premiums earned			142,419				120,747				46,427				309,593
Net losses and loss expenses			(95,409	)			(76,199	)			(29,017	)			(200,625	)
Commissions and other acquisition costs			(34,228	)			(39,011	)			(15,717	)			(88,956	)
General and administrative expenses			(6,745	)			(220	)			(124	)			(7,089	)
Underwriting income		$	6,037			$	5,317			$	1,569			$	12,923
Reconciliation to net income
Net investment income and realized and unrealized investment gains (losses)															19,127
Amortization of intangible assets															(1,452	)
Foreign exchange gains															1,187
Subordinated debt interest expense															(9,117	)
Other operating expenses															(3,751	)
Income tax expense															(391	)
Net Income														$	18,526
Net loss and loss expense ratio*			67.0	%			63.1	%			62.5	%			64.8	%
Acquisition cost ratio**			24.0	%			32.3	%			33.9	%			28.7	%
General and administrative expense ratio***			4.8	%			0.2	%			0.2	%			3.5	%
Combined ratio****			95.8	%			95.6	%			96.6	%			97.0	%

 

 

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MAIDEN HOLDINGS, LTD.

Notes to Unaudited Condensed Consolidated Financial Statements

(In Thousands of United States Dollars, Except Par Value and Per Share Data)

(Unaudited)

 

12. Segments (continued)

 

For the Nine Months Ended September 30, 2010		Diversified Reinsurance				AmTrust  Quota Share				ACAC Quota Share				Total
Net premiums written		$	409,075			$	340,992			$	147,709			$	897,776
Net premiums earned			455,378				333,070				68,858				857,306
Net losses and loss expenses			(294,044	)			(209,184	)			(43,036	)			(546,264	)
Commissions and other acquisition costs			(123,128	)			(108,249	)			(23,422	)			(254,799	)
General and administrative expenses			(18,343	)			(1,292	)			(124	)			(19,759	)
Underwriting income		$	19,863			$	14,345			$	2,276			$	36,484
Reconciliation to net income
Net investment income and realized and unrealized investment gains (losses)															56,430
Amortization of intangible assets															(4,356	)
Foreign exchange losses															(380	)
Subordinated debt interest expense															(27,348	)
Other operating expenses															(9,117	)
Income tax expense															(981	)
Net Income														$	50,732
Net loss and loss expense ratio*			64.6	%			62.8	%			62.5	%			63.7	%
Acquisition cost ratio**			27.0	%			32.5	%			34.0	%			29.7	%
General and administrative expense ratio***			4.0	%			0.4	%			0.2	%			3.4	%
Combined ratio****			95.6	%			95.7	%			96.7	%			96.8	%

 

For the Three Months Ended September 30, 2009		Diversified Reinsurance				AmTrust Quota Share				ACAC Quota Share				Total
Net premiums written		$	129,232			$	92,168			$	–			$	221,400
Net premiums earned			147,876				89,474				–				237,350
Net losses and loss expenses			(110,420	)			(54,703	)			–				(165,123	)
Commissions and other acquisition costs			(26,062	)			(29,251	)			–				(55,313	)
General and administrative expenses			(3,785	)			(812	)			–				(4,597	)
Underwriting income		$	7,609			$	4,708			$	–			$	12,317
Reconciliation to net income
Net investment income and realized investment gains (losses)															16,712
Amortization of intangible assets															(1,676	)
Foreign exchange and other gains															210
Subordinated debt interest expense															(9,114	)
Other operating expenses															(3,462	)
Net Income														$	14,987
Net loss and loss expense ratio*			74.7	%			61.1	%			–	%			69.6	%
Acquisition cost ratio**			17.6	%			32.7	%			–	%			23.3	%
General and administrative expense ratio***			2.6	%			0.9	%			–	%			3.4	%
Combined ratio****			94.9	%			94.7	%			–	%			96.3	%

 

 

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MAIDEN HOLDINGS, LTD.

Notes to Unaudited Condensed Consolidated Financial Statements

(In Thousands of United States Dollars, Except Par Value and Per Share Data)

(Unaudited)

 

12. Segments (continued)

 

For the Nine Months Ended September 30, 2009		Diversified Reinsurance				AmTrust Quota Share				ACAC Quota Share				Total
Net premiums written		$	528,963			$	267,341			$	–			$	796,304
Net premiums earned			401,761				269,522				–				671,283
Net losses and loss expenses			(294,005	)			(168,463	)			–				(462,468	)
Commissions and other acquisition costs			(71,234	)			(88,374	)			–				(159,608	)
General and administrative expenses			(13,599	)			(1,873	)			–				(15,472	)
Underwriting income		$	22,923			$	10,812			$	–			$	33,735
Reconciliation to net income
Net investment income and realized investment gains (losses)															45,688
Amortization of intangible assets															(4,915	)
Foreign exchange and other gains															2,401
Subordinated debt interest expense															(25,316	)
Other operating expenses															(7,254	)
Net Income														$	44,339
Net loss and loss expense ratio*			73.2	%			62.5	%			–	%			68.9	%
Acquisition cost ratio**			17.7	%			32.8	%			–	%			23.8	%
General and administrative expense ratio***			3.4	%			0.7	%			–	%			3.4	%
Combined ratio****			94.3	%			96.0	%			–	%			96.1	%

 

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*	Calculated by dividing net losses and loss expenses by net earned premium.

**	Calculated by dividing commission and other acquisition expenses by net earned premium

***	Calculated by dividing general and administrative expenses by net earned premium.

****	Calculated by adding together net loss and loss expense ratio, acquisition cost ratio and general and administrative expense ratio.

 

		Diversified Reinsurance				AmTrust Quota Share				ACAC Quota Share				Total
As at September 30, 2010
Reinsurance balances receivable, net		$	146,270			$	31,642			$	66,441			$	244,353
Prepaid reinsurance			31,575				–				–				31,575
Reinsurance recoverable on unpaid losses			6,000				–				–				6,000
Deferred commission and other acquisition costs			73,091				87,329				26,821				187,241
Loan to related party			–				167,975				–				167,975
Goodwill			52,617				–				–				52,617
Intangible assets, net			46,928				–				–				46,928
Restricted investments and cash			1,126,223				331,957				10,289				1,468,469
Corporate and other assets			3,933				–				–				634,412
Total Assets		$	1,486,637			$	618,903			$	103,551			$	2,839,570

 

 

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MAIDEN HOLDINGS, LTD.

Notes to Unaudited Condensed Consolidated Financial Statements

(In Thousands of United States Dollars, Except Par Value and Per Share Data)

(Unaudited)

 

12. Segments (continued)

		Diversified Reinsurance				AmTrust Quota Share				ACAC Quota Share				Total
As at December 31, 2009
Reinsurance balances receivable, net		$	171,482			$	39,856			$	–			$	211,338
Prepaid reinsurance			28,752				–				–				28,752
Reinsurance recoverable on unpaid losses			11,984				–				–				11,984
Deferred commission and other acquisition costs			88,224				84,759				–				172,983
Loan to related party			–				167,975				–				167,975
Goodwill			52,617				–				–				52,617
Intangible assets, net			51,284				–				–				51,284
Restricted investments and cash			1,168,663				206,959				–				1,375,622
Corporate and other assets			2,502				–				–				567,182
Total Assets		$	1,575,508			$	499,549			$	–			$	2,639,737

 

The following tables set forth financial information relating to gross and net premiums written and earned by major line of business for the three and nine months ended September 30, 2010 and 2009:

 

		For the Three Months Ended September 30,  2010								For the Three Months Ended September 30,  2009
		Total				% of Total				Total				% of Total
Net premiums written
Diversified Reinsurance
Property		$	37,471				13.7	%		$	28,691				13.0	%
Casualty			54,178				19.8	%			76,377				34.5	%
Accident and Health			12,803				4.7	%			24,164				10.9	%
Total Diversified Reinsurance			104,452				38.2	%			129,232				58.4	%
AmTrust Quota Share
Small Commercial Business			43,664				16.0	%			34,077				15.4	%
Specialty Program Business			20,996				7.7	%			13,052				5.9	%
Specialty Risk and Extended Warranty			45,653				16.7	%			45,039				20.3	%
Total AmTrust Quota Share			110,313				40.4	%			92,168				41.6	%
ACAC Quota Share
Automobile liability			33,565				12.2	%			–				–	%
Automobile physical damage			25,105				9.2	%			–				–	%
Total ACAC Quota share			58,670				21.4	%			–				–	%
		$	273,435				100.0	%		$	221,400				100.0	%

 

 

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MAIDEN HOLDINGS, LTD.

Notes to Unaudited Condensed Consolidated Financial Statements

(In Thousands of United States Dollars, Except Par Value and Per Share Data)

(Unaudited)

 

12. Segments (continued)

		For the Nine Months Ended September 30,  2010								For the Nine Months Ended September 30,  2009
		Total				% of Total				Total				% of Total
Net premiums written
Diversified Reinsurance
Property		$	131,800				14.7	%		$	105,650				13.3	%
Casualty			238,194				26.5	%			331,685				41.6	%
Accident and Health			39,081				4.4	%			91,628				11.5	%
Total Diversified Reinsurance			409,075				45.6	%			528,963				66.4	%
AmTrust Quota Share
Small Commercial Business			147,494				16.4	%			132,985				16.7	%
Specialty Program Business			51,897				5.8	%			35,044				4.4	%
Specialty Risk and Extended Warranty			141,601				15.8	%			99,312				12.5	%
Total AmTrust Quota Share			340,992				38.0	%			267,341				33.6	%
ACAC Quota Share
Automobile liability			84,524				9.4	%			–				–	%
Automobile physical damage			63,185				7.0	%			–				–	%
Total ACAC Quota Share			147,709				16.4	%			–				–	%
		$	897,776				100.0	%		$	796,304				100.0	%

 

		For the Three Months Ended September 30,  2010								For the Three Months Ended September 30,  2009
		Total				% of Total				Total				% of Total
Net premiums earned
Diversified Reinsurance
Property		$	42,800				13.8	%		$	33,948				14.3	%
Casualty			86,028				27.8	%			87,043				36.7	%
Accident and Health			13,591				4.4	%			26,885				11.3	%
Total Diversified Reinsurance			142,419				46.0	%			147,876				62.3	%
AmTrust Quota Share
Small Commercial Business			46,744				15.1	%			50,896				21.4	%
Specialty Program Business			21,494				6.9	%			11,426				4.9	%
Specialty Risk and Extended Warranty			52,509				17.0	%			27,152				11.4	%
Total AmTrust Quota Share			120,747				39.0	%			89,474				37.7	%
ACAC Quota Share
Automobile liability			26,001				8.4	%			–				–	%
Automobile physical damage			20,426				6.6	%			–				–	%
Total ACAC Quota Share			46,427				15.0	%			–				–	%
		$	309,593				100.0	%		$	237,350				100.0	%

 

 

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MAIDEN HOLDINGS, LTD.

Notes to Unaudited Condensed Consolidated Financial Statements

(In Thousands of United States Dollars, Except Par Value and Per Share Data)

(Unaudited)

 

12. Segments (continued)

		For the Nine Months Ended September 30,  2010								For the Nine Months Ended September 30,  2009
		Total				% of Total				Total				% of Total
Net premiums earned
Diversified Reinsurance
Property		$	132,138				15.4	%		$	99,525				14.8	%
Casualty			270,103				31.5	%			224,737				33.5	%
Accident and Health			53,137				6.2	%			77,499				11.5	%
Total Diversified Reinsurance			455,378				53.1	%			401,761				59.8	%
AmTrust Quota Share
Small Commercial Business			154,884				18.1	%			157,645				23.5	%
Specialty Program Business			52,948				6.2	%			37,844				5.7	%
Specialty Risk and Extended Warranty			125,238				14.6	%			74,033				11.0	%
Total AmTrust Quota Share			333,070				38.9	%			269,522				40.2	%
ACAC Quota Share
Automobile liability			38,595				4.5	%			–				–	%
Automobile physical damage			30,263				3.5	%			–				–	%
Total ACAC Quota Share			68,858				8.0	%			–				–	%
		$	857,306				100.0	%		$	671,283				100.0	%

 

13. Subsequent Events

 

Dividends

 

On November 4, 2010, the Company declared a quarterly dividend of $0.07 per common share, payable on January 18, 2011 to shareholders of record on January 3, 2011.

 

 

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Item 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our condensed consolidated financial statements and related notes included elsewhere in this Form 10-Q. References in this Form 10-Q to the terms “we,” “us,” “our,” “the Company” or other similar terms mean the consolidated operations of Maiden Holdings, Ltd. and its subsidiaries, unless the context requires otherwise. References in this Form 10-Q to the term “Holdings” means Maiden Holdings, Ltd. only.

 

Note on Forward-Looking Statements

 

This Quarterly Report on Form 10-Q and other publicly available documents may include, and our officers and representatives may from time to time make, projections concerning financial information and statements concerning future economic performance and events, plans and objectives relating to management, operations, products and services, and assumptions underlying these projections and statements. These projections and statements are forward-looking statements within the meaning of The Private Securities Litigation Reform Act of 1995 and are not historical facts but instead represent only our belief regarding future events, many of which, by their nature, are inherently uncertain and outside our control. These projections and statements may address, among other things, our strategy for growth, product development, financial results and reserves. Actual results and financial condition may differ, possibly materially, from these projections and statements and therefore you should not place undue reliance on them. Factors that could cause our actual results to differ, possibly materially, from those in the specific projections and statements are discussed throughout this Management’s Discussion and Analysis of Financial Condition and Results of Operations and in “Risk Factors” in Item 1A of Part I of our Annual Report on Form 10-K filed with the U.S. Securities and Exchange Commission (“SEC”) on March 16, 2010.  Since the Company commenced operations in 2007, the Company has engaged in a number of significant transactions, including entering into the AmTrust Quota Share in 2007, the GMAC Acquisition in 2008, the TRUPS Offering in 2009 and the ACAC Transaction and pending GMAC International Insurance Services, Ltd. Reinsurance acquisition in 2010, each discussed below that significantly affect the comparability of results of operations from year to year.  The projections and statements in this Report speak only as of the date of this Report and those in other publicly available documents or made by our officers and representatives from time to time speak only as of their respective dates and we undertake no obligation to update or revise any forward-looking statement that may be made from time to time, whether as a result of new information, future developments or otherwise, except as required by law.

 

Overview

 

We are a Bermuda-based holding company formed in June 2007 primarily focused on serving the needs of regional and specialty insurers in the United States and Europe by providing innovative reinsurance solutions designed to support their capital needs. We specialize in reinsurance solutions that optimize financing by providing coverage within the more predictable and actuarially credible lower layers of coverage and/or reinsuring risks that are believed to be lower hazard, more predictable and generally not susceptible to catastrophe claims. Our tailored solutions include a variety of value added services focused on helping our clients grow and prosper.

 

We provide reinsurance through our wholly owned subsidiaries, Maiden Reinsurance Company ("Maiden US") and Maiden Bermuda and have operations in the United States and Bermuda. On a more limited basis, Maiden Specialty, a wholly owned subsidiary of Maiden US, provides primary insurance on a surplus lines basis focusing on non-catastrophe inland marine and property coverage. Maiden Bermuda does not underwrite any primary insurance business.

 

We historically have managed our business through two operating segments:  Diversified Reinsurance and the AmTrust Quota Share.  In the first quarter of 2010, we added a third segment, ACAC Quota Share, as a result of the ACAC Transaction discussed below.  As of September 30, 2010, we had approximately $758.4 million of total shareholders’ equity and $973.5 million in total capital, which includes shareholders’ equity and junior subordinated debt.

 

The market conditions in which we operate have historically been cyclical, experiencing cycles of price erosion followed by rate strengthening as a result of catastrophes or other significant losses that affect the overall capacity of the industry to provide coverage. During the period covered by this discussion, the reinsurance market has been characterized by significant competition in most lines of business.

WARRANT EXCHANGE AGREEMENT

This WARRANT EXCHANGE AGREEMENT, dated as of September 20, 2010 (this “Agreement”), is made by and between Maiden Holdings Ltd., a Bermuda company (the “Company”), and Michael Karfunkel (the “Warrant Holder”).  The Company and Warrant Holder are each referred to herein as a “Party” and collectively, as the “Parties.”

RECITALS

WHEREAS, the Warrant Holder holds that certain Warrant, issued by the Company on June 7, 2007, to purchase 1,350,000 of the Company’s common shares at $10.00 per share (the “Warrant”);

WHEREAS, the Company and the Warrant Holder wish to exchange the Warrant in consideration for the issuance of certain restricted stock;

WHEREAS, the Parties desire to enter into this Agreement to set forth certain matters relating to such exchange (the “Exchange”).

NOW, THEREFORE, in consideration of the mutual covenants and agreements herein contained, the parties hereto hereby agree as follows:

ARTICLE I

EXCHANGE

Section 1.1. Exchange of Warrant.  Upon and subject to the terms and conditions set forth herein, the Warrant Holder hereby surrenders to the Company for exchange, the Warrant, together with all appropriate endorsements and instruments of transfer, and, in exchange therefor, the Company shall issue to the Warrant Holder 600,000 of the Company’s Common Shares (the “Shares”), which Shares shall be subject to the provisions of that certain Lockup Agreement attached hereto as Exhibit A (the “Lockup Agreement”).

Section 1.2 Lockup Agreement.  The Company and the Warrant Holder are concurrently entering into the Lockup Agreement.

ARTICLE II

REPRESENTATIONS AND WARRANTIES OF THE COMPANY

Section 2.1. Representations and Warranties of the Company. The Company hereby represents and warrants to the Warrant Holder, as of the date hereof, as follows:

(a) Organization, Good Standing. The Company is a company duly organized, validly existing and in good standing under the laws of Bermuda.

(b) Power, Authorization, Enforcement. The Company has the requisite corporate power and authority to enter into and perform this Agreement and transactions contemplated herein, including the Exchange.  The execution and delivery of this Agreement by the Company has been duly and validly authorized by all necessary corporate action, and no further corporate consent or authorization is required for the Company to effect the transactions contemplated hereby.  This Agreement constitutes a valid and legally binding obligation of the Company, enforceable in accordance with its terms.

 

 

 

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(c) Issuance of Shares. The Shares have been duly authorized by all necessary corporate action and, when issued in accordance with the terms hereof upon surrender of the Warrant, the Shares shall be validly issued and outstanding, fully paid and non-assessable.

(d) No Conflicts. The execution, delivery and performance of this Agreement by the Company and the consummation by the Company of the transactions contemplated hereby does not and will not (i) violate any provision of the Company’s Articles of Incorporation or Bylaws, each as amended to date, (ii) conflict with, or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, any agreement, mortgage, deed of trust, indenture, note, bond, license, lease agreement, instrument or obligation to which the Company is a party or by which any of the Company’s properties or assets are bound, or (iii) result in a violation of any federal, state, local or foreign statute, rule, regulation, order, judgment or decree (including federal and state securities laws and regulations) applicable to the Company or by which any property or asset of the Company is bound or affected, except, in all cases, other than violations pursuant to clauses (i) or (iii) (with respect to federal and state securities laws) above, except, for such conflicts, defaults, terminations, amendments, acceleration, cancellations and violations as would not, individually or in the aggregate, have a material adverse effect on the Company.

Section 2.2. Representations and Warranties of the Warrant Holder. The Warrant Holder hereby represents and warrants to the Company, as of the date hereof, as follows:

(a) Power, Authorization, Enforcement. The Warrant Holder has full power and authority to enter into and perform this Agreement, the Lockup Agreement and transactions contemplated herein, including the Exchange.  This Agreement and the Lockup Agreement constitute valid and legally binding obligations of the Warrant Holder, enforceable in accordance with their terms.

(b) Title. The Warrant Holder has record and beneficial ownership of the Warrant and is transferring good and valid title to the Warrant to the Company, free and clear of any claim, interest, mortgage, pledge, lien or security interest.

(c) Investment.  The Warrant Holder (A) understands that the Shares have not been, and will not be, registered under the Securities Act or under any state securities laws, and are being offered and issued in reliance upon federal and state exemptions for transactions not involving any public offering, (B) is acquiring the Shares solely for his own account for investment purposes, and not with a view to the distribution thereof, (C) is a sophisticated investor with knowledge and experience in business and financial matters, (D) has received certain information concerning the Company and has had the opportunity to obtain additional information as desired in order to evaluate the merits and the risks inherent in holding the Shares, (E) is able to bear the economic risk and lack of liquidity inherent in holding the Shares, and (F) is an accredited investor, as defined in Regulation D under the Securities Act of 1933, as amended.

(d) No Tax Representations.  The warrant Holder understands the tax consequences of the transactions contemplated by this Agreement.  The Warrant Holder confirms that it is not relying on any statements or representations of the Company or any of its agents with respect to the tax effect of the transactions contemplated by this Agreement.  The Warrant Holder has had the opportunity to consult with the Warrant Holder’s own legal, accounting, tax, investment and other advisors, who are unaffiliated with the Company or any affiliate of the Company, with respect to the tax treatment of the transactions contemplated by this Agreement.  The Warrant Holder also acknowledges that he is solely responsible for any tax liability that may arise as a result of the transactions contemplated by this Agreement.

 

 

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ARTICLE III

MISCELLANEOUS

Section 3.1. Fees and Expenses. Each of the Parties will bear his or its own costs and expenses incurred in connection with this Agreement and the transactions contemplated herein.

Section 3.2. Entire Agreement. This Agreement (including the documents referred to herein) constitutes the entire agreement among the Parties and supersedes any prior understandings, agreements, or representations by or among the Parties, written or oral, among the Parties with respect to the subject matter of this Agreement.

Section 3.3. Notices. All notices, requests, demands, claims, and other communications hereunder will be in writing. Any notice, request, demand, claim, or other communication hereunder shall be deemed duly given when personally delivered, one business day after it is deposited with a nationally recognized courier for overnight delivery or two business days after it is sent by registered or certified mail, return receipt requested, postage prepaid, and addressed to the intended recipient as set forth below:

 

	If to the Warrant Holder: Michael Karfunkel American Capital Acquisition Corporation 59 Maiden Lane New York, NY 10038
	If to the Company: Maiden Holdings, Ltd. 131 Front Street Hamilton HM12 Bermuda Attention: Secretary Fax: (441) 292-0471

 

Any Party may change the address to which notices, requests, demands, claims, and other communications hereunder are to be delivered by giving the other Parties notice in the manner herein set forth.

Section 3.4. Amendments and Waivers. No amendment of any provision of this Agreement shall be valid unless the same shall be in writing and signed by the Parties. No waiver by any Party of any default, misrepresentation, or breach of warranty or covenant hereunder, whether intentional or not, shall be deemed to extend to any prior or subsequent default, misrepresentation, or breach of warranty or covenant hereunder or affect in any way any rights arising by virtue of any prior or subsequent such occurrence.

Section 3.5. Headings. The section headings contained in this Agreement are inserted for convenience only and shall not affect in any way the meaning or interpretation of this Agreement.

Section 3.6. Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the Parties named herein and their respective successors and permitted assigns. No Party may assign either this Agreement or any of his or its rights, interests, or obligations hereunder without the prior written approval of the other; provided, however, that the Company may (i) assign any or all of its rights and interests hereunder to one or more of its affiliates, or (ii) designate one or more of its affiliates to perform its obligations hereunder (in any or all of which cases the Company nonetheless shall remain responsible for the performance of all of its obligations hereunder).

 

 

3

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Section 3.7. No Third Party Beneficiaries. This Agreement shall not confer any rights or remedies upon any individual, partnership, corporation, limited liability company, association, joint stock company, trust, joint venture, unincorporated organization, governmental entity (or any department, agency, or political subdivision thereof) or any other entity, other than the Parties and their respective successors and permitted assigns.

Section 3.8. Governing Law. This Agreement shall be governed by and construed in accordance with the domestic laws of the State of New York without giving effect to any choice or conflict of law provision or rule (whether of Bermuda or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of New York.

Section 3.9. Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original but all of which together will constitute one and the same instrument.

Section 3.10. Severability. Any term or provision of this Agreement that is invalid or unenforceable in any situation in any jurisdiction shall not affect the validity or enforceability of the remaining terms and provisions hereof or the validity or enforceability of the offending term or provision in any other situation or in any other jurisdiction.

Section 3.11. Certain Interpretive Matters and Definitions.  (i) Unless the context of this Agreement otherwise requires, (A) the terms “hereof,” “herein,” “hereby” and derivative or similar words refer to this entire Agreement and not to any particular provision of this Agreement; and (B) the term “Section” without any reference to a specified document refer to the specified Section of this Agreement.

 

(ii) The words “including,” “include” and “includes” are not exclusive and shall be deemed to be followed by the words “without limitation”; if exclusion is intended, the word “comprising” is used instead.

 

(iii) The word “or” shall be construed to mean “and/or” unless the context clearly prohibits that construction.

 

(iv) Any reference to any federal, state, local, provincial or foreign statute or law, including any one or more sections thereof, shall be deemed also to refer to, unless the context requires otherwise, all rules and regulations promulgated thereunder, including Treasury Regulations.

 

(v) Any representation or warranty contained herein as to the enforceability of a contract, including this Agreement, shall be subject to the effect of any bankruptcy, insolvency, reorganization, moratorium or other similar law affecting the enforcement of creditors’ rights generally and to general equitable principles (regardless of whether such enforceability is considered in a proceeding in equity or at law).

 

(vi) The Parties have participated jointly in the negotiation and drafting of this Agreement.  If an ambiguity or question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by the Parties and no presumption or burden of proof shall arise favoring or disfavoring any Party by virtue of the authorship of any of the provisions hereof.

 

[Signature Page Next]

 

 

4

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IN WITNESS WHEREOF, the parties hereto have executed this Warrant Exchange Agreement as of the date first above written.

 

SHAREHOLDER		THE COMPANY Maiden Holdings Ltd.
/s/ Michael Karfunkel		By:	/s/ Arturo M. Raschbaum
MICHAEL KARFUNKEL		Name:	Arturo M. Raschbaum
		Title:	President and Chief Executive Officer

 

 

 

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WARRANT EXCHANGE AGREEMENT

This WARRANT EXCHANGE AGREEMENT, dated as of September 20, 2010 (this “Agreement”), is made by and between Maiden Holdings Ltd., a Bermuda company (the “Company”), and George Karfunkel (the “Warrant Holder”).  The Company and Warrant Holder are each referred to herein as a “Party” and collectively, as the “Parties.”

RECITALS

WHEREAS, the Warrant Holder holds that certain Warrant, issued by the Company on June 7, 2007, to purchase 1,350,000 of the Company’s common shares at $10.00 per share (the “Warrant”);

WHEREAS, the Company and the Warrant Holder wish to exchange the Warrant in consideration for the issuance of certain restricted stock;

WHEREAS, the Parties desire to enter into this Agreement to set forth certain matters relating to such exchange (the “Exchange”).

NOW, THEREFORE, in consideration of the mutual covenants and agreements herein contained, the parties hereto hereby agree as follows:

ARTICLE I

EXCHANGE

Section 1.1. Exchange of Warrant.  Upon and subject to the terms and conditions set forth herein, the Warrant Holder hereby surrenders to the Company for exchange, the Warrant, together with all appropriate endorsements and instruments of transfer, and, in exchange therefor, the Company shall issue to the Warrant Holder 600,000 of the Company’s Common Shares (the “Shares”), which Shares shall be subject to the provisions of that certain Lockup Agreement attached hereto as Exhibit A (the “Lockup Agreement”).

Section 1.2 Lockup Agreement.  The Company and the Warrant Holder are concurrently entering into the Lockup Agreement.

ARTICLE II

REPRESENTATIONS AND WARRANTIES OF THE COMPANY

Section 2.1. Representations and Warranties of the Company. The Company hereby represents and warrants to the Warrant Holder, as of the date hereof, as follows:

(a) Organization, Good Standing. The Company is a company duly organized, validly existing and in good standing under the laws of Bermuda.

(b) Power, Authorization, Enforcement. The Company has the requisite corporate power and authority to enter into and perform this Agreement and transactions contemplated herein, including the Exchange.  The execution and delivery of this Agreement by the Company has been duly and validly authorized by all necessary corporate action, and no further corporate consent or authorization is required for the Company to effect the transactions contemplated hereby.  This Agreement constitutes a valid and legally binding obligation of the Company, enforceable in accordance with its terms.

 

 

 

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(c) Issuance of Shares. The Shares have been duly authorized by all necessary corporate action and, when issued in accordance with the terms hereof upon surrender of the Warrant, the Shares shall be validly issued and outstanding, fully paid and non-assessable.

(d) No Conflicts. The execution, delivery and performance of this Agreement by the Company and the consummation by the Company of the transactions contemplated hereby does not and will not (i) violate any provision of the Company’s Articles of Incorporation or Bylaws, each as amended to date, (ii) conflict with, or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, any agreement, mortgage, deed of trust, indenture, note, bond, license, lease agreement, instrument or obligation to which the Company is a party or by which any of the Company’s properties or assets are bound, or (iii) result in a violation of any federal, state, local or foreign statute, rule, regulation, order, judgment or decree (including federal and state securities laws and regulations) applicable to the Company or by which any property or asset of the Company is bound or affected, except, in all cases, other than violations pursuant to clauses (i) or (iii) (with respect to federal and state securities laws) above, except, for such conflicts, defaults, terminations, amendments, acceleration, cancellations and violations as would not, individually or in the aggregate, have a material adverse effect on the Company.

Section 2.2. Representations and Warranties of the Warrant Holder. The Warrant Holder hereby represents and warrants to the Company, as of the date hereof, as follows:

(a) Power, Authorization, Enforcement. The Warrant Holder has full power and authority to enter into and perform this Agreement, the Lockup Agreement and transactions contemplated herein, including the Exchange.  This Agreement and the Lockup Agreement constitute valid and legally binding obligations of the Warrant Holder, enforceable in accordance with their terms.

(b) Title. The Warrant Holder has record and beneficial ownership of the Warrant and is transferring good and valid title to the Warrant to the Company, free and clear of any claim, interest, mortgage, pledge, lien or security interest.

(c) Investment.  The Warrant Holder (A) understands that the Shares have not been, and will not be, registered under the Securities Act or under any state securities laws, and are being offered and issued in reliance upon federal and state exemptions for transactions not involving any public offering, (B) is acquiring the Shares solely for his own account for investment purposes, and not with a view to the distribution thereof, (C) is a sophisticated investor with knowledge and experience in business and financial matters, (D) has received certain information concerning the Company and has had the opportunity to obtain additional information as desired in order to evaluate the merits and the risks inherent in holding the Shares, (E) is able to bear the economic risk and lack of liquidity inherent in holding the Shares, and (F) is an accredited investor, as defined in Regulation D under the Securities Act of 1933, as amended.

(d) No Tax Representations.  The warrant Holder understands the tax consequences of the transactions contemplated by this Agreement.  The Warrant Holder confirms that it is not relying on any statements or representations of the Company or any of its agents with respect to the tax effect of the transactions contemplated by this Agreement.  The Warrant Holder has had the opportunity to consult with the Warrant Holder’s own legal, accounting, tax, investment and other advisors, who are unaffiliated with the Company or any affiliate of the Company, with respect to the tax treatment of the transactions contemplated by this Agreement.  The Warrant Holder also acknowledges that he is solely responsible for any tax liability that may arise as a result of the transactions contemplated by this Agreement.

 

 

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ARTICLE III

MISCELLANEOUS

Section 3.1. Fees and Expenses. Each of the Parties will bear his or its own costs and expenses incurred in connection with this Agreement and the transactions contemplated herein.

Section 3.2. Entire Agreement. This Agreement (including the documents referred to herein) constitutes the entire agreement among the Parties and supersedes any prior understandings, agreements, or representations by or among the Parties, written or oral, among the Parties with respect to the subject matter of this Agreement.

Section 3.3. Notices. All notices, requests, demands, claims, and other communications hereunder will be in writing. Any notice, request, demand, claim, or other communication hereunder shall be deemed duly given when personally delivered, one business day after it is deposited with a nationally recognized courier for overnight delivery or two business days after it is sent by registered or certified mail, return receipt requested, postage prepaid, and addressed to the intended recipient as set forth below:

 

	If to the Warrant Holder: George Karfunkel 1671 52nd Street Brooklyn, NY 11204
	If to the Company: Maiden Holdings, Ltd. 131 Front Street Hamilton HM12 Bermuda Attention: Secretary Fax: (441) 292-0471

Any Party may change the address to which notices, requests, demands, claims, and other communications hereunder are to be delivered by giving the other Parties notice in the manner herein set forth.

Section 3.4. Amendments and Waivers. No amendment of any provision of this Agreement shall be valid unless the same shall be in writing and signed by the Parties. No waiver by any Party of any default, misrepresentation, or breach of warranty or covenant hereunder, whether intentional or not, shall be deemed to extend to any prior or subsequent default, misrepresentation, or breach of warranty or covenant hereunder or affect in any way any rights arising by virtue of any prior or subsequent such occurrence.

Section 3.5. Headings. The section headings contained in this Agreement are inserted for convenience only and shall not affect in any way the meaning or interpretation of this Agreement.

Section 3.6. Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the Parties named herein and their respective successors and permitted assigns. No Party may assign either this Agreement or any of his or its rights, interests, or obligations hereunder without the prior written approval of the other; provided, however, that the Company may (i) assign any or all of its rights and interests hereunder to one or more of its affiliates, or (ii) designate one or more of its affiliates to perform its obligations hereunder (in any or all of which cases the Company nonetheless shall remain responsible for the performance of all of its obligations hereunder).

 

 

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Section 3.7. No Third Party Beneficiaries. This Agreement shall not confer any rights or remedies upon any individual, partnership, corporation, limited liability company, association, joint stock company, trust, joint venture, unincorporated organization, governmental entity (or any department, agency, or political subdivision thereof) or any other entity, other than the Parties and their respective successors and permitted assigns.

Section 3.8. Governing Law. This Agreement shall be governed by and construed in accordance with the domestic laws of the State of New York without giving effect to any choice or conflict of law provision or rule (whether of Bermuda or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of New York.

Section 3.9. Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original but all of which together will constitute one and the same instrument.

Section 3.10. Severability. Any term or provision of this Agreement that is invalid or unenforceable in any situation in any jurisdiction shall not affect the validity or enforceability of the remaining terms and provisions hereof or the validity or enforceability of the offending term or provision in any other situation or in any other jurisdiction.

Section 3.11. Certain Interpretive Matters and Definitions.  (i) Unless the context of this Agreement otherwise requires, (A) the terms “hereof,” “herein,” “hereby” and derivative or similar words refer to this entire Agreement and not to any particular provision of this Agreement; and (B) the term “Section” without any reference to a specified document refer to the specified Section of this Agreement.

 

(ii) The words “including,” “include” and “includes” are not exclusive and shall be deemed to be followed by the words “without limitation”; if exclusion is intended, the word “comprising” is used instead.

 

(iii) The word “or” shall be construed to mean “and/or” unless the context clearly prohibits that construction.

 

(iv) Any reference to any federal, state, local, provincial or foreign statute or law, including any one or more sections thereof, shall be deemed also to refer to, unless the context requires otherwise, all rules and regulations promulgated thereunder, including Treasury Regulations.

 

(v) Any representation or warranty contained herein as to the enforceability of a contract, including this Agreement, shall be subject to the effect of any bankruptcy, insolvency, reorganization, moratorium or other similar law affecting the enforcement of creditors’ rights generally and to general equitable principles (regardless of whether such enforceability is considered in a proceeding in equity or at law).

 

(vi) The Parties have participated jointly in the negotiation and drafting of this Agreement.  If an ambiguity or question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by the Parties and no presumption or burden of proof shall arise favoring or disfavoring any Party by virtue of the authorship of any of the provisions hereof.

 

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IN WITNESS WHEREOF, the parties hereto have executed this Warrant Exchange Agreement as of the date first above written.

 

SHAREHOLDER		THE COMPANY Maiden Holdings Ltd.
/s/ George Karfunkel		By:	/s/ Arturo M. Raschbaum
GEORGE KARFUNKEL		Name:	Arturo M. Raschbaum
		Title:	President and Chief Executive Officer

 

 

 

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WARRANT EXCHANGE AGREEMENT

This WARRANT EXCHANGE AGREEMENT, dated as of September 20, 2010 (this “Agreement”), is made by and between Maiden Holdings Ltd., a Bermuda company (the “Company”), and Barry Zyskind (the “Warrant Holder”).  The Company and Warrant Holder are each referred to herein as a “Party” and collectively, as the “Parties.”

RECITALS

WHEREAS, the Warrant Holder holds that certain Warrant, issued by the Company on June 7, 2007, to purchase 1,350,000 of the Company’s common shares at $10.00 per share (the “Warrant”);

WHEREAS, the Company and the Warrant Holder wish to exchange the Warrant in consideration for the issuance of certain restricted stock;

WHEREAS, the Parties desire to enter into this Agreement to set forth certain matters relating to such exchange (the “Exchange”).

NOW, THEREFORE, in consideration of the mutual covenants and agreements herein contained, the parties hereto hereby agree as follows:

ARTICLE I

EXCHANGE

Section 1.1. Exchange of Warrant.  Upon and subject to the terms and conditions set forth herein, the Warrant Holder hereby surrenders to the Company for exchange, the Warrant, together with all appropriate endorsements and instruments of transfer, and, in exchange therefor, the Company shall issue to the Warrant Holder 600,000 of the Company’s Common Shares (the “Shares”) via the Company’s 2007 Share Incentive Plan, which Shares shall be subject to the provisions of that certain Lockup Agreement attached hereto as Exhibit A (the “Lockup Agreement”).

Section 1.2 Lockup Agreement.  The Company and the Warrant Holder are concurrently entering into the Lockup Agreement.

ARTICLE II

REPRESENTATIONS AND WARRANTIES OF THE COMPANY

Section 2.1. Representations and Warranties of the Company. The Company hereby represents and warrants to the Warrant Holder, as of the date hereof, as follows:

(a) Organization, Good Standing. The Company is a company duly organized, validly existing and in good standing under the laws of Bermuda.

(b) Power, Authorization, Enforcement. The Company has the requisite corporate power and authority to enter into and perform this Agreement and transactions contemplated herein, including the Exchange.  The execution and delivery of this Agreement by the Company has been duly and validly authorized by all necessary corporate action, and no further corporate consent or authorization is required for the Company to effect the transactions contemplated hereby.  This Agreement constitutes a valid and legally binding obligation of the Company, enforceable in accordance with its terms.

 

 

 

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(c) Issuance of Shares. The Shares have been duly authorized by all necessary corporate action and, when issued in accordance with the terms hereof upon surrender of the Warrant, the Shares shall be validly issued and outstanding, fully paid and non-assessable.

(d) No Conflicts. The execution, delivery and performance of this Agreement by the Company and the consummation by the Company of the transactions contemplated hereby does not and will not (i) violate any provision of the Company’s Articles of Incorporation or Bylaws, each as amended to date, (ii) conflict with, or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, any agreement, mortgage, deed of trust, indenture, note, bond, license, lease agreement, instrument or obligation to which the Company is a party or by which any of the Company’s properties or assets are bound, or (iii) result in a violation of any federal, state, local or foreign statute, rule, regulation, order, judgment or decree (including federal and state securities laws and regulations) applicable to the Company or by which any property or asset of the Company is bound or affected, except, in all cases, other than violations pursuant to clauses (i) or (iii) (with respect to federal and state securities laws) above, except, for such conflicts, defaults, terminations, amendments, acceleration, cancellations and violations as would not, individually or in the aggregate, have a material adverse effect on the Company.

Section 2.2. Representations and Warranties of the Warrant Holder. The Warrant Holder hereby represents and warrants to the Company, as of the date hereof, as follows:

(a) Power, Authorization, Enforcement. The Warrant Holder has full power and authority to enter into and perform this Agreement, the Lockup Agreement and transactions contemplated herein, including the Exchange.  This Agreement and the Lockup Agreement constitute valid and legally binding obligations of the Warrant Holder, enforceable in accordance with their terms.

(b) Title. The Warrant Holder has record and beneficial ownership of the Warrant and is transferring good and valid title to the Warrant to the Company, free and clear of any claim, interest, mortgage, pledge, lien or security interest.

(c) Investment.  The Warrant Holder (A) understands that the Shares have not been, and will not be, registered under the Securities Act or under any state securities laws, and are being offered and issued in reliance upon federal and state exemptions for transactions not involving any public offering, (B) is acquiring the Shares solely for his own account for investment purposes, and not with a view to the distribution thereof, (C) is a sophisticated investor with knowledge and experience in business and financial matters, (D) has received certain information concerning the Company and has had the opportunity to obtain additional information as desired in order to evaluate the merits and the risks inherent in holding the Shares, (E) is able to bear the economic risk and lack of liquidity inherent in holding the Shares, and (F) is an accredited investor, as defined in Regulation D under the Securities Act of 1933, as amended.

(d) No Tax Representations.  The warrant Holder understands the tax consequences of the transactions contemplated by this Agreement.  The Warrant Holder confirms that it is not relying on any statements or representations of the Company or any of its agents with respect to the tax effect of the transactions contemplated by this Agreement.  The Warrant Holder has had the opportunity to consult with the Warrant Holder’s own legal, accounting, tax, investment and other advisors, who are unaffiliated with the Company or any affiliate of the Company, with respect to the tax treatment of the transactions contemplated by this Agreement.  The Warrant Holder also acknowledges that he is solely responsible for any tax liability that may arise as a result of the transactions contemplated by this Agreement.

 

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ARTICLE III

MISCELLANEOUS

Section 3.1. Fees and Expenses. Each of the Parties will bear his or its own costs and expenses incurred in connection with this Agreement and the transactions contemplated herein.

Section 3.2. Entire Agreement. This Agreement (including the documents referred to herein) constitutes the entire agreement among the Parties and supersedes any prior understandings, agreements, or representations by or among the Parties, written or oral, among the Parties with respect to the subject matter of this Agreement.

Section 3.3. Notices. All notices, requests, demands, claims, and other communications hereunder will be in writing. Any notice, request, demand, claim, or other communication hereunder shall be deemed duly given when personally delivered, one business day after it is deposited with a nationally recognized courier for overnight delivery or two business days after it is sent by registered or certified mail, return receipt requested, postage prepaid, and addressed to the intended recipient as set forth below:

 

	If to the Warrant Holder: Barry Zyskind AmTrust Financial Services, Inc. 59 Maiden Lane, 6th Floor New York, NY 10038
	If to the Company: Maiden Holdings, Ltd. 131 Front Street Hamilton HM12 Bermuda Attention: Secretary Fax: (441) 292-0471

Any Party may change the address to which notices, requests, demands, claims, and other communications hereunder are to be delivered by giving the other Parties notice in the manner herein set forth.

Section 3.4. Amendments and Waivers. No amendment of any provision of this Agreement shall be valid unless the same shall be in writing and signed by the Parties. No waiver by any Party of any default, misrepresentation, or breach of warranty or covenant hereunder, whether intentional or not, shall be deemed to extend to any prior or subsequent default, misrepresentation, or breach of warranty or covenant hereunder or affect in any way any rights arising by virtue of any prior or subsequent such occurrence.

Section 3.5. Headings. The section headings contained in this Agreement are inserted for convenience only and shall not affect in any way the meaning or interpretation of this Agreement.

Section 3.6. Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the Parties named herein and their respective successors and permitted assigns. No Party may assign either this Agreement or any of his or its rights, interests, or obligations hereunder without the prior written approval of the other; provided, however, that the Company may (i) assign any or all of its rights and interests hereunder to one or more of its affiliates, or (ii) designate one or more of its affiliates to perform its obligations hereunder (in any or all of which cases the Company nonetheless shall remain responsible for the performance of all of its obligations hereunder).

 

 

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Section 3.7. No Third Party Beneficiaries. This Agreement shall not confer any rights or remedies upon any individual, partnership, corporation, limited liability company, association, joint stock company, trust, joint venture, unincorporated organization, governmental entity (or any department, agency, or political subdivision thereof) or any other entity, other than the Parties and their respective successors and permitted assigns.

Section 3.8. Governing Law. This Agreement shall be governed by and construed in accordance with the domestic laws of the State of New York without giving effect to any choice or conflict of law provision or rule (whether of Bermuda or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of New York.

Section 3.9. Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original but all of which together will constitute one and the same instrument.

Section 3.10. Severability. Any term or provision of this Agreement that is invalid or unenforceable in any situation in any jurisdiction shall not affect the validity or enforceability of the remaining terms and provisions hereof or the validity or enforceability of the offending term or provision in any other situation or in any other jurisdiction.

Section 3.11. Certain Interpretive Matters and Definitions.  (i) Unless the context of this Agreement otherwise requires, (A) the terms “hereof,” “herein,” “hereby” and derivative or similar words refer to this entire Agreement and not to any particular provision of this Agreement; and (B) the term “Section” without any reference to a specified document refer to the specified Section of this Agreement.

 

(ii) The words “including,” “include” and “includes” are not exclusive and shall be deemed to be followed by the words “without limitation”; if exclusion is intended, the word “comprising” is used instead.

 

(iii) The word “or” shall be construed to mean “and/or” unless the context clearly prohibits that construction.

 

(iv) Any reference to any federal, state, local, provincial or foreign statute or law, including any one or more sections thereof, shall be deemed also to refer to, unless the context requires otherwise, all rules and regulations promulgated thereunder, including Treasury Regulations.

 

(v) Any representation or warranty contained herein as to the enforceability of a contract, including this Agreement, shall be subject to the effect of any bankruptcy, insolvency, reorganization, moratorium or other similar law affecting the enforcement of creditors’ rights generally and to general equitable principles (regardless of whether such enforceability is considered in a proceeding in equity or at law).

 

(vi) The Parties have participated jointly in the negotiation and drafting of this Agreement.  If an ambiguity or question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by the Parties and no presumption or burden of proof shall arise favoring or disfavoring any Party by virtue of the authorship of any of the provisions hereof.

 

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IN WITNESS WHEREOF, the parties hereto have executed this Warrant Exchange Agreement as of the date first above written.

 

SHAREHOLDER		THE COMPANY Maiden Holdings Ltd.
/s/ Barry Zyskind		By:	/s/ Arturo M. Raschbaum
BARRY ZYSKIND		Name:	Arturo M. Raschbaum
		Title:	President and Chief Executive Officer

 

 

 

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LOCKUP AGREEMENT

 

This Lockup Agreement is being executed and delivered as of September 20, 2010 by Michael Karfunkel (the “Shareholder”) in favor of and for the benefit of Maiden Holdings Ltd., a Bermuda company (the “Company”).

RECITALS

A.          Contemporaneously with the execution and delivery of this Lockup Agreement, the Shareholder is entering into an Warrant Exchange Agreement with the Company (the “Agreement”) pursuant to which the Shareholder will acquire common shares of the Company (the “Shares”) in exchange for the surrender of a Warrant (the “Exchange”).

B.           In connection with the Exchange (and as a condition to consummating the Exchange), the Company has requested that the Shareholder enter into this Lockup Agreement; and the Shareholder is entering into this Lockup Agreement in order to induce the Company to enter into the Agreement and consummate the Exchange.

 

AGREEMENT

 

In order to induce the Company to enter into the Agreement and consummate the Exchange, and in consideration of the issuance and delivery to the Shareholder of the Shares pursuant to the Agreement, the Shareholder agrees as follows:

 

1.           Agreement by Shareholder.

 

(a)         The Shareholder agrees with the Company that, beginning on the closing of the Exchange (the “Closing”) and continuing for a period of thirty six (36) months from the Closing, the Shareholder will not, without the prior written consent of the Company, directly or indirectly, (A) offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant for the sale of, or otherwise dispose of or transfer any Shares acquired by the Shareholder as a result of the Exchange or (B) enter into any swap or any other agreement or any transaction that transfers, in whole or in part, directly or indirectly, the economic consequence of ownership of such Shares, whether any such swap transaction is to be settled by delivery of Shares or other securities, in cash or otherwise.

 

(b)         Notwithstanding the foregoing, the Shareholder may transfer such Shares either during his lifetime or upon death by will or intestacy to his immediate family or to a trust if the beneficiaries of such trust are exclusively the Shareholder and/or a member or members of his immediate family; provided, however, that prior to any such transfer each transferee shall execute an agreement substantially identical to this agreement and which shall be satisfactory to the Company, pursuant to which each transferee shall agree to receive and hold such Shares, subject to the provisions hereof, and there shall be no further transfer except in accordance with the provisions hereof. For purposes of this paragraph, “immediate family” shall mean spouse, lineal descendant, father, mother, brother, sister or domestic partner of the transferor.

 

The Shareholder also agrees and consents to the entry of stop-transfer instructions with the Company’s transfer agent against the transfer of such Shares except in compliance with this Agreement.

 

 

 

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2.           Notices. Any notice or other communication required or permitted to be delivered to the Shareholder or the Company under this Lockup Agreement shall be in writing and shall be deemed properly delivered, given and received when delivered (by hand, by registered mail, by courier or express delivery service or by confirmed facsimile) to the address or facsimile telephone number set forth beneath the name of such party below (or to such other address or facsimile telephone number as such party shall have specified in a written notice delivered in accordance with this Section 2):

if to the Company:

Maiden Holdings, Ltd.

131 Front Street

Hamilton HM12 Bermuda

Attention: Secretary

Fax: (441) 292-0471

if to the Shareholder:

Michael Karfunkel

American Capital Acquisition Corporation

59 Maiden Lane

New York, NY 10038

3.           Severability. If any provision of this Lockup Agreement or any part of any such provision is held under any circumstances to be invalid or unenforceable in any jurisdiction, then (a) such provision or part thereof shall, with respect to such circumstances and in such jurisdiction, be deemed amended to conform to applicable laws so as to be valid and enforceable to the fullest possible extent, (b) the invalidity or unenforceability of such provision or part thereof under such circumstances and in such jurisdiction shall not affect the validity or enforceability of such provision or part thereof under any other circumstances or in any other jurisdiction, and (c) such invalidity of enforceability of such provision or part thereof shall not affect the validity or enforceability of the remainder of such provision or the validity or enforceability of any other provision of this Lockup Agreement. Each provision of this Lockup Agreement is separable from every other provision of this Lockup Agreement, and each part of each provision of this Lockup Agreement is separable from every other part of such provision.

 

4.           Governing Law. This Lockup Agreement shall be construed in accordance with, and governed in all respects by, the laws of the State of New York, regardless of the laws that might otherwise govern under applicable principles of conflicts of laws thereof.

 

 

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5.           Waiver. No failure on the part of the Company to exercise any power, right, privilege or remedy under this Lockup Agreement, and no delay on the part of the Company in exercising any power, right, privilege or remedy under this Lockup Agreement, shall operate as a waiver of such power, right, privilege or remedy; and no single or partial exercise of any such power, right, privilege or remedy shall preclude any other or further exercise thereof or of any other power, right, privilege or remedy. The Company shall not be deemed to have waived any claim arising out of this Lockup Agreement, or any power, right, privilege or remedy under this Lockup Agreement, unless the waiver of such claim, power, right, privilege or remedy is expressly set forth in a written instrument duly executed and delivered on behalf of the Company; and any such waiver shall not be applicable or have any effect except in the specific instance in which it is given.

 

6.           Captions. The captions contained in this Lockup Agreement are for convenience of reference only, shall not be deemed to be a part of this Lockup Agreement and shall not be referred to in connection with the construction or interpretation of this Lockup Agreement.

 

7.          Further Assurances. The Shareholder shall execute and/or cause to be delivered to the Company such instruments and other documents and shall take such other actions as the Company may reasonably request to effectuate the intent and purposes of this Lockup Agreement.

 

8.          Entire Agreement. This Lockup Agreement and the other agreements referred to herein set forth the entire understanding of the Shareholder and the Company relating to the subject matter hereof and thereof and supersede all prior agreements and understandings between any of such parties relating to the subject matter hereof and thereof.

 

9.          Amendments. This Lockup Agreement may not be amended, modified, altered, or supplemented other than by means of a written instrument duly executed and delivered on behalf of the Company and the Shareholder.

 

10.        Assignment. This Lockup Agreement and all obligations hereunder are personal to the Shareholder and may not be transferred or assigned by the Shareholder at any time except as provided in Section 1(b). The Company may assign its rights under this Lockup Agreement to any entity in connection with any merger or sale or transfer of all or substantially all of the Company’s assets.

 

11.        Binding Nature. Subject to Section 10, this Lockup Agreement will be binding upon the Shareholder and the Shareholder’s representatives, executors, administrators, estate, heirs, successors and assigns, and will inure to the benefit of the Company and its successors and assigns.

 

 

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In Witness Whereof, the Shareholder and the Company have executed this Lockup Agreement as of the date first above written.

 

SHAREHOLDER			THE COMPANY
			Maiden Holdings Ltd.
/s/ Michael Karfunkel		By:	/s/ Arturo M. Raschbaum
MICHAEL KARFUNKEL		Name:	Arturo M. Raschbaum
		Title:	President and Chief Executive Officer

 

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LOCKUP AGREEMENT

 

This Lockup Agreement is being executed and delivered as of September 20, 2010 by George Karfunkel (the “Shareholder”) in favor of and for the benefit of Maiden Holdings Ltd., a Bermuda company (the “Company”).

RECITALS

A.          Contemporaneously with the execution and delivery of this Lockup Agreement, the Shareholder is entering into an Warrant Exchange Agreement with the Company (the “Agreement”) pursuant to which the Shareholder will acquire common shares of the Company (the “Shares”) in exchange for the surrender of a Warrant (the “Exchange”).

B.           In connection with the Exchange (and as a condition to consummating the Exchange), the Company has requested that the Shareholder enter into this Lockup Agreement; and the Shareholder is entering into this Lockup Agreement in order to induce the Company to enter into the Agreement and consummate the Exchange.

 

AGREEMENT

 

In order to induce the Company to enter into the Agreement and consummate the Exchange, and in consideration of the issuance and delivery to the Shareholder of the Shares pursuant to the Agreement, the Shareholder agrees as follows:

 

1.           Agreement by Shareholder.

 

(a) The Shareholder agrees with the Company that, beginning on the closing of the Exchange (the “Closing”) and continuing for a period of thirty six (36) months from the Closing, the Shareholder will not, without the prior written consent of the Company, directly or indirectly, (A) offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant for the sale of, or otherwise dispose of or transfer any Shares acquired by the Shareholder as a result of the Exchange or (B) enter into any swap or any other agreement or any transaction that transfers, in whole or in part, directly or indirectly, the economic consequence of ownership of such Shares, whether any such swap transaction is to be settled by delivery of Shares or other securities, in cash or otherwise.

 

(b)         Notwithstanding the foregoing, the Shareholder may transfer such Shares either during his lifetime or upon death by will or intestacy to his immediate family or to a trust if the beneficiaries of such trust are exclusively the Shareholder and/or a member or members of his immediate family; provided, however, that prior to any such transfer each transferee shall execute an agreement substantially identical to this agreement and which shall be satisfactory to the Company, pursuant to which each transferee shall agree to receive and hold such Shares, subject to the provisions hereof, and there shall be no further transfer except in accordance with the provisions hereof. For purposes of this paragraph, “immediate family” shall mean spouse, lineal descendant, father, mother, brother, sister or domestic partner of the transferor.

 

The Shareholder also agrees and consents to the entry of stop-transfer instructions with the Company’s transfer agent against the transfer of such Shares except in compliance with this Agreement.

 

 

 

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2.           Notices. Any notice or other communication required or permitted to be delivered to the Shareholder or the Company under this Lockup Agreement shall be in writing and shall be deemed properly delivered, given and received when delivered (by hand, by registered mail, by courier or express delivery service or by confirmed facsimile) to the address or facsimile telephone number set forth beneath the name of such party below (or to such other address or facsimile telephone number as such party shall have specified in a written notice delivered in accordance with this Section 2):

if to the Company:

Maiden Holdings, Ltd.

131 Front Street

Hamilton HM12 Bermuda

Attention: Secretary

Fax: (441) 292-0471

if to the Shareholder:

George Karfunkel

1671 52nd Street

Brooklyn, NY 11204

3.           Severability. If any provision of this Lockup Agreement or any part of any such provision is held under any circumstances to be invalid or unenforceable in any jurisdiction, then (a) such provision or part thereof shall, with respect to such circumstances and in such jurisdiction, be deemed amended to conform to applicable laws so as to be valid and enforceable to the fullest possible extent, (b) the invalidity or unenforceability of such provision or part thereof under such circumstances and in such jurisdiction shall not affect the validity or enforceability of such provision or part thereof under any other circumstances or in any other jurisdiction, and (c) such invalidity of enforceability of such provision or part thereof shall not affect the validity or enforceability of the remainder of such provision or the validity or enforceability of any other provision of this Lockup Agreement. Each provision of this Lockup Agreement is separable from every other provision of this Lockup Agreement, and each part of each provision of this Lockup Agreement is separable from every other part of such provision.

 

4.      Governing Law. This Lockup Agreement shall be construed in accordance with, and governed in all respects by, the laws of the State of New York, regardless of the laws that might otherwise govern under applicable principles of conflicts of laws thereof.

 

 

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5.      Waiver. No failure on the part of the Company to exercise any power, right, privilege or remedy under this Lockup Agreement, and no delay on the part of the Company in exercising any power, right, privilege or remedy under this Lockup Agreement, shall operate as a waiver of such power, right, privilege or remedy; and no single or partial exercise of any such power, right, privilege or remedy shall preclude any other or further exercise thereof or of any other power, right, privilege or remedy. The Company shall not be deemed to have waived any claim arising out of this Lockup Agreement, or any power, right, privilege or remedy under this Lockup Agreement, unless the waiver of such claim, power, right, privilege or remedy is expressly set forth in a written instrument duly executed and delivered on behalf of the Company; and any such waiver shall not be applicable or have any effect except in the specific instance in which it is given.

 

6.           Captions. The captions contained in this Lockup Agreement are for convenience of reference only, shall not be deemed to be a part of this Lockup Agreement and shall not be referred to in connection with the construction or interpretation of this Lockup Agreement.

 

7.           Further Assurances. The Shareholder shall execute and/or cause to be delivered to the Company such instruments and other documents and shall take such other actions as the Company may reasonably request to effectuate the intent and purposes of this Lockup Agreement.

 

8.           Entire Agreement. This Lockup Agreement and the other agreements referred to herein set forth the entire understanding of the Shareholder and the Company relating to the subject matter hereof and thereof and supersede all prior agreements and understandings between any of such parties relating to the subject matter hereof and thereof.

 

9.           Amendments. This Lockup Agreement may not be amended, modified, altered, or supplemented other than by means of a written instrument duly executed and delivered on behalf of the Company and the Shareholder.

 

10.        Assignment. This Lockup Agreement and all obligations hereunder are personal to the Shareholder and may not be transferred or assigned by the Shareholder at any time except as provided in Section 1(b). The Company may assign its rights under this Lockup Agreement to any entity in connection with any merger or sale or transfer of all or substantially all of the Company’s assets.

 

11.        Binding Nature. Subject to Section 10, this Lockup Agreement will be binding upon the Shareholder and the Shareholder’s representatives, executors, administrators, estate, heirs, successors and assigns, and will inure to the benefit of the Company and its successors and assigns.

 

 

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In Witness Whereof, the Shareholder and the Company have executed this Lockup Agreement as of the date first above written.

 

SHAREHOLDER			THE COMPANY
			Maiden Holdings Ltd.
/s/ George Karfunkel		By:	/s/ Arturo M. Raschbaum
GEORGE KARFUNKEL		Name:	Arturo M. Raschbaum
		Title:	President and Chief Executive Officer

 

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LOCKUP AGREEMENT

 

This Lockup Agreement is being executed and delivered as of September 20, 2010 by Barry Zyskind (the “Shareholder”) in favor of and for the benefit of Maiden Holdings Ltd., a Bermuda company (the “Company”).

RECITALS

A.          Contemporaneously with the execution and delivery of this Lockup Agreement, the Shareholder is entering into an Warrant Exchange Agreement with the Company (the “Agreement”) pursuant to which the Shareholder will acquire common shares of the Company (the “Shares”) in exchange for the surrender of a Warrant (the “Exchange”).

B.           In connection with the Exchange (and as a condition to consummating the Exchange), the Company has requested that the Shareholder enter into this Lockup Agreement; and the Shareholder is entering into this Lockup Agreement in order to induce the Company to enter into the Agreement and consummate the Exchange.

 

AGREEMENT

 

In order to induce the Company to enter into the Agreement and consummate the Exchange, and in consideration of the issuance and delivery to the Shareholder of the Shares pursuant to the Agreement, the Shareholder agrees as follows:

 

1.           Agreement by Shareholder.

 

(a)         The Shareholder agrees with the Company that, beginning on the closing of the Exchange (the “Closing”) and continuing for a period of thirty six (36) months from the Closing, the Shareholder will not, without the prior written consent of the Company, directly or indirectly, (A) offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant for the sale of, or otherwise dispose of or transfer any Shares acquired by the Shareholder as a result of the Exchange or (B) enter into any swap or any other agreement or any transaction that transfers, in whole or in part, directly or indirectly, the economic consequence of ownership of such Shares, whether any such swap transaction is to be settled by delivery of Shares or other securities, in cash or otherwise.

 

(b)          Notwithstanding the foregoing, the Shareholder may transfer such Shares either during his lifetime or upon death by will or intestacy to his immediate family or to a trust if the beneficiaries of such trust are exclusively the Shareholder and/or a member or members of his immediate family; provided, however, that prior to any such transfer each transferee shall execute an agreement substantially identical to this agreement and which shall be satisfactory to the Company, pursuant to which each transferee shall agree to receive and hold such Shares, subject to the provisions hereof, and there shall be no further transfer except in accordance with the provisions hereof. For purposes of this paragraph, “immediate family” shall mean spouse, lineal descendant, father, mother, brother, sister or domestic partner of the transferor.

 

The Shareholder also agrees and consents to the entry of stop-transfer instructions with the Company’s transfer agent against the transfer of such Shares except in compliance with this Agreement.

 

 

 

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2.           Notices. Any notice or other communication required or permitted to be delivered to the Shareholder or the Company under this Lockup Agreement shall be in writing and shall be deemed properly delivered, given and received when delivered (by hand, by registered mail, by courier or express delivery service or by confirmed facsimile) to the address or facsimile telephone number set forth beneath the name of such party below (or to such other address or facsimile telephone number as such party shall have specified in a written notice delivered in accordance with this Section 2):

if to the Company:

Maiden Holdings, Ltd.

131 Front Street

Hamilton HM12 Bermuda

Attention: Secretary

Fax: (441) 292-0471

if to the Shareholder:

Barry Zyskind

AmTrust Financial Services, Inc.

59 Maiden Lane, 6th Floor

New York, NY 10038

3.           Severability. If any provision of this Lockup Agreement or any part of any such provision is held under any circumstances to be invalid or unenforceable in any jurisdiction, then (a) such provision or part thereof shall, with respect to such circumstances and in such jurisdiction, be deemed amended to conform to applicable laws so as to be valid and enforceable to the fullest possible extent, (b) the invalidity or unenforceability of such provision or part thereof under such circumstances and in such jurisdiction shall not affect the validity or enforceability of such provision or part thereof under any other circumstances or in any other jurisdiction, and (c) such invalidity of enforceability of such provision or part thereof shall not affect the validity or enforceability of the remainder of such provision or the validity or enforceability of any other provision of this Lockup Agreement. Each provision of this Lockup Agreement is separable from every other provision of this Lockup Agreement, and each part of each provision of this Lockup Agreement is separable from every other part of such provision.

 

4.           Governing Law. This Lockup Agreement shall be construed in accordance with, and governed in all respects by, the laws of the State of New York, regardless of the laws that might otherwise govern under applicable principles of conflicts of laws thereof.

 

 

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5.           Waiver. No failure on the part of the Company to exercise any power, right, privilege or remedy under this Lockup Agreement, and no delay on the part of the Company in exercising any power, right, privilege or remedy under this Lockup Agreement, shall operate as a waiver of such power, right, privilege or remedy; and no single or partial exercise of any such power, right, privilege or remedy shall preclude any other or further exercise thereof or of any other power, right, privilege or remedy. The Company shall not be deemed to have waived any claim arising out of this Lockup Agreement, or any power, right, privilege or remedy under this Lockup Agreement, unless the waiver of such claim, power, right, privilege or remedy is expressly set forth in a written instrument duly executed and delivered on behalf of the Company; and any such waiver shall not be applicable or have any effect except in the specific instance in which it is given.

 

6.           Captions. The captions contained in this Lockup Agreement are for convenience of reference only, shall not be deemed to be a part of this Lockup Agreement and shall not be referred to in connection with the construction or interpretation of this Lockup Agreement.

 

7.           Further Assurances. The Shareholder shall execute and/or cause to be delivered to the Company such instruments and other documents and shall take such other actions as the Company may reasonably request to effectuate the intent and purposes of this Lockup Agreement.

 

8.           Entire Agreement. This Lockup Agreement and the other agreements referred to herein set forth the entire understanding of the Shareholder and the Company relating to the subject matter hereof and thereof and supersede all prior agreements and understandings between any of such parties relating to the subject matter hereof and thereof.

 

9.          Amendments. This Lockup Agreement may not be amended, modified, altered, or supplemented other than by means of a written instrument duly executed and delivered on behalf of the Company and the Shareholder.

 

10.         Assignment. This Lockup Agreement and all obligations hereunder are personal to the Shareholder and may not be transferred or assigned by the Shareholder at any time except as provided in Section 1(b). The Company may assign its rights under this Lockup Agreement to any entity in connection with any merger or sale or transfer of all or substantially all of the Company’s assets.

 

11.         Binding Nature. Subject to Section 10, this Lockup Agreement will be binding upon the Shareholder and the Shareholder’s representatives, executors, administrators, estate, heirs, successors and assigns, and will inure to the benefit of the Company and its successors and assigns.

 

 

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In Witness Whereof, the Shareholder and the Company have executed this Lockup Agreement as of the date first above written.

SHAREHOLDER			THE COMPANY
			Maiden Holdings Ltd.
/s/ Barry Zyskind		By:	/s/ Arturo M. Raschbaum
BARRY ZYSKIND		Name:	Arturo M. Raschbaum
		Title:	President and Chief Executive Officer

 

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EXHIBIT 31.1

 

CERTIFICATION

 

I, Arturo M. Raschbaum, certify that:

 

1.	I have reviewed this quarterly report on Form 10-Q of Maiden Holdings, Ltd.;

 

2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

 

4.

The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f) for the registrant and have:

 

(a)

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including any consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

(b)

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

(c)

Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

(d)

Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

5.	The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

(a)

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

 

(b)

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

Date:  November 9, 2010		/s/ ARTURO M. RASCHBAUM
		Arturo M. Raschbaum
		President and Chief Executive Officer
		(Principal Executive Officer)

Dated:   November 9, 2010		/s/ JOHN MARSHALECK
		John Marshaleck
		Chief Financial Officer
		(Principal Financial and Accounting Officer)

 

 

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Exhibit 32.1

 

CERTIFICATION

 

Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of Section 1350, chapter 63 of title 18, United States Code), the undersigned officer of Maiden Holdings, Ltd. (the “Company”), hereby certifies, to such officer’s knowledge, that:

 

The Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2010 (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

 

 

Date:  November 9, 2010	By:	/s/ ARTURO M. RASCHBAUM
	Name:	Arturo M. Raschbaum
	Title:	President and Chief Executive Officer

The foregoing certification is being furnished solely pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of Section 1350, chapter 63 of title 18, United States Code) and is not being filed as part of the Report.