UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8‑K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of Earliest Event Reported): October 7, 2019
Atlas Financial Holdings, Inc.
(Exact name of registrant as specified in its charter)

Cayman Islands
 
000-54627
 
27-5466079
(State or other jurisdiction
of incorporation)
 
(Commission
File Number)
 
(I.R.S. Employer
Identification No.)
 
 
 
 
 

953 American Lane, 3rd Floor
Schaumburg, IL
(Address of principal executive offices)
60173
(Zip Code)

Registrant's telephone number, including area code: (847) 472-6700

Not applicable
(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

o            Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o            Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o            Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o            Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol(s)
Name of each exchange on which registered
Common Shares, $0.003 par value per share
AFH
Nasdaq Stock Market
6.625% Senior Unsecured Notes due 2022
AFHBL
Nasdaq Stock Market

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging Growth Company    o 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange
Act. o  




Item 5.02 Departure of Directors or Certain Offices; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.

(e) On October 7, 2019, Atlas Financial Holdings, Inc. (the “Company”) and its wholly-owned subsidiary Anchor Group Management, Inc. entered into agreements regarding a newly adopted near term incentive program with certain senior executives of the Company, including each of Scott Wollney, Paul Romano and Leslie DiMaggio, the Company’s Chief Executive Officer, Chief Financial Officer and Vice President, Operations, respectively (each such individual, an “Executive,” and each such agreement, an “Agreement”).  Pursuant to the terms of the Agreements, each Executive is entitled to receive, under certain conditions, (i) a cash retention bonus equal to thirty percent (30%) of such Executive’s current base salary (which has not increased since 2017)(a “Retention Amount”), and (ii) an Incentive Amount of up to seventy percent (70%) of such Executive’s current base salary plus a set number of Company common shares (an “Incentive Amount”).

The Retention Amount will be paid in the first payroll period following December 31, 2020, provided the Executive remains employed by the Company or its subsidiaries through such date. In addition, to the extent that an Executive is terminated for any reason other than “for cause” on or before June 30, 2021 and is entitled to any severance amount under any then-existing Company policy, any Retention Amount previously paid will be deducted from any severance payment due.

The Incentive Amount will be paid incrementally (in proportionate amounts of cash and shares) only upon the competition of certain milestones within the eighteen (18) month period from the date of the Agreements; provided, however, that not more than one-sixth (1/6th) of the Incentive Amount will be paid in any quarter, with the first available evaluation period being in the fourth quarter of 2019. The milestones are the same for each Agreement and relate to the (i) transition of gross written paratransit premium pursuant to a previously announced agreement with American Financial Group ("AFG") and their subsidiary National Interstate Insurance Company (“NATL”), (ii) placement of gross written non-paratransit premium with alternative markets, (iii) progress with respect to the rehabilitation plan for the ASI Pool Companies (defined below) as represented by regulatory approval of certain expense sharing arrangements and related payments between the Company and its subsidiaries and (iv) sale or disposition of Company assets, all as further described in the Agreements.

The Retention Amount and maximum Incentive Amount for each Executive is as follows:

Executive
Base Salary
Retention Amount
Maximum Cash Incentive Amount
Maximum Shares Incentive Amount
Mr. Wollney
$450,000
$135,000
$315,000
145,000 Shares
Mr. Romano
$250,000
$75,000
$175,000
85,000 Shares
Ms. DiMaggio
$220,000
$66,000
$154,000
70,000 Shares

The terms of all Agreements, including the milestones, are the same other than the award amounts, as set forth above. A form of the Agreements is attached hereto as Exhibit 10.1, and the description of the Agreements set forth herein is qualified in its entirety by the terms of such Agreement.

Item 7.01. Regulation FD Disclosure.

As previously disclosed, the Company’s subsidiaries American Country Insurance Company (“ACIC”) and American Service Insurance, Inc. (“ASIC”) are subject to an agreed order of rehabilitation with the Illinois insurance regulator, and as of August 31, 2019 no new business is being written by such subsidiaries. As previously disclosed, it is expected that Gateway Insurance Company (“GIC,” and, together with ACIC and ASIC, the “ASI Pool Companies”) will also be placed into rehabilitation. Starting in October 2019, non-renewals related to in-force business written by the ASI Pool Companies were initiated consistent with requirements of the Illinois insurance regulator. Pursuant to regulatory requirements in each state where these companies have in-force business, non-renewal notices are being sent for effective dates beginning later this year. Non-renewals will continue for all business expiring throughout 2020.

In addition, certain states have taken action to suspend or terminate the insurance licenses of the Company’s insurance subsidiaries. Such action were not unanticipated given the order of rehabilitation by the Illinois regulator and related circumstances, and the Company does not believe the actions taken to date will have a material effect on the Company’s business or operations. These actions do not alter the Company's strategic plans. No regulatory restrictions have been placed on the Company’s managing general agency operation.





Item 9.01. Financial Statements and Exhibits.

(d) Exhibits.
10.1





SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
 
 
 
ATLAS FINANCIAL HOLDINGS, INC.
(Registrant)
 
By:
/s/ Paul A. Romano
 
Name:
Paul A. Romano
 
Title:
Vice President and Chief Financial Officer
 
 
October 11, 2019





EXHIBIT 10.1
Atlas financial holdings, inc.
This Agreement (the “Agreement”) constitutes the terms of a near-term incentive plan between _________________ (the “Executive”) and Anchor Group Management, Inc. (“AGMI”) a wholly owned indirect subsidiary of Atlas Financial Holdings, Inc. (“Atlas”). This Agreement applies to the period of employment from September 15, 2019 through December 31, 2020. The terms of this agreement are intended to provide incentives aligned with Atlas’ current business activities, challenges and retention objectives.
EMPLOYMENT
Title
_____________________________
INCENTIVE PLAN    
Annual Base Salary
$_____________ (the “Annual Base Salary”).
Retention/Severance    
A cash Retention Bonus equal to 30% of the Executive’s Annual Base Salary will be paid in the first payroll following December 31, 2020 provided the Executive remains employed by Atlas or one of its subsidiaries. To the extent that the Executive is terminated for any reason other than “for cause” on or before June 30, 2021 and entitled to severance, any amount paid under this retention payment will be deducted from any severance payment due. All other existing terms relating to severance remain unchanged.
Incentive    
An Available Incentive Amount will be established based on an amount of 70% of the Executive’s Annual Base Salary plus [ ] shares of AFH common stock. Actual amounts paid up to this Available Incentive Amount are to be based on achievement of Milestones as defined below.
Earned Incentive amounts will be paid in cash and stock from the Available Incentive Amount to the executive based on the successful completion of key business activities (“Milestones”) over the eighteen month period following the date of this agreement as follows. Each of these activities are considered to be critical to Atlas’ ongoing value creation, solvency and will increase cash flow for the enterprise:




Milestone
Earned Incentive Amount
Transition of at least $10 million of gross written paratransit premium to AFG/NATL via AGMI underwriting agreement.
2% of the Available Incentive Amount for every $5 million of GWP up to a total of 30% of the Available Incentive Amount
Written confirmation from insurance regulators regarding expense sharing between ASI Pool Companies and AGMI/AIAI and cash payment of at least $5 million along with continued commission payments from ASI Pool Companies to AGMI under the terms of the existing MGA agreement.
2% of the Available Incentive Amount for every $1 million AGMI expense allocated to insurance subsidiaries up to a total of 20% of the Available Incentive Amount
Placement of at least $10 million of non-paratransit gross written premiums to an alternative market via an MGA agreement with AGMI.
2% of the Available Incentive Amount for every $5 million of GWP up to a total of 30% of the Available Incentive Amount.
Sale or other disposition of an asset or assets generating cash/capital for AFH or a subsidiary.
3% of the cash/capital from the transaction(s) up to a total of 20% of the Available Incentive Amount

Not more than 1/6th of the Available Incentive Amount will be paid out in any quarter with first available quarterly payment date being September 30, 2019.
Subsequent Periods
It is anticipated that this agreement will be replaced prior to December 31, 2020 based on Atlas’ business plans at that time; however, any Milestones achieved prior to this date for which Earned Incentive Amounts have not been paid will be included in the next payroll following Board or Directors approval of same.
Bonus Determination
and Payment
The final determination of the Executive’s Earned Incentive Amounts will be subject to approval by the Board of Directors based on the terms provided for herein taking into account the recommendations of Atlas’ Chief Executive Officer and of its Compensation Committee, and will consider all aspects of the Executive’s and Atlas’ performance. Such amounts, subject to any timing and payment restrictions set out herein, shall be paid in cash not later than 30 days following the completion of a given Milestone.
Stock-Based
Compensation
The stock portion of the Available Incentive Amount will be issued subject to Atlas’ existing equity incentive plan.

This Agreement is intended to set out terms related to the retention and incentive plan to which the Executive is entitled during the eighteen month period subsequent to the date of this agreement. It does not otherwise modify pre-existing employment or severance agreements.