PRE 14A
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
(Rule 14a 101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(A) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant þ
Filed by a Party other than the Registrant o
Check the appropriate box:
þ Preliminary Proxy Statement
o Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
o Definitive Proxy Statement
o Definitive Additional Materials
o Soliciting Material Pursuant to Section 240.14a-12
ALLIED WORLD ASSURANCE COMPANY HOLDINGS, LTD
(Name of Registrant as Specified in Its Charter)
Not Applicable
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
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Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the
offsetting fee was paid previously. Identify the previous filing
by registration statement number, or the Form or Schedule and the
date of its filing. |
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Form, Schedule or Registration Statement No.: |
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ALLIED WORLD ASSURANCE COMPANY
HOLDINGS, LTD
27 Richmond Road
Pembroke HM 08, Bermuda
NOTICE OF 2008 ANNUAL GENERAL
MEETING
TO BE HELD ON MAY 8,
2008
March [ ],
2008
To Our Shareholders:
The 2008 Annual General Meeting of Allied World Assurance
Company Holdings, Ltd (the Company) will be held at
10:00 a.m., local time, on Thursday, May 8, 2008 at
the Companys corporate headquarters, 27 Richmond Road,
Pembroke HM 08, Bermuda, for the following purposes:
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To elect two Class I Directors to hold office until the
Companys Annual General Meeting in 2011 or until their
successors are duly elected and qualified or their office is
otherwise vacated;
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To approve certain individuals as eligible subsidiary directors
of certain of our
non-U.S. subsidiaries;
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To approve the Allied World Assurance Company Holdings, Ltd
Second Amended and Restated 2001 Employee Stock Option Plan;
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To approve the Allied World Assurance Company Holdings, Ltd
Second Amended and Restated 2004 Stock Incentive Plan;
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To approve the Allied World Assurance Company Holdings, Ltd 2008
Employee Share Purchase Plan;
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To approve and adopt the Second Amended and Restated Bye-laws of
Allied World Assurance Company Holdings, Ltd;
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To act on a proposal to appoint Deloitte & Touche as
the Companys independent auditors to serve until the
Companys Annual General Meeting in 2009; and
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To transact such other further business, if any, as lawfully may
be brought before the meeting.
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Only shareholders of record holding voting common shares, as
shown by the transfer books of the Company, as of the close of
business on March 12, 2008 are entitled to vote at the
Annual General Meeting and at any adjournment or postponement
thereof.
Please sign, date and return the enclosed proxy in the return
envelope furnished for that purpose, as promptly as possible,
whether or not you plan to attend the meeting. If you later
desire to revoke your proxy for any reason, you may do so in the
manner described in the attached Proxy Statement. For further
information concerning the individuals nominated as directors,
use of the proxy and other related matters, you are urged to
read the Proxy Statement on the following pages.
By Order of the Board of Directors,
Wesley D. Dupont
Secretary
TABLE OF
CONTENTS
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i
ALLIED WORLD ASSURANCE COMPANY
HOLDINGS, LTD
27 Richmond Road
Pembroke HM 08, Bermuda
PROXY STATEMENT
GENERAL
MEETING INFORMATION
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Why am I receiving these materials? |
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You are receiving these materials because you are a shareholder
of Allied World Assurance Company Holdings, Ltd (the
Company) as of the Record Date (as defined below).
The Board of Directors (the Board) of the Company is
soliciting the enclosed proxy to be voted at the 2008 Annual
General Meeting of the Companys shareholders to be held at
10:00 a.m., local time, on Thursday, May 8, 2008 at
the Companys corporate headquarters, 27 Richmond Road,
Pembroke HM 08, Bermuda, and at any adjournment or postponement
thereof (the Annual General Meeting). This Proxy
Statement summarizes the information you need to know to vote at
the Annual General Meeting. References in this Proxy Statement
to we, us and our refer to
Allied World Assurance Company Holdings, Ltd and our
consolidated subsidiaries, unless the context requires
otherwise. When the enclosed proxy card is properly executed and
returned, the Companys common shares, par value $0.03 per
share (the Common Shares), it represents will be
voted, subject to any direction to the contrary, at the Annual
General Meeting FOR the matters specified in the Notice
of Annual General Meeting attached hereto and described more
fully herein. |
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This Proxy Statement, the attached Notice of Annual General
Meeting and the enclosed proxy card are being first mailed to
shareholders on or about March [ ], 2008. A copy
of the Companys Annual Report to Shareholders for the
fiscal year ended December 31, 2007 accompanies this Proxy
Statement. Although the Annual Report and Proxy Statement are
being mailed together, the Annual Report is not part of this
Proxy Statement. |
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Who is entitled to vote? |
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The Board has set March 12, 2008, as the record date for
the Annual General Meeting (the Record Date).
Shareholders of record holding voting Common Shares (the
Voting Shares), as shown by the transfer books of
the Company as of the close of business on the Record Date, will
be entitled to vote at the Annual General Meeting and at any
adjournment or postponement thereof. Holders of non-voting
Common Shares (the Non-Voting Shares) will receive
this Proxy Statement but are not entitled to vote at the Annual
General Meeting and at any adjournment or postponement thereof.
As of March 12, 2008, there were outstanding
[ ] Voting
Shares and
[ ] Non-Voting
Shares. |
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What will I be voting on? |
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You are voting on seven items (collectively, the
proposals): |
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1. To elect two Class I directors to hold office until
the Companys Annual General Meeting in 2011 or until their
successors are duly elected and qualified or their office is
otherwise vacated;
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2. To approve certain individuals as eligible subsidiary
directors of certain of the Companys
non-U.S.
subsidiaries;
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3. To approve the Allied World Assurance Company Holdings,
Ltd Second Amended and Restated 2001 Employee Stock Option Plan;
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4. To approve the Allied World Assurance Company Holdings,
Ltd Second Amended and Restated 2004 Stock Incentive Plan;
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5. To approve the Allied World Assurance Company Holdings,
Ltd 2008 Employee Share Purchase Plan;
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6. To approve and adopt the Second Amended and Restated
Bye-laws of Allied World Assurance Company Holdings, Ltd; and
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7. To act on a proposal to appoint Deloitte &
Touche as the Companys independent auditors to serve until
the Companys Annual General Meeting in 2009.
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You may also vote on any other business that properly comes
before the meeting. |
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What are the voting recommendations of the Board? |
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Your Board unanimously recommends that you vote: |
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1. FOR each of the nominees to the Board;
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2. FOR each slate of eligible subsidiary directors;
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3. FOR approval of the Allied World Assurance
Company Holdings, Ltd Second Amended and Restated 2001 Employee
Stock Option Plan;
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4. FOR approval of the Allied World Assurance
Company Holdings, Ltd Second Amended and Restated 2004 Stock
Incentive Plan;
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5. FOR approval of the Allied World Assurance
Company Holdings, Ltd 2008 Employee Share Purchase Plan;
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6. FOR approval and adoption of the Second Amended
and Restated Bye-laws of Allied World Assurance Company
Holdings, Ltd; and
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7. FOR the appointment of Deloitte &
Touche as the Companys independent auditors.
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How many votes do I have? |
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Holders of Voting Shares are entitled to one vote per share on
each matter to be voted upon by the shareholders at the Annual
General Meeting. |
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How do I vote? |
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The manner in which your shares may be voted depends on how your
shares are held. If you own shares of record, meaning that your
Voting Shares are represented by certificates or book entries in
your name so that you appear as a shareholder on the records of
the Companys share transfer agent, Continental Stock
Transfer & Trust Company, a proxy card for voting
those shares will be included with this Proxy Statement. You may
direct how your shares are to be voted by completing, signing
and returning the proxy card in the enclosed envelope. If you
own shares of record, you may also vote your Voting Shares in
person at the Annual General Meeting. |
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If you own shares through a bank or brokerage firm, you may
instead receive from your bank or brokerage firm a voting
instructions form with this Proxy Statement that you may use to
instruct how your shares are to be voted. As with a proxy card,
you may direct how your shares are to be voted by completing,
signing and returning the voting instructions form in the
envelope provided. Many banks and brokerage firms have arranged
for Internet or telephonic voting of shares and provide
instructions for using those services on the voting instruction
form. If you want to vote your shares in person at the meeting,
you must obtain a proxy from your bank or broker giving you the
right to vote your Voting Shares at the Annual General Meeting. |
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The Company has requested that brokerage and other custodians,
nominees and fiduciaries forward solicitation materials to the
beneficial owners of Voting Shares and will reimburse the
brokers and other fiduciaries for their reasonable out-of-pocket
expenses for forwarding the materials. |
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What does it mean if I receive more than one proxy card? |
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Generally, it means that you hold shares registered in more than
one account. To ensure that all of your shares are voted, sign
and return each proxy card you receive. |
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What happens if I do not indicate how to vote by proxy? |
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If no instructions are provided in an executed proxy, the Voting
Shares represented by the proxy will be voted at the Annual
General Meeting FOR each of the proposals, and, as to any other
business as may properly come before the Annual General Meeting,
in accordance with the proxyholders judgment as to such
business. |
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How are abstentions and broker non-votes
treated? |
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Abstentions and broker non-votes will be counted
toward the presence of a quorum at, but will not be considered
votes cast on any of the proposals brought before, the Annual
General Meeting. Therefore, abstentions and broker
non-votes will have no effect on the outcome of any
proposal brought before the Annual General Meeting. |
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Can I change my vote after I have mailed my signed proxy card
or otherwise instructed how my shares are to be voted? |
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Yes. Any shareholder giving a proxy may revoke it prior to its
exercise by providing the Secretary of the Company with written
notice of revocation, by voting in person at the Annual General
Meeting or by executing a later-dated proxy; provided,
however, that the action is taken in sufficient time to
permit the necessary examination and tabulation of the
subsequent proxy or revocation before the vote is taken. |
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Attendance at the Annual General Meeting by a shareholder who
has executed and delivered a proxy to us shall not in and of
itself constitute a revocation of such proxy. Only your vote at
the Annual General Meeting will revoke your proxy. |
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How does the voting take place at the Annual General
Meeting? |
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A vote by poll will be taken on all matters properly brought
before the Annual General Meeting. On a vote by poll, each
shareholder present who elects to vote in person and each person
holding a valid proxy is entitled to one vote for each Voting
Share owned or represented. |
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The nominees for election as Class I Directors of the
Company at the Annual General Meeting who receive the highest
number of FOR votes will be elected as directors.
This is called plurality voting; an absolute majority of the
votes cast is not a prerequisite to election. |
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All other proposals require the affirmative FOR vote
of a majority of the votes cast at the Annual General Meeting. |
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Are there any voting restrictions? |
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Each Voting Share entitles the holder of record on such date to
one vote on a poll; provided, however, if the number of
Controlled Shares of any holder would constitute 10%
or more of the total combined voting power of the issued Voting
Shares (such holder, a 10% Shareholder), such holder
will have the voting rights attached to its Voting Shares
reduced to less than 10% of the total voting rights attached to
the outstanding Voting Shares, in the manner provided in the
Companys Amended and Restated Bye-Laws (the
Bye-Laws). Controlled Shares of any
person refers to all Voting Shares owned by such person, whether
(i) directly; (ii) with respect to persons who are
United States persons, by application of the attribution and
constructive ownership rules of Section 958(a) and 958(b)
of the U.S. Internal Revenue Code of 1986 (the
Code); or (iii) beneficially, directly or
indirectly, within the meaning of Section 13(d)(3) of the
U.S. Securities Exchange Act of 1934, as amended (the
Exchange Act), and the rules and regulations
thereunder. |
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As of the date of this Proxy Statement, the Company is not aware
of any shareholders that possess Controlled Shares requiring a
reduction in their voting power to less than 10%; however, the
applicability of the foregoing provisions may have the effect of
increasing another shareholders voting power to 10% or
more, thereby requiring a corresponding reduction in such other
shareholders voting power. The Companys Bye-Laws
exclude from the calculation of the 10%-voting power limitation
described in the preceding paragraph any Voting Shares owned by
a bank, broker, dealer or investment adviser that does not have
or exercise the power to vote those shares and that has only a
passive investment intent as reflected in its ability to file
beneficial ownership reports on Schedule 13G under the
Exchange Act with respect to the Voting Shares it holds. Because |
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the applicability of the voting power reduction provisions to
any particular shareholder depends on facts and circumstances
that may be known only to the shareholder or related persons,
the Company requests that any holder of Voting Shares with
reason to believe that it is a 10% Shareholder within the
meaning of the Bye-Laws please contact the Secretary of the
Company promptly so that the Company may determine whether the
voting power of such holders Voting Shares should be
reduced. By submitting a proxy, a holder of Voting Shares will
be deemed to have confirmed that, to its knowledge, it is not,
and is not acting on behalf of, a 10% Shareholder. The directors
are empowered to require any shareholder to provide information
as to that shareholders legal or beneficial share
ownership, the names of persons having beneficial ownership of
the shareholders shares, relationships with other
shareholders or persons or any other facts the directors may
deem relevant to a determination of the number of Controlled
Shares attributable to any person. The directors may disregard
the votes attached to shares of any holder failing to respond to
such a request or submitting incomplete or untrue information.
The directors retain certain discretion to make such final
adjustments as to the aggregate number of votes attaching to the
Voting Shares of any shareholder that they consider fair and
reasonable in all the circumstances to ensure that no person
will be a 10% Shareholder at any time. |
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How many votes are required to transact business at the
Annual General Meeting? |
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A quorum is required to transact business at the Annual General
Meeting. Without giving effect to the limitation on voting
rights described above, the quorum required at the Annual
General Meeting is two or more persons present in person and
representing in person or by proxy more than 50% of the total
issued and outstanding Voting Shares. |
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What else will happen at the Annual General Meeting? |
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At the Annual General Meeting, shareholders will also receive
the report of the Companys independent auditors and the
Companys financial statements for the year ended
December 31, 2007. |
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Who pays the costs of soliciting proxies? |
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The cost of solicitation of proxies will be borne by the
Company. Solicitation will be made by mail, and may be made by
the Companys directors, officers and employees, personally
or by telephone, facsimile or other electronic means, for which
the Companys directors, officers and employees will not
receive any additional compensation. Proxy cards and materials
also will be distributed to beneficial owners of Voting Shares
through brokers, custodians, nominees and other parties, and the
Company expects to reimburse such parties for their charges and
expenses. D.F. King & Co., Inc. and W.F.
Doring & Co., Inc. have been retained to assist the
Company in the solicitation of proxies at a fee not expected to
exceed $6,500 and $1,500, respectively, plus out-of-pocket
expenses. |
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How may I receive a copy of the Companys Annual Report
on
Form 10-K? |
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The Company will furnish without charge to any shareholder, a
copy of the Companys Annual Report on
Form 10-K
for the year ended December 31, 2007, filed with the
Securities and Exchange Commission (SEC). A copy of
such report may be obtained upon written request to the Company
at 27 Richmond Road, Pembroke HM 08, Bermuda, Attention:
Wesley D. Dupont, Secretary. Each such request must
include a representation that, as of March 12, 2008, the
person making the request was a beneficial owner of Common
Shares entitled to vote at the Annual General Meeting. The
Annual Report on
Form 10-K,
and all of the Companys filings with the SEC, can be
accessed through our website at www.awac.com under the SEC
Filings link located in the section entitled
Investor Relations. As permitted by the SECs
rules, the Company will not furnish any exhibits to its Annual
Report on
Form 10-K
without charge, but will provide along with such report a list
of such exhibits and information about its charges for providing
them. |
4
ELECTION
OF DIRECTORS
(Item A on Proxy Card)
The Board is divided into three classes of directors,
Class I, Class II and Class III, each of
approximately equal size. Two director nominees are being
presented for election at the Annual General Meeting to serve as
Class I Directors until the Annual General Meeting in 2011
or until their successors are duly elected and qualified or
their office is otherwise vacated. All of the nominees are
current members of the Board. Such nominees were recommended for
appointment to the Board by the Nominating & Corporate
Governance Committee of the Board.
Your Board recommends a vote FOR each of the nominees listed
on the enclosed proxy card. It is not expected that any of
the nominees will become unavailable for election as a director
but, if any nominee should become unavailable prior to the
meeting, proxies will be voted for such persons as your Board
shall recommend.
The name, age, principal occupation and certain other
information concerning each nominee is set forth below.
Mark R. Patterson (age 56) was appointed to the
Board in March 2006. Since 2002, Mr. Patterson has served
as Chairman of MatlinPatterson Asset Management, which manages
distressed investment funds. From 1994 until 2002,
Mr. Patterson was a Managing Director of Credit Suisse
First Boston Corporation, where he served as Vice Chairman from
2000 to 2002. Mr. Patterson had 20 years prior
experience in commercial and investment banking at Bankers
Trust, Salomon Brothers and Scully Brothers & Foss.
Mr. Patterson is currently a member of the board of
directors of Broadpoint Securities Group, Inc.
Samuel J. Weinhoff (age 57) was appointed to
the Board in July 2006. Mr. Weinhoff has served as a
consultant to the insurance industry since 2000. Prior to this,
Mr. Weinhoff was head of the Financial Institutions Group
for Schroder & Co. from 1997 until 2000. He was also a
Managing Director at Lehman Brothers, where he worked from 1985
to 1997. Mr. Weinhoff had ten years prior experience at
Home Insurance Company and the Reliance Insurance Company in a
variety of positions, including excess casualty reinsurance
treaty underwriter, investment department analyst, and head of
corporate planning and reporting. Mr. Weinhoff is currently
a member of the board of directors of Infinity Property and
Casualty Corporation where he is a member of both the Executive
Committee and the Audit Committee, and of Inter-Atlantic
Financial, Inc. where he is a member of both the Audit Committee
and Nominating Committee.
The following individuals are the Companys continuing
directors:
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Name
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Term Expires
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Scott A. Carmilani
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Class III Director
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2009
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James F. Duffy
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Class III Director
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2009
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Bart Friedman
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Class III Director
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2009
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Michael I.D. Morrison
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Class II Director
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2010
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Scott Hunter
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Class II Director
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2010
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It is with deep regret that the Company reports the passing of
Mr. Philip D. DeFeo. As a Board member of the Company,
Mr. DeFeo provided invaluable guidance to the Company.
Scott A. Carmilani (age 43) was elected our
President and Chief Executive Officer in January 2004 and became
a director in September 2003. As of January 1, 2008,
Mr. Carmilani was also appointed Chairman of the Board.
Mr. Carmilani was, prior to joining our Company as
Executive Vice President in February 2002, the President of the
Mergers & Acquisition Insurance Division of
subsidiaries of American International Group, Inc.
(AIG) and responsible for the management, marketing
and underwriting of transactional insurance products for clients
engaged in mergers, acquisitions or divestitures.
Mr. Carmilani was previously the Regional Vice-President
overseeing the New York general insurance operations of AIG.
Before that he was the Divisional President of the Middle Market
Division of National Union Fire Insurance Company of Pittsburgh,
Pa., which underwrites directors and officers liability,
employment practice liability and fidelity insurance for
middle-market-sized companies. Prior to joining our Company, he
held a succession of underwriting and management positions with
subsidiaries of AIG since 1987.
5
James F. Duffy (age 64) was appointed to the
Board in July 2006. Mr. Duffy retired in 2002 as Chairman
and Chief Executive Officer of The St. Paul Reinsurance Group,
where he originally served from 1993 until 2000 as President and
Chief Operating Officer of global reinsurance operations. Prior
to this, Mr. Duffy served as an executive vice president of
The St. Paul Companies from 1984 to 1993, and as President and
Chief Operating Officer of St. Paul Surplus Lines Insurance
Company from 1980 until 1984. Mr. Duffy had 15 years
prior experience in insurance underwriting with Employers
Surplus Lines Insurance Company, First State Insurance Company
and New England Re.
Bart Friedman (age 63) was appointed to the
Board in March 2006 and was elected Deputy Chairman of the Board
effective in July 2006. As of January 1, 2008,
Mr. Friedman was also appointed Lead Independent Director
of the Board. Mr. Friedman has been a partner at Cahill
Gordon & Reindel LLP, a New York law firm, since 1980.
Mr. Friedman specializes in corporate governance, special
committees and director representation. Mr. Friedman worked
early in his career at the SEC. Mr. Friedman is currently a
member of the board of directors of Sanford Bernstein Mutual
Funds, where he is a member of the Audit Committee and the
Nominating and Governance Committee.
Michael I.D. Morrison (age 78) has been one of
our directors since November 2001 and served as Chairman of the
Board from July 2006 through December 2007. He currently also
serves as a consultant to the Company. Mr. Morrison was our
Vice Chairman from January 2004 to October 2004. Prior to this,
Mr. Morrison served as our President and Chief Executive
Officer from the inception of our Company in November 2001. He
also served as a consultant to AIG from July 1997 to November
2001. Before this, he held various positions with AIG or its
subsidiaries, including Vice Chairman of American Home Assurance
Company and Senior AIG Executive for broker relations. He also
served as General Manager for American International
Underwriters Overseas Associations China Division from
July 1994 to June 1997, where he was based in Shanghai. He also
served as Director of Domestic Branch Operations from 1983 to
1988, President of American Home Assurance Company from 1978 to
1983 and President of Commerce and Industry Insurance Company
from 1976 to 1978. Mr. Morrison joined the
property-underwriting department of American Home Assurance
Company in 1964 and was appointed manager in 1969. He was a
broker and an underwriter in the Lloyds market from 1953
to 1959, and a New York broker from 1959 to 1963.
Scott Hunter (age 56) was appointed to the
Board in March 2006. Mr. Hunter has served as an
independent consultant to Bermudas financial services
industry since 2002. From 1986 until 2002, Mr. Hunter was a
partner at Arthur Andersen Bermuda, whose clients included
numerous insurance and reinsurance companies.
The Board has determined that Messrs. Duffy, Friedman,
Hunter, Patterson and Weinhoff are independent under the listing
standards of the New York Stock Exchange (NYSE). The
Company requires that a majority of its directors meet the
criteria for independence under applicable law and the rules of
the NYSE. The Board has adopted a policy to assist it and the
Nominating & Corporate Governance Committee in their
determination as to whether a nominee or director qualifies as
independent. This policy contains categorical standards for
determining independence and includes the independence standards
required by the SEC and NYSE as well as standards published by
institutional investor groups and other corporate governance
experts. In making its determination of independence, the Board
applied these standards for director independence and determined
that no material relationship existed between the Company and
these directors. A copy of the Board Policy on Director
Independence was attached as an appendix to the Companys
Proxy Statement filed with the SEC on October 19, 2006.
Meetings
and Committees of the Board
During the year ended December 31, 2007, there were five
meetings of the Board (including regularly scheduled and special
meetings). Each of our directors attended at least 75% of the
aggregate Board meetings and committee meetings of which he was
a member during the period he served on the Board, except for
Messrs. Patterson and Weinhoff. Our non-management
directors meet separately from the other directors in an
executive session at least quarterly.
6
Mr. Carmilani, our President and Chief Executive Officer,
was appointed Chairman of the Board in January 2008. Concurrent
with this appointment, the Board appointed Mr. Friedman,
our Deputy Chairman of the Board, to serve as its Lead
Independent Director. The Lead Independent Directors
responsibilities include:
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organizing and presiding over all meetings of the Board at which
the Chairman of the Board is not present, including all
executive sessions of the non-management and independent
directors;
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serving as the liaison between the Chairman of the Board and the
non-management directors;
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overseeing the information sent to the Board by management;
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assisting the Chairman of the Board in setting meeting agendas
and schedules for the Board to assure that there is sufficient
time for discussion of all agenda items;
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facilitating communication between the Board and management;
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being available to communicate with and respond to certain
inquiries of the Companys shareholders; and
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performing such other duties as requested by the Board.
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Michael I.D. Morrison, our Chairman of the Board during 2007,
served as the presiding director of the executive sessions of
our non-management directors held in 2007. As Mr. Morrison
is not an independent director, in accordance with NYSE
Rule 303A.03, we held one executive session in 2007 with
only our independent directors. During this executive session,
Mr. Friedman, our Deputy Chairman of the Board, served as
the presiding director.
Our Board has established an Audit Committee, a Compensation
Committee, an Executive Committee, an Investment Committee and a
Nominating & Corporate Governance Committee, each of
which reports to the Board. During 2007, the Audit Committee
held five meetings, the Compensation Committee held five
meetings, the Nominating & Corporate Governance
Committee held four meetings, the Executive Committee held no
meetings and the Investment Committee held four meetings. The
Board has adopted an Audit Committee Charter, a Compensation
Committee Charter, an Investment Committee Charter and a
Nominating & Corporate Governance Committee Charter.
Copies of these charters are available on our website at
www.awac.com under Corporate Governance
Charters. Printed copies are also available by sending a
written request to the Companys Secretary.
Our Board has also approved Corporate Governance Guidelines, a
Code of Business Conduct and Ethics and a Code of Ethics for
Chief Executive Officer and Senior Financial Officers. The
foregoing information is available on our website at
www.awac.com under Corporate Governance
Guidelines and Corporate Governance
Codes of Ethics. Printed copies are also available by
sending a written request to the Companys Secretary.
Audit Committee. The Audit Committee presently
consists of Messrs. Hunter (Chairman), Duffy and Weinhoff,
each of whom is an independent director. Pursuant to its
charter, the Audit Committee is responsible for overseeing our
independent auditors, internal auditors, compliance with legal
and regulatory standards and the integrity of our financial
reporting. Each of Messrs. Hunter, Duffy and Weinhoff has
been determined by the Board to be financially
literate within the meaning of the NYSE Listing Standards
and each has been designated by the Board as an audit
committee financial expert, as defined by applicable rules
of the SEC, based on either his extensive prior accounting and
auditing experience or having a range of experience in varying
executive positions in the insurance or financial services
industry.
Compensation Committee. The Compensation
Committee presently consists of Messrs. Patterson
(Chairman), Friedman and Hunter. The Compensation Committee is
comprised entirely of independent directors. Pursuant to its
charter, the Compensation Committee has the authority to
establish compensation policies and recommend compensation
programs to the Board, including administering all stock option
plans and incentive compensation plans of the Company.
Executive Committee. The Executive Committee
presently consists of Messrs. Carmilani (Chairman), Duffy
and Weinhoff. The Executive Committee has the authority to
oversee the general business and affairs of the Company to the
extent permitted by Bermuda law.
7
Investment Committee. The Investment Committee
presently consists of Messrs. Patterson (Chairman), Hunter
and Weinhoff. The Investment Committee is comprised entirely of
independent directors. Pursuant to its charter, the Investment
Committee is responsible for establishing investment guidelines
and supervising our investment activity.
Nominating & Corporate Governance
Committee. The Nominating & Corporate
Governance Committee consists of Messrs. Friedman
(Chairman), Duffy and Hunter. The Nominating &
Corporate Governance Committee is comprised entirely of
independent directors. Pursuant to its charter, the
Nominating & Corporate Governance Committee is
responsible for identifying individuals believed to be qualified
to become directors and to recommend such individuals to the
Board and to set compliance policies and corporate governance
standards.
The Nominating & Corporate Governance Committee will
consider nominees recommended by shareholders and will evaluate
such nominees on the same basis as all other nominees.
Shareholders who wish to submit nominees for director for
consideration by the Nominating & Corporate Governance
Committee for election at the Annual General Meeting in
2009 may do so by submitting in writing such nominees
names and other information required under Bye-law 34(2) of the
Companys Bye-laws, in compliance with the procedures
described under Shareholder Proposals for 2009 Annual
General Meeting in this Proxy Statement.
The criteria adopted by the Board for use in evaluating the
suitability of all nominees for director include the following:
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high personal and professional ethics, values and integrity;
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education, skill and experience with insurance, reinsurance or
other businesses and organizations that the Board deems relevant
and useful;
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ability and willingness to serve on any committees of the
Board; and
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ability and willingness to commit adequate time to the proper
functioning of the Board and its committees.
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In addition to considering candidates suggested by shareholders,
the Nominating & Corporate Governance Committee
considers candidates recommended by current directors, Company
officers and others. The Nominating & Corporate Governance
Committee determines whether or not the candidate meets the
Companys general qualifications and specific qualities for
directors and whether or not additional information is
appropriate.
Director
Compensation
The following table provides information concerning the
compensation of the Companys non-employee directors for
fiscal year 2007.
Non-Employee
Directors Compensation
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Fees
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Earned or
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Paid in
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Stock
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All Other
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Name
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Cash
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Awards(1)
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Compensation
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Total(4)
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Michael I.D. Morrison
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$
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59,000
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$
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149,989
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(2)
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$
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158,771
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(3)
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$
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367,760
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Bart Friedman
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$
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74,000
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$
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83,723
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$
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157,723
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Philip D. DeFeo
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$
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64,500
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$
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64,989
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$
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129,489
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James F. Duffy
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$
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66,000
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$
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81,241
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$
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147,241
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Scott Hunter
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$
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94,500
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$
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83,723
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$
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178,223
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Mark R. Patterson
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$
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76,000
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$
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83,723
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$
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159,723
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Samuel J. Weinhoff
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$
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58,500
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$
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81,241
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$
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139,741
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(1) |
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As of December 31, 2007, an aggregate of 26,791 restricted
stock units (RSUs) were outstanding and held by our
non-employee directors as follows: Mr. Morrison holds an
aggregate of 11,494 RSUs; Mr. Friedman holds an aggregate
of 3,147 RSUs; Mr. Duffy holds an aggregate of 2,928 RSUs;
Mr. Hunter holds an aggregate of |
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3,147 RSUs; Mr. Patterson holds an aggregate of 3,147 RSUs;
and Mr. Weinhoff holds an aggregate of 2,928 RSUs. All of
Mr. DeFeos 1,494 RSUs vested upon his death in
November 2007 in accordance with the terms of the Allied World
Assurance Company Holdings, Ltd Amended and Restated 2004 Stock
Incentive Plan (the Stock Incentive Plan). In March
2006, Messrs. Friedman, Hunter and Patterson each received
2,204 RSUs and in July 2006, Messrs. Duffy and Weinhoff
each received 1,912 RSUs. The RSUs issued in March 2006 to
Messrs. Friedman, Hunter and Patterson were revalued in
July 2006 as a result of a modification to the Stock Incentive
Plan combined with the initial public offering of our Common
Shares (the IPO). The revised grant date fair value
of each of these RSUs was based on the IPO price of $34.00 per
share, and totaled $74,936 for each of these directors. The RSUs
issued to Messrs. Duffy and Weinhoff in July 2006 had a
grant date fair value of $34.00 per RSU for a fair value of
$65,000 for each of these directors. On January 3, 2007,
Messrs. DeFeo, Duffy, Friedman, Hunter, Morrison, Patterson
and Weinhoff each received 1,494 RSUs as part of their director
compensation arrangement. The grant date fair value of each of
these RSUs was $43.50 per RSU, based on the closing price of the
Common Shares on the NYSE on such date, for a total fair value
of approximately $65,000 per individual grant. The total stock
award compensation expense recorded in this table represents the
accounting expense recognized in the consolidated financial
statements of the Company in accordance with the Statement of
Financial Accounting Standards No. 123(R) Share Based
Payment (FAS 123(R)) and does not
correspond to the actual value that may be recognized by each
director. For additional information on the calculation of the
compensation expense, please refer to note 9(b) of the
Companys consolidated financial statements contained in
the
Form 10-K
for the year ended December 31, 2007, as filed with the SEC. |
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(2) |
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Mr. Morrison received 10,000 RSUs in May 2004 when he was
our Vice Chairman. To date, no portion of these RSU awards has
vested. These RSUs were revalued in July 2006 as a result of a
modification in the Stock Incentive Plan combined with the IPO.
Their total fair value of $340,000 is being expensed on a
straight-line basis over the four-year vesting period from May
2004 in accordance with FAS 123(R). The total stock award
compensation expense recorded in this table represents the
accounting expense recognized in the consolidated financial
statements of the Company in accordance with FAS 123(R) and
does not correspond to the actual value that may be recognized
by this director. |
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(3) |
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In October 2004, we entered into a consulting agreement with
Mr. Morrison, who presently serves on our Board, pursuant
to which he receives $150,000 annually. In 2007, we also paid
health benefits on behalf of Mr. Morrison and his wife.
These amounts are shown in the All Other
Compensation column above. |
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(4) |
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In 2007, our non-employee directors received no non-equity
incentive plan compensation. In addition, in 2007, we did not
have any pension or deferred compensation plans for our
non-employee directors. Accordingly, these columns are not
included in the Non-Employee Directors Compensation
table above. |
Since March 1, 2006, directors who are not our employees
have been paid the following aggregate fees for serving as
directors of both the Company and Allied World Assurance
Company, Ltd:
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$45,000 annually for serving as a director; and
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$1,500 per meeting attended by a director (meetings of the
Company and Allied World Assurance Company, Ltd held on the same
day are considered one meeting for the purpose of calculating
attendance fees).
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Additionally, we provide to all non-employee directors
reimbursement of expenses incurred in connection with their
service on the Board, including the reimbursement of director
educational expenses. Commencing in January 2007, each
non-employee director receives an annual equity award of RSUs of
the Company worth $65,000. Each RSU represents the right to
receive one newly-issued, fully paid and non-assessable Common
Share of the Company at a future date and fully vests on the
first anniversary of the date of grant. The RSUs were, and will
be, awarded to our non-employee directors pursuant to the Stock
Incentive Plan and were, and will be, granted on similar terms
and conditions as those granted to our employees generally. On
January 3, 2007, each of our non-employee directors
received 1,494 RSUs. In 2008, these annual equity awards were
granted concurrently with the grant of equity awards to members
of our senior management following the preparation and
completion of the 2007 year-end financial statements.
Accordingly, on February 28, 2008, each of our non-employee
directors received 1,502 RSUs.
The Compensation Committee recently approved an increase in the
annual fee that the non-employee directors on the Board are
entitled to receive. Commencing in 2008, each non-employee
director will receive an aggregate
9
annual retainer of $55,000 for serving as a director of the
Company and Allied World Assurance Company, Ltd. The meeting
attendance fees and the dollar amount of RSU awards to be
granted annually to the non-employee directors remain unchanged.
Committee
Fees
An attendance fee of $1,500 is paid to each committee member who
is not an employee of the Company for attendance at committee
meetings thereof. Committee meetings of the Company and Allied
World Assurance Company, Ltd held on the same day are considered
one meeting for the purpose of calculating attendance fees.
The Chairman of a committee of the Board also serves as the
Chairman of the same committee of the board of directors of
Allied World Assurance Company, Ltd, and receives one retainer,
paid annually, for such service. The Chairman of the Audit
Committee of both the Company and Allied World Assurance
Company, Ltd received an annual retainer of $15,000 in 2007. All
other committee chairmen of both the Company and Allied World
Assurance Company, Ltd receive an annual retainer of $8,000.
The Compensation Committee recently approved changes to the
annual retainers received by committee chairmen and other
non-employee directors on the Board. Commencing in 2008, the
Chairman of the Audit Committee of both the Company and Allied
World Assurance Company, Ltd will receive an annual retainer of
$25,000, and each other member of the Audit Committee will
receive an annual retainer of $10,000. In addition, our Lead
Independent Director will receive an annual retainer of $15,000.
Stock
Ownership Policy
In order to promote equity ownership and further align the
interests of the Board with our shareholders, in 2007 the Board
adopted a stock ownership policy for all non-employee directors.
Under this policy, non-employee directors are expected to own,
within five years after his joining the Board, equity interests
of the Company with a value equal to five times the then-current
annual cash retainer for serving on the Board.
Mr. Carmilani, our President, Chief Executive Officer and
Chairman of the Board, is subject to a stock ownership policy
for senior employees as described in Executive
Compensation Compensation Discussion and
Analysis Stock Ownership Policy.
APPROVAL
OF ELIGIBLE SUBSIDIARY DIRECTORS
(Item B on Proxy Card)
In accordance with our Bye-Laws, no person may be elected as a
director of any of the Companys
non-U.S. subsidiaries
(excluding Allied World Assurance Company, Ltd) unless such
person has been approved by the Companys shareholders. The
individuals identified below have been nominated to serve as
Eligible Subsidiary Directors for certain of our
non-U.S. subsidiaries.
Your Board recommends a vote FOR each slate of nominees
listed as Eligible Subsidiary Directors on the enclosed proxy
card. It is not expected that any of the nominees will
become unavailable for approval as an Eligible Subsidiary
Director but, if any nominee should become unavailable prior to
the meeting, proxies will be voted for such persons as your
Board shall recommend.
Allied World Assurance Holdings (Ireland) Ltd
Scott A. Carmilani
John Clifford
Wesley D. Dupont
Hugh Governey
Michael I.D. Morrison
John T. Redmond
10
Allied World Assurance Company (Europe) Limited
J. Michael Baldwin
Scott A. Carmilani
John Clifford
Hugh Governey
Michael I.D. Morrison
John T. Redmond
Allied World Assurance Company (Reinsurance)
Limited
J. Michael Baldwin
Scott A. Carmilani
John Clifford
Hugh Governey
Michael I.D. Morrison
John T. Redmond
Newmarket Administrative Services (Bermuda), Ltd
Scott A. Carmilani
Joan H. Dillard
Wesley D. Dupont
Richard E. Jodoin
Newmarket Administrative Services (Ireland) Limited
Scott A. Carmilani
John Clifford
Hugh Governey
John T. Redmond
J. Michael Baldwin (age 66) served as
Managing Director of Allied World Assurance Company (Europe)
Limited and Allied World Assurance Company (Reinsurance) Limited
from November 2001 through July 2006. Mr. Baldwin worked
for The Chubb Corporation (Chubb) for almost
30 years, starting in 1972. From 1997 to November 2001,
Mr. Baldwin worked for Chubbs European Commercial
Insurance Division in London and was elected Senior Vice
President of Chubb Insurance Company of Europe in 1998. From
1991 to 1997, Mr. Baldwin was the Zone Underwriting Officer
for Latin America and was elected Vice President in 1996. From
1988 to 1991, Mr. Baldwin managed Chubbs operations
in Italy and from 1984 to 1988, he worked at Chubb U.S. as
Home Foreign Manager and Underwriting Officer for Asia/Pacific.
Prior to that, Mr. Baldwin held various underwriting and
managerial positions at Chubb in Latin America. From 1962 to
1972, Mr. Baldwin worked for Royal Insurance in both the
United Kingdom and Venezuela.
Scott A. Carmilani. Please see
Mr. Carmilanis biography under Election of
Directors elsewhere in this Proxy Statement.
John Clifford (age 58) has been a non-executive
director of Allied World Assurance Company (Reinsurance) Limited
since July 2004. From 1967 to date, Mr. Clifford has held
various positions at the Bank of Ireland, including Group
Secretary since 2003 to present; General Manager, Group Chief
Executive Officers Office, from 2000 to 2003; Executive
Director GB (London Based), responsible for the Banks
commercial banking activities in Britain, from 1990 to 1999;
General Manager, Group Credit Control, from 1987 to 1989; Group
Chief Internal Auditor from 1985 to 1987; and Assistant General
Manager Banking from 1983 to 1985. Mr. Clifford is a
non-executive director of Irish Clearing House Ltd and a number
of subsidiary companies within the Bank of Ireland Group. He is
a fellow of the Institute of Bankers and a member of the
Institute of Directors.
Wesley D. Dupont (age 39) is our Senior Vice
President, General Counsel and Secretary. In November 2003,
Mr. Dupont began working for American International Company
Limited, a subsidiary of AIG, and began providing legal services
to us pursuant to a former administrative services contract with
American International Company
11
Limited. Through that contract, Mr. Dupont served as our
Senior Vice President, General Counsel and Secretary from April
2004 until November 30, 2005. As of December 1, 2005,
Mr. Dupont became an employee of our Company. Prior to
joining American International Company Limited, Mr. Dupont
worked as an attorney at Paul, Hastings, Janofsky &
Walker LLP, a large international law firm, where he specialized
in general corporate and securities law. From April 2000 to July
2002, Mr. Dupont was a Managing Director and the General
Counsel for Fano Securities, LLC, a specialized securities
brokerage firm. Prior to that, Mr. Dupont worked as an
attorney at Kelley Drye & Warren LLP, another large
international law firm, where he also specialized in general
corporate and securities law.
Joan H. Dillard, CMA (age 56), is our Senior Vice
President and Chief Financial Officer. In April 2003,
Ms. Dillard began working for American International
Company Limited, a subsidiary of AIG, and began providing
accounting services to us pursuant to a former administrative
services contract with American International Company Limited.
Through that contract, Ms. Dillard served as our Vice
President and Chief Accounting Officer until November 30,
2005. As of December 1, 2005, Ms. Dillard became an
employee of our Company. From August 2001 until December 2002,
Ms. Dillard served as the Chief Financial Officer of
Worldinsure Ltd., an insurance technology provider. From May
2000 until April 2001, Ms. Dillard served as the Chief
Operating Officer and Chief Financial Officer of CICcorp Inc., a
medical equipment service provider. From March 1998 until May
2000, Ms. Dillard served as the Chief Financial Officer of
ESG Re Limited, based in Hamburg, Germany, and from 1993 until
1998, Ms. Dillard worked for TIG Holdings, Inc. and served
as the Chief Financial Officer of TIG Retail Insurance and later
as the Senior Vice President of Alternative Distribution. Prior
to that, Ms. Dillard served in various senior financial
positions at both USF&G Corporation and American General
Corporation. Ms. Dillard is currently a member of the board
of directors of RAM Holdings Ltd. where she is a member of the
Compensation Committee.
Hugh Governey (age 65) served as a
non-executive director of Coyle Hamilton Willis Holdings, Ltd.,
a subsidiary of Willis Group Holdings Ltd., a NYSE-traded
company, from August 2005 through December 2007, when he
retired. From 2004 to 2005, Mr. Governey was the Chief
Executive Officer of Coyle Hamilton Willis Holdings Ltd. From
2000 to 2004, Mr. Governey was the Chief Executive Officer
of Coyle Hamilton Holdings Ltd. Prior to that, from 1981 to
2000, he was the Managing Director of Coyle Hamilton Corporate
Broking, and from 1970 to 1981, was a Director of Coyle Hamilton
Phillips Ltd. From 1965 to 1970, he worked for V.P.
Phillips & Co. Ltd. Insurance Brokers (then a part of
C.E. Heath) and from 1960 to 1965, he worked for the Royal
Exchange Assurance Dublin (now part of the AXA Group). From May
2005 to June 2006, Mr. Governey served as the President of
the Bureau International des Producteurs dAssurances at de
Réassurances (BIPAR), the European Federation
of Insurance Intermediaries, which represents the public affairs
interests of insurance intermediaries with European
institutions. He was Vice President of BIPAR and Chairman of its
EU Executive Committee from 1997 to 1998 and was elected
Honorary Vice President in 1999. Mr. Governey served as the
President of the Dublin Chamber of Commerce from 1999 to 2000;
as a member of the board of the Council of Insurance
Agents & Brokers (U.S.) from 1998 to 2004; as Vice
President of The Chartered Insurance Institute (U.K.) from 1997
to 1998; and as President of the Irish Brokers Association and
the Insurance Institute of Dublin from 1994 to 1995 and 1989 to
1990, respectively.
Richard E. Jodoin (age 56) has been the
President of Allied World Assurance Company (U.S.) Inc. and
Allied World National Assurance Company since July 2002. Prior
to joining Allied World Assurance Company (U.S.) Inc.,
Mr. Jodoin was employed by Lexington Insurance Company in
various positions for 17 years, and served as Executive
Vice President from 1994 until July 2002.
Michael I.D. Morrison. Please see
Mr. Morrisons biography under Election of
Directors elsewhere in this Proxy Statement.
John T. Redmond (age 52) joined us in July 2002
and is the President of Allied World Assurance Company (Europe)
Limited and Allied World Assurance Company (Reinsurance)
Limited. Prior to joining our Company, Mr. Redmond held
various positions with Chubb, and served as a Senior Vice
President of Chubb from 1993 until July 2002.
12
APPROVAL
OF THE ALLIED WORLD ASSURANCE COMPANY HOLDINGS, LTD
SECOND AMENDED AND RESTATED 2001 EMPLOYEE STOCK OPTION PLAN
(Item C on Proxy Card)
At the Annual General Meeting, the Companys shareholders
will be asked to approve a second amendment to and restatement
of the Allied World Assurance Company Holdings, Ltd Amended and
Restated 2001 Employee Stock Option Plan. The Board unanimously
approved the Second Amended and Restated 2001 Employee Stock
Option Plan (which we refer to as the Amended Plan
for purposes of this proposal only) on February 28, 2008
and recommends that the Companys shareholders approve and
adopt the Amended Plan. The Amended Plan will become effective
upon the approval of the Companys shareholders.
In 2001, the Company implemented the Allied World Assurance
Holdings, Ltd 2001 Employee Warrant Plan (the Warrant
Plan), under which up to 2,000,000 of our Common Shares
could be issued. On June 9, 2006, the Company amended and
restated the Warrant Plan and renamed it the Allied World
Assurance Company Holdings, Ltd Amended and Restated 2001
Employee Stock Option Plan (which we refer to as the
Current Plan for purposes of this proposal only).
Among other things, the amendment and restatement on such date
extended the term of the Current Plan to June 9, 2016,
required that any repricing of awards under the Current Plan be
approved by our shareholders and provided the Compensation
Committee additional flexibility with respect to awards in
certain corporate events. The warrants that were granted under
the Warrant Plan were converted to options under the Current
Plan as part of our IPO.
Your Board recommends approval of the Amended Plan to:
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Increase by 2,000,000 Common Shares (from 2,000,000 to
4,000,000) the total number of our Common Shares that may be
issued;
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Prohibit our Common Shares from becoming available for issuance
under the Amended Plan once they are surrendered or withheld in
connection with:
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satisfying an option holders income tax withholding
obligations, or
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paying the exercise price of the option;
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Prohibit the Company from adversely affecting an option
holders rights with respect to an outstanding option
without such option holders consent;
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Extend the termination date from June 9, 2016 to
May 8, 2018, after which date no awards may be granted.
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As compared to the Current Plan, additional changes under the
Amended Plan include increasing limits on the maximum number of
our Common Shares as to which options may be granted to any one
person in any one year; eliminating restrictions prohibiting the
granting of options to any one person with respect to which the
number of our Common Shares underlying options granted to such
person exceeds, in the aggregate, 9% of our Common Shares
authorized for issuance; and making a technical correction to
the determination of fair market value of our Common Shares from
the average high and low bid prices on the date of grant to the
closing price of the Common Shares on the date of grant.
The following summary of the Amended Plan is qualified in its
entirety by express reference to the text of the Amended Plan, a
copy of which is attached as Appendix A to this
Proxy Statement. For more information about our Current Plan,
our Stock Incentive Plan and our Amended and Restated Long-Term
Incentive Plan (the LTIP), please see
Executive Compensation Narrative Disclosure
Regarding Equity Plans and Employment Agreements elsewhere
in this Proxy Statement.
General
The purposes of the Amended Plan are to provide certain
officers, directors, employees, prospective employees,
consultants and others who perform services for the Company with
the opportunity to acquire a proprietary interest in the success
of the Company, to enhance the long-term performance of the
Company and to attract to the Company and its subsidiaries and
affiliates people with superior training, experience and
ability. The Board believes that the Amended Plan furthers these
purposes by making available sufficient shares to permit future
13
awards by the Compensation Committee as a part of the
Companys compensation program and believes that the
Amended Plan is important to the success of the Company.
As of February 29, 2008, approximately 300 individuals
would be eligible to participate in the Amended Plan. The
closing price of the Common Shares on the NYSE on
February 29, 2008 was $43.55 per share.
Administration
As with the Current Plan, the Amended Plan will be administered
by the Compensation Committee, which will have the authority to
establish rules and regulations for the administration of the
Amended Plan; to take any action in connection with the Amended
Plan that it deems necessary or advisable; to determine who
shall receive awards and under what terms; to determine whether,
to what extent, and under what circumstances and methods awards
may be settled, canceled, forfeited or suspended; to determine
whether awards may be settled in Common Shares or cash or other
property; and to determine whether amounts payable under an
award may be deferred. The determination of the Compensation
Committee on all matters relating to the Amended Plan will be
final and binding.
Awards;
Adjustments
The Amended Plan provides for the grants of options to purchase
Common Shares. The terms and conditions of options granted under
the Amended Plan are set out in option agreements between the
Company and the individuals receiving such options, including
vesting conditions, exercise price and the expiration date of
the options, as well as the treatment of such options upon a
termination of employment or service with the Company. All
options granted under the Amended Plan are non-qualified
stock options which are not intended to qualify as
incentive stock options subject to favorable tax
treatment under Section 422 of the Code. The exercise price
of an option may not be less than the fair market value of our
Common Shares on the date the award is granted. Options may be
granted with an exercise period lasting not more than ten years
from the date of grant. Except as otherwise provided in an
option agreement, no option may be exercised after the
holders termination of employment or service with the
Company, except that (i) if such termination of employment
or service is on or after the holders 65th birthday
or is due to such holders death or disability, the entire
option may be exercised by the holder or his beneficiary at any
time within the original term of the option, whether or not such
option was exercisable at the time of such termination; and
(ii) if such termination of employment or service is prior
to the holders 65th birthday or not due to such
holders death or disability, only that portion of such
holders options that were exercisable as of the date of
such termination may be exercised after the date of such
termination, and only during the
90-day
period following such termination.
As with the Current Plan, under the Amended Plan the
Compensation Committee will have the authority to make
appropriate adjustments to the exercise price and other terms of
any outstanding options in the event of changes to the Common
Shares by reason of capital adjustments, such as stock splits
and recapitalizations. In the event of a merger, amalgamation,
consolidation, reorganization, liquidation or sale of a majority
of the Companys securities, the Compensation Committee
will have the discretion to provide, as an alternative to the
adjustment described above, for the accelerated vesting of
options prior to such an event or the cancellation of options in
exchange for a payment based on the per-share consideration
being paid in connection with the event.
Shares
Subject to the Amended Plan
Subject to the requisite affirmative shareholder vote at the
Annual General Meeting, the total number of Common Shares
reserved for issuance under the Amended Plan is 4,000,000.
During any time that the Company is subject to
Section 162(m) of the Code, the maximum number of Common
Shares with respect to which awards may be granted to any
individual in any one year shall not exceed the maximum number
of Common Shares available for issue under the Amended Plan.
Common Shares granted pursuant to the Amended Plan may be
authorized but unissued Common Shares or authorized and issued
Common Shares held by the Company or acquired by the Company for
the purposes of the Amended Plan.
14
Amendment
and Termination
Except as otherwise provided in an option agreement, the Board
retains the right to amend, suspend or terminate the Amended
Plan, and the Compensation Committee may amend the terms of any
option provided that such amendment may not adversely affect an
option holders rights with respect to an outstanding
option without his or her consent. In addition, no award may be
amended if such amendment would constitute a repricing or
similar event unless first approved by our shareholders.
Nonassignability;
No Hedging
As with the Current Plan, no award to any person under the
Amended Plan may be assigned, transferred or hedged in any
manner (except as expressly approved by the Compensation
Committee), other than by will or by the laws of descent and
distribution, and all such awards shall be exercisable during
the life of the option grantee only by the grantee or the
grantees legal representative. Any assignment or transfer
in violation of the applicable provisions of the Amended Plan
shall be null and void and any award that is hedged in any
manner shall immediately be forfeited.
U.S.
Federal Income Tax Consequences
The following is a brief discussion of the U.S. federal
income tax consequences of transactions with respect to options
granted under the Amended Plan based on the Code, as in effect
as of the date of this summary. This discussion is not intended
to be exhaustive and does not describe any foreign, state or
local tax consequences. Holders of options under the Amended
Plan should consult with their own tax advisors.
No income is realized by an optionee at the time an option is
granted. Generally, at exercise, ordinary income is realized by
the optionee in an amount equal to the excess, if any, of the
fair market value of the Common Shares subject to such option on
such date over the exercise price, and the Company is generally
entitled to a tax deduction in the same amount, subject to
applicable tax withholding requirements. Upon a sale of Common
Shares acquired due to the exercise of an option, appreciation
(or depreciation) after the date of exercise is treated as
either short-term or long-term capital gain (or loss) depending
on how long the Common Shares have been held.
New Plan
Benefits
The grant of options under the Amended Plan is entirely within
the discretion of the Compensation Committee and we cannot
forecast the extent to which such grants will be made in the
future. Therefore, we have omitted the tabular disclosure of the
benefits or amounts allocated under the Amended Plan.
Your Board recommends a vote FOR the approval of the Allied
World Assurance Company Holdings, Ltd Second Amended and
Restated 2001 Employee Stock Option Plan.
APPROVAL
OF THE ALLIED WORLD ASSURANCE COMPANY HOLDINGS, LTD
SECOND AMENDED AND RESTATED 2004 STOCK INCENTIVE PLAN
(Item D on Proxy Card)
At the Annual General Meeting, the Companys shareholders
will be asked to approve a second amendment to and restatement
of the Allied World Assurance Company Holdings, Ltd Amended and
Restated 2004 Stock Incentive Plan. The Board unanimously
approved the Second Amended and Restated 2004 Stock Incentive
Plan (which we refer to as the Amended Stock Incentive
Plan for purposes of this proposal only) on
February 28, 2008 and recommends that the Companys
shareholders approve and adopt the Amended Stock Incentive Plan.
The Amended Stock Incentive Plan will become effective upon the
approval of the Companys shareholders.
On June 9, 2006, the Company amended and restated the
Allied World Assurance Holdings, Ltd 2004 Stock Incentive Plan
and renamed it the Allied World Assurance Company Holdings, Ltd
Amended and Restated 2004 Stock Incentive Plan (which we refer
to as the Current Stock Incentive Plan for purposes
of this proposal only).
15
Your Board recommends approval of the Amended Stock Incentive
Plan to:
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Increase the limits on the maximum number of our Common Shares
as to which awards may be granted to any one person in any one
year, provided that the maximum number of shares that may be
issued under the Plan will not change; and
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Extend the termination date from May 27, 2014 to
May 8, 2018, after which date no awards may be granted.
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The following summary of the Amended Stock Incentive Plan is
qualified in its entirety by express reference to the text of
the Amended Stock Incentive Plan, a copy of which has been
marked to indicate changes from the Current Stock Incentive Plan
and is attached as Appendix B to this Proxy
Statement. For more information about our Current Stock
Incentive Plan, our Amended and Restated 2001 Employee Stock
Option Plan and our LTIP, please see Executive
Compensation Narrative Disclosure Regarding Equity
Plans and Employment Agreements elsewhere in this Proxy
Statement.
The changes discussed above are the only changes being
proposed to the Current Stock Incentive Plan.
General
The purposes of the Amended Stock Incentive Plan are to attract,
retain and motivate officers, directors, employees (including
prospective employees), consultants and others who may perform
services for the Company, to compensate them for their
contributions to the long-term growth and profits of the
Company, and to encourage them to acquire a proprietary interest
in the success of the Company. The Board believes that the
Amended Stock Incentive Plan furthers these purposes by removing
limits on the maximum number of our Common Shares that the
Compensation Committee may award to a participant under this
plan as a part of the Companys compensation program and
believes that the Amended Stock Incentive Plan is important to
the success of the Company.
As of February 29, 2008, approximately 300 individuals
would be eligible to participate in the Amended Stock Incentive
Plan. The closing price of the Common Shares on the NYSE on
February 29, 2008 was $43.55 per share.
Administration
As with the Current Stock Incentive Plan, the Amended Stock
Incentive Plan will be administered by the Compensation
Committee, which will have the authority to establish rules and
regulations for the administration of the Amended Stock
Incentive Plan; to take any action in connection with the
Amended Stock Incentive Plan that it deems necessary or
advisable; to determine who shall receive awards and under what
terms; to amend any outstanding awards; to determine whether, to
what extent, and under what circumstances and methods awards may
be settled, cancelled, forfeited or suspended; to determine
whether awards may be settled in Common Shares or cash or other
property; and to determine whether amounts payable under an
award may be deferred. The determination of the Compensation
Committee on all matters relating to the Amended Stock Incentive
Plan will be final and binding.
Awards;
Adjustments
As with the Current Stock Incentive Plan, the Amended Stock
Incentive Plan provides for the grant of restricted Common
Shares, RSUs, dividend equivalent rights and other equity-based
or equity-related awards. The terms and conditions of any such
awards granted under the Amended Stock Incentive Plan are set
out in award agreements between the Company and the individuals
receiving such awards. No options to purchase Common Shares may
be granted under the Amended Stock Incentive Plan. Only RSUs
have been granted under the Current Stock Incentive Plan.
As with the Current Stock Incentive Plan, under the Amended
Stock Incentive Plan, the Compensation Committee will have the
authority to make appropriate adjustments to the number of
Common Shares authorized for issuance under the Amended Stock
Incentive Plan, the number of Common Shares covered by each
outstanding award and the type of property to which an award is
subject, in each case in such manner as it deems appropriate to
preserve the benefits intended to be made available to grantees
of awards for any changes to the Common Shares by reason of
capital adjustments, such as stock splits and recapitalizations.
In the event of a merger, amalgamation,
16
consolidation, reorganization, liquidation or sale of a majority
of the Companys securities, the Compensation Committee
will have the discretion to provide, as an alternative to the
adjustment described above, for the accelerated vesting of
awards prior to such an event or the cancellation of awards in
exchange for a payment based on the per-share consideration
being paid in connection with the event.
Shares
Subject to the Amended Stock Incentive Plan
The total number of Common Shares reserved for issuance under
the Amended Stock Incentive Plan is 2,000,000, which is
unchanged from the Current Stock Incentive Plan. During any time
that the Company is subject to Section 162(m) of the Code,
the maximum number of Common Shares with respect to which awards
may be granted to any individual in any one year shall not
exceed the maximum number of Common Shares available for issue
under the Amended Stock Incentive Plan. Common Shares granted
pursuant to the Amended Stock Incentive Plan may be authorized
but unissued Common Shares or authorized and issued Common
Shares acquired by the Company for the purposes of the Amended
Stock Incentive Plan.
Amendment
and Termination
Except as otherwise provided in an award agreement, the Board
retains the right to suspend, discontinue, revise or amend the
Amended Stock Incentive Plan without any grantees consent,
including in any manner that may adversely affect an
grantees rights with respect to an outstanding award.
Nonassignability;
No Hedging
As with the Current Stock Incentive Plan, no award to any person
under the Amended Stock Incentive Plan may be assigned,
transferred or hedged in any manner (except as expressly
approved by the Compensation Committee), other than by will or
by the laws of descent and distribution, and all such awards
shall be exercisable during the life of the grantee only by the
grantee or the grantees legal representative. Any
assignment or transfer in violation of the applicable provisions
of the Amended Stock Incentive Plan shall be null and void, and
any award that is hedged in any manner shall immediately be
forfeited.
New Plan
Benefits
The grant of awards under the Amended Stock Incentive Plan is
entirely within the discretion of the Compensation Committee and
we cannot forecast the extent to which such grants will be made
in the future. Therefore, we have omitted the tabular disclosure
of the benefits or amounts allocated under the Amended Stock
Incentive Plan.
Your Board recommends a vote FOR the approval of the Allied
World Assurance Company Holdings, Ltd Second Amended and
Restated 2004 Stock Incentive Plan.
APPROVAL
OF THE ALLIED WORLD ASSURANCE COMPANY HOLDINGS, LTD
2008 EMPLOYEE SHARE PURCHASE PLAN
(Item E on Proxy Card)
At the Annual General Meeting, the Companys shareholders
will be asked to approve the Companys 2008 Employee Share
Purchase Plan (the Share Purchase Plan). The Board
unanimously approved the Companys Share Purchase Plan on
February 28, 2008 and recommends that the Companys
shareholders approve and adopt the Share Purchase Plan. The
Share Purchase Plan will become effective upon the approval of
the Companys shareholders.
The Company is seeking shareholder approval of the Share
Purchase Plan in order to comply with the requirements of
Section 423 of the Code and in order that the Share
Purchase Plan qualify as an employee share purchase
plan thereunder. In the event that the Companys
shareholders do not approve the Share Purchase Plan, it will not
qualify as an employee share purchase plan under
Section 423 of the Code, and no offerings will be made. The
Company has reserved for issuance under the Share Purchase Plan
1,000,000 Common Shares.
17
The following summary of the Share Purchase Plan is qualified in
its entirety by express reference to the text of the Share
Purchase Plan, a copy of which is attached as Appendix C
to this Proxy Statement.
Eligibility
and Participation
All employees of the Company and its subsidiaries are eligible
to participate if they are employed by the Company or its
subsidiaries for more than 20 hours per week and for more
than five months in any calendar year. However, no employee is
eligible to participate who, after the grant of options under
the Share Purchase Plan, would own (including all Common Shares
which may be purchased under any outstanding options under the
Share Purchase Plan) 5% or more of the total Voting Shares
issued and outstanding. The purposes of the Share Purchase Plan
are to provide employees of the Company and its subsidiaries
with an opportunity to purchase our Common Shares, help such
employees to provide for their future security and encourage
such employees to remain in the employment of the Company and
its subsidiaries.
The Share Purchase Plan provides for consecutive six-month
offering periods (or other offering periods of not more than
27 months as determined by the Compensation Committee)
under which participating employees can elect to have amounts
withheld from their total compensation during the offering
period and applied to purchase our Common Shares at the end of
such offering period (each, an exercise date). An
eligible employee may become a participant in the Share Purchase
Plan for an offering period by completing a subscription
agreement authorizing payroll deductions and filing it with the
Company at least 15 business days prior to the first day of such
offering period.
Payroll
Deductions
A participating employee may authorize after-tax payroll
deductions of a specific whole percentage of his or her
compensation between 1% and 10%, subject to the limitation that
no employee may purchase more than $25,000 of the Common Shares
in any one calendar year.
Payroll deductions will commence on the first payroll date on or
following the commencement of an offering period and will end on
the last payroll date in the offering period to which such
subscription agreement applies, unless terminated sooner by the
participating employee. Deductions are accumulated in the
participating employees account during the applicable
offering period. In the event that any participating
employees payroll deductions exceed the limits under the
Code, his or her payroll deductions will automatically be
decreased until such limits are satisfied.
A participating employee may discontinue participation in the
Share Purchase Plan at any time during the offering period prior
to the exercise date. Once an offering period has begun, a
participating employee may increase or decrease the rate of
payroll deductions for that offering period by completing a new
subscription agreement. The Compensation Committee may limit the
number of rate changes that a participating employee may elect
during any offering period.
Grant and
Exercise of Option
The Company will grant to each participating employee an option,
effective on each enrollment date, to purchase on the exercise
date the number of full Common Shares that may be purchased with
the accumulated payroll deductions in his or her account. Unless
otherwise determined by the Compensation Committee before an
offering period, the purchase price for each offering period
will be 85% of the fair market value of the Common Shares on the
exercise date. Unless a participant withdraws from the Share
Purchase Plan, his or her option for the purchase of Common
Shares will be exercised automatically on the exercise date.
Delivery;
Transfer Restrictions
The Common Shares will be purchased by a participating employee
directly from the Company and will be deemed to have been issued
and sold at the close of business on the exercise date. As
promptly as practicable after each exercise date on which a
purchase of shares occurs, the Company will arrange for the full
Common Shares purchased to be issued to each participant and the
Company may arrange for the deposit of such Common Shares
18
into each such participants account with any broker
designated by the Company to administer the Share Purchase Plan;
provided, however, that no Participant shall be permitted
to dispose of or transfer any Common Shares purchased pursuant
to an option under the Share Purchase Plan prior to the date
that is 12 months following the date upon which such Common
Shares were so purchased, in which case the Compensation
Committee may provide, in its sole discretion, that the Common
Shares so purchased shall be held in book entry form, rather
than delivered to the Participant, through the expiration of
such
12-month
period. If certificates representing the Common Shares are
registered in the name of the Participant, the Compensation
Committee may require that such certificates bear an appropriate
legend referring to the terms, conditions and restrictions
applicable to such Common Shares and that the Company retain
physical possession of the certificates.
Withdrawal;
Termination of Employment
At any time prior to the exercise date, a participant may give
written notice to the Company to withdraw payroll deductions
credited to his or her account and not yet used to exercise his
or her option. Once a participant withdraws, such
participants account balance will be distributed to him or
her as soon as practicable, and no Common Shares will be
purchased for such participant. Upon a participants
ceasing to be an employee of the Company or its subsidiaries for
any reason, he or she will be deemed to have elected to withdraw
from the Share Purchase Plan, and such participants
account balance will be distributed to him or her as soon as
practicable, and no Common Shares will be purchased for such
participant.
Administration
The Share Purchase Plan will be administered by the Compensation
Committee of the Board. Subject to the provisions of the Share
Purchase Plan, the Compensation Committee will have the
authority to adopt rules and regulations for the interpretation
and administration of the Share Purchase Plan. In addition, the
Compensation Committee may adopt such procedures and sub-plans
as are necessary or appropriate to permit participation in the
Share Purchase Plan by employees who are foreign nationals or
employed outside of the United States and to accommodate the
specific requirements of the local laws and procedures of the
relevant jurisdiction.
Adjustment
Relating to Shares
The Compensation Committee will have the authority to adjust the
number of Common Shares authorized for issuance under the Share
Purchase Plan, the maximum number of Common Shares each
participant may purchase in each offering period, and the price
per Common Share and the number of Common Shares covered by each
unexercised option for increases or decreases in the number of
issued Common Shares resulting from a stock split, reverse stock
split, stock dividend, recapitalization, combination or
reclassification of the Common Shares, or any other event that
the Compensation Committee determines affects our
capitalization, other than regular cash dividends.
In the event the Company proposes to merge or amalgamate with or
into another corporation or proposes to sell all or
substantially all of its assets, each option under the Share
Purchase Plan shall be assumed, or an equivalent option shall be
substituted by the successor or amalgamated corporation. In the
event that these options are not assumed or substituted, or in
the event of the proposed dissolution or liquidation of the
Company, the Compensation Committee may shorten the offering
period then in progress and set a new exercise date to occur no
later than immediately prior to the effective date of the
applicable merger, amalgamation, sale, dissolution or
liquidation.
Amendment
and Termination of the Share Purchase Plan
The Board may at any time and for any reason terminate or amend
the Share Purchase Plan. Amendments may be made without regard
as to whether any participants rights are adversely
affected and without shareholder approval except as required to
satisfy Section 423 of the Code. Except as provided above
in Adjustments Relating to Shares, no termination
may adversely affect options previously granted; provided, that
an offering period may be terminated by the Board on any
exercise date if it determines that the termination of the Share
Purchase Plan is in the best interests of the Company and its
shareholders.
19
Term
The Share Purchase Plan became effective upon its adoption by
the Board on February 28, 2008. Subject to approval by the
shareholders of the Company, the Share Purchase Plan will
continue in effect for a term of ten years thereafter unless all
Common Shares authorized to be issued under it have been
exhausted or the plan is otherwise terminated sooner.
U.S.
Federal Income Tax Consequences
The following is a brief discussion of the U.S. federal
income tax consequences of transactions under the Share Purchase
Plan based on the Code, as in effect as of the date of this
summary. The Share Purchase Plan is not qualified under
Section 401(a) of the Code. This discussion does not
address all aspects of U.S. federal income taxation and
does not describe foreign, state, or local tax consequences.
Participants in the Share Purchase Plan should consult with
their own tax advisors.
Under Section 423(a) of the Code, the transfer to a
participating employee of Common Shares pursuant to the Share
Purchase Plan is entitled to the benefits of Section 421(a)
of the Code. Under that section of the Code, a participant will
not be required to recognize income at the time the option is
granted or at the time the option is exercised.
Section 423(c) of the Code requires that, provided the
holding periods described below are met, when the Common Shares
acquired during an offering period pursuant to the Share
Purchase Plan are sold or otherwise disposed of in a taxable
transaction (or in the event of the death of the participant
while owning such shares whether or not the holding period
requirements are met), the participant will recognize income
subject to U.S. federal income tax as ordinary
income for the taxable year in which disposition or death
occurs in an amount equal to the lesser of (i) the excess
of the fair market value of the Common Shares at the time of
such disposition or death over the purchase price and
(ii) the excess of the fair market value of the Common
Shares on the enrollment date of the applicable offering period
over the purchase price, determined on the enrollment date. Such
recognition of income upon disposition shall have the effect of
increasing the taxable basis of the shares in the
participants possession by an amount equal to the income
subject to U.S. federal income tax. Any additional gain or
loss resulting from the disposition, provided it is not a
disqualifying disposition (as defined below),
measured by the difference between the amount paid for the
shares and the amount realized (less the amount recognized as
income as described above), will be recognized by the
participant as long-term capital gain or loss. No portion of the
amount received pursuant to such a disposition will be subject
to withholding for U.S. federal income taxes or subject to
withholding under the U.S. Federal Insurance Contribution
Act (FICA) or the U.S. Federal Unemployment Tax
Act (FUTA).
The Company will not be entitled to any deduction in the
determination of its taxable income with respect to the Share
Purchase Plan, except in connection with a disqualifying
disposition as discussed below.
In order for a participant to receive the favorable tax
treatment provided in Section 421(a) of the Code,
Section 423(a) of the Code requires that the participant
make no disposition of the shares acquired during an offering
period within two years from the enrollment date of an
applicable offering period, or within one year from the exercise
date of such offering period. If a participant disposes of
Common Shares acquired pursuant to the Share Purchase Plan
before the expiration of these holding period requirements, it
will be deemed a disqualifying disposition and the
participant will realize, at the time of disposition,
ordinary income to the extent the fair market value
of the Common Shares on the exercise date exceeds the purchase
price. The difference between the fair market value of the
Common Shares on the exercise date and the amount realized on
disposition is treated as long-term or short-term capital gain
or loss, depending on the participants holding period in
the Common Shares. The amount treated as ordinary
income will not be subject to the income tax or FICA or
FUTA withholding requirements of the Code.
New Plan
Benefits
Because participation in the Share Purchase Plan is entirely
within the discretion of the eligible employees of the Company
and its subsidiaries, the Company cannot forecast the extent of
participation in the future. Accordingly, the Company has
omitted the tabular disclosure of the benefits or amounts
allocated under the Share Purchase Plan.
Your Board recommends a vote FOR the approval and adoption of
the Allied World Assurance Company Holdings, Ltd 2008 Employee
Share Purchase Plan.
20
APPROVAL
OF THE SECOND AMENDED AND RESTATED BYE-LAWS
OF ALLIED WORLD ASSURANCE COMPANY HOLDINGS, LTD
(Item F on Proxy Card)
At the Annual General Meeting, the Companys shareholders
will be asked to approve and adopt the Companys Second
Amended and Restated Bye-Laws. Pursuant to Section 13(5) of
the Companies Act 1981 of Bermuda, as amended (the
Companies Act) and the Companys current
Bye-Laws, any amendment to the Companys Bye-Laws must
receive shareholder approval. The Board unanimously approved the
Companys Second Amended and Restated Bye-Laws on
February 28, 2008 and recommends that the Companys
shareholders approve and adopt the Second Amended and Restated
Bye-Laws. The Second Amended and Restated Bye-Laws will become
effective upon the approval of the Companys shareholders.
The following summary of the proposed changes to the
Companys current Bye-laws is qualified in its entirety by
express reference to the text of the Second Amended and Restated
Bye-Laws, a copy of which has been marked to indicate changes
from the Companys current Bye-Laws and is attached as
Appendix D to this Proxy Statement.
Proposed
Changes
The proposed Second Amended and Restated Bye-Laws provide
greater flexibility to the Company to purchase its shares for
cancellation because they allow such repurchases to be done only
in a manner that the Board, in its sole and absolute discretion,
reasonably believes would not result in, or materially increase
the risk of, a material adverse regulatory or tax treatment of
the Company, any subsidiary thereof or any shareholder in any
jurisdiction. To provide for this ability, the proposed Second
Amended and Restated Bye-Laws modify Bye-Law 11 and add a new
Bye-Law 64(13) which clarifies that the transfer provisions in
Bye-Law 64 shall not apply to purchases of shares by the Company
pursuant to Bye-Law 11.
Additionally, the proposed Second Amended and Restated Bye-Laws
revise the director and bye-law requirements relating to the
Companys subsidiaries as set forth in Bye-Laws 90, 91, 92
and 93 of the Companys current Bye-Laws. These changes
will make it easier for the Company to acquire and form any new
insurance subsidiaries in the future. The proposed Second
Amended and Restated Bye-Laws also make certain conforming and
definitional changes to reflect the foregoing.
It is no longer a mandatory requirement of the Companies Act
that deeds or other documents be executed under seal in order to
be effective as a matter of Bermuda law. The requirements for
issuing share certificates under seal have also been modernized
to provide increased flexibility. The proposed Second Amended
and Restated Bye-Laws amend Bye-Laws 86 and 87 of the
Companys current Bye-Laws to provide the Company greater
flexibility in terms of the use or non-use of its corporate seal.
Finally, the proposed Second Amended and Restated Bye-Laws also
provide for certain technical amendments, specifically to
Bye-law 51(4), and revise Bye-law 64 to give the Board sole and
absolute discretion to decline to register a share transfer in
certain circumstances, particularly if there is reason to
believe that such transfer may expose, or materially increase
the risk of, a material adverse regulatory or tax treatment of
the Company, any subsidiary thereof or any shareholder in any
jurisdiction.
Your Board recommends a vote FOR the approval and adoption of
the Second Amended and Restated Bye-Laws of Allied World
Assurance Company Holdings, Ltd.
APPOINTMENT
OF INDEPENDENT AUDITORS
(Item G on Proxy Card)
The appointment of independent auditors is subject to approval
annually by the Companys shareholders.
Deloitte & Touche has served as the Companys
independent auditors since April 9, 2002. The Audit
Committee of
21
your Board has recommended the appointment of
Deloitte & Touche as our independent auditors for the
fiscal year ending December 31, 2008.
Representatives of Deloitte & Touche are expected to
attend the Annual General Meeting and will have an opportunity
to make a statement if they wish. They will also be available to
answer questions at the meeting. If approved,
Deloitte & Touche will serve as the Companys
auditor until the Companys Annual General Meeting in 2009
for such compensation as the Audit Committee of your Board shall
determine.
Fees to
Independent Registered Public Accountants for Fiscal 2007 and
2006
The following table shows information about fees billed to us by
Deloitte & Touche for services rendered for the fiscal
years ended December 31, 2007 and 2006.
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|
|
|
|
|
|
|
|
|
2007
|
|
|
2006
|
|
|
Audit Fees
|
|
$
|
3,307,800
|
|
|
$
|
1,860,746
|
|
Audit-Related Fees(1)
|
|
$
|
|
|
|
|
|
|
Tax Fees(2)
|
|
$
|
2,699
|
|
|
$
|
90,088
|
|
All Other Fees(3)
|
|
$
|
233,577
|
|
|
|
|
|
|
|
|
(1) |
|
Audit-Related Fees are fees for assurance and related services
that are reasonably related to the performance of the audit or
review of our financial statements and are not reported under
the Audit Fees category. |
|
(2) |
|
In 2006, Tax Fees are for work performed in the preparation of
tax returns, tax planning and tax consulting for the
Companys subsidiaries in the United States and Europe. In
2007, Tax Fees related to the transition to another firm of
certain tax compliance services. |
|
(3) |
|
All Other Fees are fees related to technical consultations and
services provided in relation to security offerings. |
The Audit Committee has a policy to pre-approve all audit and
non-audit services to be provided by the independent auditors
and estimates therefor. The Audit Committee pre-approved all
audit services and non-audit services and estimates therefor
provided to the Company by the independent auditors in 2007 and
2006.
Your Board recommends a vote FOR the appointment of
Deloitte & Touche as the Companys independent
auditors.
CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS
The following summarizes certain relationships and the
material terms of certain of our agreements. This summary is
subject to, and is qualified in its entirety by reference to,
all of the provisions of the relevant agreements. A copy of
certain of these agreements has been previously filed with the
SEC and is listed as an exhibit to the Companys Annual
Report on Form 10-K for the year ended December 31,
2007, a copy of which will be provided upon request. See
General Meeting Information How may I receive
a copy of the Companys Annual Report on
Form 10-K?.
Founding
Shareholders
We were formed in November 2001, by a group of investors,
including AIG, Chubb, certain affiliates of The Goldman Sachs
Group, Inc. (the Goldman Sachs Funds) and Securitas
Allied Holdings, Ltd, an affiliate of Swiss Reinsurance Company.
These investors purchased Common Shares and the shareholders
listed below were granted warrants that entitle them to purchase
a total of 5,500,000 additional Common Shares, or approximately
11% of all Common Shares outstanding at our formation, at an
exercise price of $34.20 per Common Share. These warrants expire
on November 21, 2011.
The warrants are exercisable, in whole or in part, (1) in
connection with any sale of Common Shares by the exercising
selling shareholder or (2) to avoid a reduction of the
exercising selling shareholders equity ownership below a
certain percentage. The exercise price and number of shares
issuable under each warrant are subject to
22
adjustment with respect to certain dilution events. The
following table shows the ownership of warrants as of
February 29, 2008:
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|
|
|
|
|
|
Warrants to
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|
|
|
Acquire
|
|
|
|
Common
|
|
Holder
|
|
Shares
|
|
|
American International Group, Inc.
|
|
|
2,000,000
|
|
The Chubb Corporation
|
|
|
2,000,000
|
|
GS Capital Partners 2000, L.P.
|
|
|
848,113
|
|
GS Capital Partners 2000 Offshore, L.P.
|
|
|
308,172
|
|
GS Capital Partners 2000 Employee Fund, L.P.
|
|
|
269,305
|
|
GS Capital Partners 2000, GmbH & Co. Beteiligungs KG
|
|
|
35,449
|
|
Stone Street Fund 2000, L.P.
|
|
|
25,974
|
|
Bridge Street Special Opportunities Fund 2000, L.P.
|
|
|
12,987
|
|
Certain
Business Relationships
We have assumed, and continue to assume, premiums from, and have
paid, and continue to pay, production fees to affiliates of some
of our shareholders. We also have ceded and assumed and will
continue to cede and assume reinsurance to and from affiliates
of some of our principal shareholders.
Transactions
with Affiliates of American International Group, Inc.
Stock
Purchase Agreement
On December 14, 2007, we entered into a stock purchase
agreement with AIG pursuant to which we purchased an AIG
subsidiary whose sole asset was its holding of 11,693,333 Common
Shares. These shares equated to approximately 19.4% of the
Common Shares outstanding as of November 30, 2007. The
purchase price per share was $48.19 for an aggregate price of
$563.4 million and was based on and reflected a 0.5%
discount from the volume-weighted average trading price of the
Common Shares during the ten consecutive trading day period
leading up to December 14, 2007.
Software
License
On February 16, 2007, Allied World Assurance Company, Ltd
entered into an amended and restated software license agreement,
effective as of November 17, 2006, with Transatlantic
Holdings, Inc., a publicly traded company in which AIG holds a
controlling interest, for certain reinsurance accounting
management information software proprietary to Transatlantic
Holdings, Inc. The initial term of the agreement expires on
November 17, 2009 and will automatically renew for
successive one-year terms unless either party delivers prior
written notice to terminate at least 90 days prior to the
end of any current term. Allied World Assurance Company, Ltd has
paid $3.9 million to Transatlantic Holdings, Inc. for the
initial term of the license.
Guarantee
On May 22, 2006, Allied World Assurance Company, Ltd
entered into a guarantee in favor of AIG. Pursuant to the
guarantee, Allied World Assurance Company, Ltd absolutely,
unconditionally and irrevocably guaranteed the payment of all
amounts legally due and owed by either Allied World Assurance
Company (Europe) Limited or Allied World Assurance Company
(Reinsurance) Limited to certain reinsurance subsidiaries of AIG
under any new or renewal contract of reinsurance entered into
between such AIG subsidiaries and Allied World Assurance Company
(Europe) Limited
and/or
Allied World Assurance Company (Reinsurance) Limited on or after
January 1, 2006.
Office
Space
Allied World Assurance Company, Ltd entered into a lease on
November 29, 2006 with American International Company
Limited, a subsidiary of AIG, under which Allied World Assurance
Company, Ltd rents 78,057 square feet of office space at 27
Richmond Road, Pembroke HM 08, Bermuda that serves as the
Companys corporate headquarters. The lease is for a
15-year term
commencing on October 1, 2006 with an option to extend for
23
an additional ten years. For the first five years under the
lease, Allied World Assurance Company, Ltd will pay an aggregate
monthly rent and user fees of approximately $0.4 million.
In addition to the rent, Allied World Assurance Company, Ltd
will also pay certain maintenance expenses. Effective as of
October 1, 2011, and on each five-year anniversary date
thereafter, the rent payable under the lease will be mutually
agreed to by Allied World Assurance Company, Ltd and American
International Company Limited.
Hedge
Fund
Since April 1, 2004, Allied World Assurance Company, Ltd
has invested a total of $56.6 million in shares of AIG
Select Hedge Ltd. (the Select Fund). The Select Fund
is a fund of hedge funds and is a Cayman Islands exempted
company incorporated under the Companies Law of the Cayman
Islands. The Select Funds investment objective is to seek
attractive long-term, risk-adjusted absolute returns in a
variety of capital market conditions. The investment manager of
the Select Fund is AIG Global Investment Corp., a wholly-owned
subsidiary of AIG. Allied World Assurance Company, Ltd may
request a redemption of all or some of its shares by giving
notice three business days prior to the last business day of any
calendar month for the redemption to be effective the last
business day of the next following month. The Select Fund will
pay the investment manager both a management fee and an
incentive fee. The management fee is an annual asset-based fee
of 1.5%, payable quarterly, and a 5% incentive fee is paid to
the investment manager at the end of each year on the net
capital appreciation of our shares, so long as a 5%
non-cumulative annual return is obtained. The aggregate fees for
the year ended December 31, 2007 were $1.0 million.
Deferred
Compensation Plan
Scott A. Carmilani, President and Chief Executive Officer of the
Company; W. Gordon Knight, President, U.S. Operations,
Distribution and Marketing; and Richard E. Jodoin, President of
Allied Word Assurance Company (U.S.) Inc. and Allied World
National Assurance Company (formerly known as Newmarket
Underwriters Insurance Company), participated in the Starr
International Company, Inc. Deferred Compensation Profit
Participation Plan in connection with services previously
rendered to AIG prior to joining us.
Transactions
with AIG in the Ordinary Course of Business
Our company either accepts or rejects reinsurance offered by
subsidiaries of AIG based upon our assessment of the risk
selection, pricing, terms and conditions. All of our reinsurance
transactions with AIG or its subsidiaries are open-market
transactions that we believe have been on customary, arms
length terms. We assumed premiums from subsidiaries of AIG of
approximately $106.7 million for the year ended
December 31, 2007, and we ceded premiums to subsidiaries of
AIG during the same period of approximately $13.3 million.
Transactions
with Affiliates of the Goldman Sachs Funds
Investment
Management Services
Certain affiliates of the Goldman Sachs Funds provide us with
investment management services pursuant to several investment
management agreements. Pursuant to these agreements, affiliates
of the Goldman Sachs Funds manage substantially all of our
investment portfolio. The investment management agreements are
generally in force for an initial three-year term with
subsequent one-year period renewals, during which they may be
terminated by either party upon 60 days prior written
notice. Each investment management agreement prohibits the
investment manager from executing trades with or through itself
or any of its affiliates acting as agent or principal. However,
each investment management agreement does allow the investment
manager to invest a portion of the portfolio in funds for which
the investment manager or any of its affiliates serves as
investment adviser, provided that these investments are made in
money market sweep or similar funds for the management of
short-term cash balances in the account. We must pay all fees
associated with these investments; however, these fees will be
offset against the fee to be paid by us pursuant to the
investment management agreements. With respect to Allied World
Assurance Company, Ltd, the investment manager may also invest
up to $150 million in the Goldman Sachs Global High Yield
Portfolio of the Goldman Sachs Funds SICAV and the restrictions
and limits of our investment guidelines shall not apply to this
investment. Mutual fund fees that will be deducted on both a
monthly and quarterly basis will vary by fund and will include
investment management fees, sales and distribution fees and
operational expense fees. The aggregate fees for our investment
in the Goldman Sachs Global High Yield Portfolio for the fiscal
year ended
24
December 31, 2007 were $0.4 million. The investment
manager is also authorized to effect cross transactions between
our account and other accounts managed by the investment manager
and its affiliates.
We pay affiliates of the Goldman Sachs Funds an annual fee of
0.12% on the first $1 billion of our aggregate funds under
management, 0.10% on the next $1 billion of our aggregate
funds under management and 0.08% on all of our aggregate funds
managed greater than $2 billion. A pro rata portion of
these annual fees is payable quarterly. The total advisory fee
for investment management services provided by affiliates of the
Goldman Sachs Funds with respect to the investment management
agreements totaled $5.2 million for the year ended
December 31, 2007. Our Investment Committee periodically
reviews the performance of the investment managers under these
investment management agreements.
Hedge
Funds
Allied World Assurance Company, Ltd invested a total of
$57 million in shares of the Goldman Sachs Global Alpha
Hedge Fund, plc (the Alpha Fund) in December 2004.
The Alpha Fund is an Irish open-ended investment company
registered under the Companies Act, 1990 of Ireland. The Alpha
Funds investment objective is to seek attractive
long-term, risk-adjusted returns across a variety of market
environments with volatility and correlations that are lower
than those of the broad equity markets. The investment manager
of the Alpha Fund is Goldman Sachs Asset Management, L.P., an
affiliate of the Goldman Sachs Funds. The Alpha Fund pays the
investment manager both a management fee and an incentive fee.
The management fee is an annual asset-based fee of 2.0%, payable
quarterly, and a 20% incentive fee is paid to the investment
manager on the net capital appreciation of our shares. The
aggregate fees for the year ended December 31, 2007 were
$0.9 million. On December 31, 2007, Allied World
Assurance Company, Ltd sold its shares in the Alpha Fund.
Effective February 1, 2005, Allied World Assurance Company,
Ltd invested $62 million in shares of the Goldman Sachs
Multi-Strategy Portfolio VI, Ltd. (the Portfolio VI
Fund). Allied World Assurance Company, Ltd is the sole
investor in the Portfolio VI Fund. The Portfolio VI Fund is a
fund of hedge funds and is an exempted limited company
incorporated under the laws of the Cayman Islands. The Portfolio
VI Funds investment objective is to seek attractive
long-term, risk-adjusted absolute returns in U.S. dollars
with volatility lower than, and minimal correlation to, the
broad equity markets. The investment manager of the Portfolio VI
Fund is Goldman Sachs Hedge Fund Strategies LLC, an
affiliate of the Goldman Sachs Funds. Allied World Assurance
Company, Ltd may request a redemption of all or some of its
shares at any time or from time to time by giving notice;
provided, however, that the aggregate net asset value of
the remaining shares held by the redeeming shareholders is not
less than $30 million. The Portfolio VI Fund pays the
investment manager both a management fee and an incentive fee.
The management fee is an annual asset-based fee of 1.0%, payable
quarterly, and a 5% incentive fee is paid to the investment
manager at the end of each year on the net capital appreciation
of our shares. The aggregate fees for the year ended
December 31, 2007 were $1.2 million.
Allied World Assurance Company, Ltd invested a total of
$45 million in shares of the Goldman Sachs Liquid Trading
Opportunities Fund Offshore, Ltd. (the Opportunity
Fund) in December 2004. The Opportunity Fund is an
exempted limited company incorporated under the laws of the
Cayman Islands. The Opportunity Funds investment objective
is to seek attractive total returns through both capital
appreciation and current return from a portfolio of investments
mainly in currencies, publicly traded securities and derivative
instruments, primarily in the fixed income and currency markets.
The investment manager of the Opportunity Fund is Goldman Sachs
Asset Management, an affiliate of the Goldman Sachs Funds. The
Opportunity Fund pays the investment manager both a management
fee and an incentive fee. The management fee is an annual
asset-based fee of 1.0%, payable quarterly, and a 20% incentive
fee is paid to the investment manager on the net capital
appreciation of our shares. The aggregate fees for the year
ended December 31, 2007 were $0.4 million. On
June 30, 2007, Allied World Assurance Company, Ltd sold its
shares in the Opportunity Fund.
On August 20, 2007, Allied World Assurance Company, Ltd
invested $50 million in the Goldman Sachs Global Equity
Opportunities Fund, plc (the Global Equity Fund).
The Global Equity Fund is an open-ended investment company
incorporated in Ireland as a public limited company. The fund
seeks to achieve attractive total returns through both capital
appreciation and current returns in the global equity market.
The investment manager of the Global Equity Fund is Goldman
Sachs Asset Management, L.P., an affiliate of the Goldman Sachs
Funds. The Global Equity Fund allows for monthly liquidity with
a 15-day
notification period, after a six month initial
lock-up. The
fund pays the investment manager both a management fee and an
incentive fee. The management fee is an
25
annual asset-based fee of 1.5%, payable monthly, and a 20%
incentive fee is paid to the investment manager on the net
capital appreciation of our shares. The aggregate fees for the
year ended December 31, 2007 were $0.3 million. On
February 29, 2008, Allied World Assurance Company, Ltd sold
its shares in the Global Equity Fund.
Investment
Banking Services
Pursuant to the Placement Agency Agreement, dated
October 25, 2001, among the Company, AIG, Chubb and GS
Capital Partners 2000, L.P., in the event we determine to
undertake any transaction in connection with which we will
utilize investment banking or financial advisory services, we
have agreed to offer Goldman, Sachs & Co.
(Goldman Sachs) directly or to one of its affiliates
the right to act in such transaction as sole lead manager or
agent in the case of any offering or placement of securities,
lead arranger, underwriter and syndication agent in the case of
any syndicated bank loan, or as sole advisors or dealer
managers, as applicable in the case of any other transaction. If
Goldman Sachs or any of its affiliates agrees to act in any such
capacity, we will enter into an appropriate agreement with
Goldman Sachs or its affiliate, as applicable, which will
contain customary terms and conditions. These investment banking
rights of Goldman Sachs shall terminate upon the earlier of
(a) the sale, transfer or other disposition of our capital
stock to one party, other than AIG, Chubb or GS Capital Partners
2000, L.P. or their respective affiliates, if as a result of
such sale, transfer or other disposition such party holds more
than 50% of our outstanding voting capital stock; (b) GS
Capital Partners 2000, L.P., together with related investment
funds, ceasing to retain in the aggregate ownership of at least
25% of its original shareholding in Allied World Assurance
Company Holdings, Ltd (including any shares that may be issued
upon the exercise of warrants); or (c) the second
anniversary of our IPO. This arrangement may be terminated by us
with cause, or without cause upon a change of control of Goldman
Sachs. There were no fees incurred under this Placement Agency
Agreement for the year ended December 31, 2007.
Transactions
with Affiliates of The Chubb Corporation
Surplus
Lines Agreement
Allied World Assurance Company (U.S.) Inc. and Allied World
National Assurance Company (formerly known as Newmarket
Underwriters Insurance Company) are each party to a surplus
lines agreement, effective June 11, 2002, with Chubb Custom
Market, Inc., an affiliate of Chubb. Under these two agreements,
Chubb Custom Market, Inc. underwrites surplus lines insurance on
behalf of Allied World Assurance Company (U.S.) Inc. and Allied
World National Assurance Company, subject to underwriting
guidelines provided by our U.S. subsidiaries. Under these
agreements, Chubb Custom Market, Inc., on behalf of our
U.S. subsidiaries, also processes applications, collects
and remits premiums, issues quotes, policies and other insurance
documentation, keeps records, secures and maintains insurance
licenses and provides and trains employees to perform these
services. Total fees and commissions incurred under these
agreements for the year ended December 31, 2007 were
$0.4 million. The amount of premiums placed through these
surplus lines agreements for the year ended December 31,
2007 totaled $1.7 million. These agreements were terminated
effective as of June 2007.
Transactions
with Chubb in the Ordinary Course of Business
Our company either accepts or rejects reinsurance offered by
subsidiaries of Chubb based upon our assessment of risk
selection, pricing, terms and conditions. All of our reinsurance
transactions with Chubb or its subsidiaries are open-market
transactions that we believe have been on customary, arms
length terms. We assumed premiums from subsidiaries of Chubb of
approximately $10.7 million for the year ended
December 31, 2007, and we ceded premiums to subsidiaries of
Chubb during the same period of approximately $8.2 million.
Registration
Rights
We executed a Registration Rights Agreement upon the closing of
our IPO that provided AIG, Chubb, the Goldman Sachs Funds or
Securitas Allied Holdings, Ltd. (the Specified
Shareholders) with registration rights for Common Shares
held by them (or obtainable pursuant to warrants held by them)
or any of their affiliates. Each of the Specified Shareholders
has the right under this agreement to require us to register
Common Shares under the Securities Act of 1933, as amended (the
Securities Act) for sale in the public market, in an
underwritten offering, block trades from time to time, or
otherwise. For the Specified Shareholders (other than AIG), the
total amount of Common Shares requested to be registered under
any demand of that kind must, as of the date of the demand,
equal
26
or exceed 10% of all Common Shares outstanding or Common Shares
having a value of $100 million (based on the average
closing price during any 15 consecutive trading days ending
within 30 days prior to but not including such date of
demand). We agreed to waive this provision for AIG in connection
with our purchase of an AIG subsidiary holding 11,693,333 Common
Shares so that AIG may still make a demand registration request
for Common Shares underlying its warrant. We may include other
Common Shares in any demand registration of that kind on a
second-priority basis subject to a customary underwriters
reduction. If we propose to file a registration statement
covering Common Shares at any time, each Specified Shareholder
will have the right to include Common Shares held by it (or
obtainable pursuant to warrants held by it) in the registration
on a second-priority basis with us, ratably according to the
relevant respective holdings and subject to a customary
underwriters reduction. We have agreed to indemnify each
Specified Shareholder with respect to specified liabilities,
including civil liabilities under the Securities Act, and to pay
specified expenses relating to any of these registrations. In
addition, the Goldman Sachs Funds, as the financial founder,
have the right under the Registration Rights Agreement to
appoint Goldman Sachs as the lead managing underwriter if the
Goldman Sachs Funds are selling more than 20% of the Common
Shares sold in a registered public offering.
Review,
Approval or Ratification of Transactions with Related
Persons
Pursuant to our Audit Committee charter, the Audit Committee
reviewed and approved the related party transactions we entered
into during 2007. We do not have written standards in connection
with the review and approval of related party transactions as we
believe each transaction should be analyzed on its own merits.
In making its decision, the Audit Committee reviews, among other
things, the relevant agreement, analyzes the specific facts and
circumstances and speaks with, or receives a memorandum from,
management that outlines the background and terms of the
transaction. As insurance and reinsurance companies enter into
various transactions in the ordinary course of business, the
Audit Committee does not review these types of transactions to
the extent they are open-market transactions that happen to
involve related parties.
27
PRINCIPAL
SHAREHOLDERS
The table below sets forth information as of March 3, 2008
regarding the beneficial ownership of our Common Shares by:
|
|
|
|
|
each person known by us to beneficially own more than 5% of our
outstanding Common Shares,
|
|
|
|
each of our directors,
|
|
|
|
our Chief Executive Officer (CEO), Chief Financial
Officer (CFO) and our three other most highly
compensated officers who were serving as executive officers at
the end of our 2007 fiscal year (collectively, our named
executive officers or NEOs), and
|
|
|
|
all of our directors and executive officers as a group.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beneficial Ownership of Common Shares(1)
|
|
|
|
|
|
|
Non-
|
|
|
Percent of
|
|
Name and Address of Beneficial Owner
|
|
Voting
|
|
|
Voting
|
|
|
Common Shares
|
|
|
American International Group, Inc.
|
|
|
2,000,000
|
(2)
|
|
|
|
|
|
|
3.3
|
%
|
70 Pine Street
New York, NY 10270
|
|
|
|
|
|
|
|
|
|
|
|
|
The Chubb Corporation
|
|
|
1,266,995
|
|
|
|
8,369,936
|
(3)
|
|
|
15.8
|
%
|
15 Mountain View Road
Warren, NJ 07059
|
|
|
|
|
|
|
|
|
|
|
|
|
GS Capital Partners 2000, L.P.(4)
|
|
|
|
|
|
|
4,745,198
|
(5)
|
|
|
7.8
|
%
|
85 Broad Street
New York, NY 10004
|
|
|
|
|
|
|
|
|
|
|
|
|
GS Capital Partners 2000 Offshore, L.P.(4)
|
|
|
|
|
|
|
1,721,770
|
(6)
|
|
|
2.8
|
%
|
85 Broad Street
New York, NY 10004
|
|
|
|
|
|
|
|
|
|
|
|
|
GS Capital Partners 2000 Employee Fund, L.P.(4)
|
|
|
|
|
|
|
1,504,476
|
(7)
|
|
|
2.5
|
%
|
85 Broad Street
New York, NY 10004
|
|
|
|
|
|
|
|
|
|
|
|
|
GS Capital Partners 2000, GmbH & Co. Beteiligungs KG(4)
|
|
|
|
|
|
|
197,924
|
(8)
|
|
|
*
|
|
85 Broad Street
New York, NY 10004
|
|
|
|
|
|
|
|
|
|
|
|
|
Stone Street Fund 2000, L.P.(4)
|
|
|
|
|
|
|
145,018
|
(9)
|
|
|
*
|
|
85 Broad Street
New York, NY 10004
|
|
|
|
|
|
|
|
|
|
|
|
|
Bridge Street Special Opportunities Fund 2000, L.P.(4)
|
|
|
|
|
|
|
72,506
|
(10)
|
|
|
*
|
|
85 Broad Street
New York, NY 10004
|
|
|
|
|
|
|
|
|
|
|
|
|
Wellington Management Company, LLP(11)
|
|
|
3,810,227
|
|
|
|
|
|
|
|
6.3
|
%
|
75 State Street
Boston, MA 02109
|
|
|
|
|
|
|
|
|
|
|
|
|
Scott A. Carmilani
|
|
|
117,333
|
(12)
|
|
|
|
|
|
|
*
|
|
Bart Friedman
|
|
|
4,596
|
|
|
|
|
|
|
|
*
|
|
James F. Duffy
|
|
|
2,972
|
|
|
|
|
|
|
|
*
|
|
Scott Hunter
|
|
|
2,596
|
|
|
|
|
|
|
|
*
|
|
Michael I.D. Morrison
|
|
|
118,161
|
(13)
|
|
|
|
|
|
|
*
|
|
Mark R. Patterson
|
|
|
31,596
|
|
|
|
|
|
|
|
*
|
|
Samuel J. Weinhoff
|
|
|
2,972
|
|
|
|
|
|
|
|
*
|
|
Joan H. Dillard
|
|
|
26,582
|
(14)
|
|
|
|
|
|
|
*
|
|
Wesley D. Dupont
|
|
|
16,916
|
(15)
|
|
|
|
|
|
|
*
|
|
Marshall J. Grossack
|
|
|
10,698
|
(16)
|
|
|
|
|
|
|
*
|
|
Richard E. Jodoin
|
|
|
31,042
|
(17)
|
|
|
|
|
|
|
*
|
|
All directors and executive officers as a group (13 persons)
|
|
|
368,922
|
(18)
|
|
|
|
|
|
|
*
|
|
28
|
|
|
(1) |
|
Pursuant to the regulations promulgated by the SEC, our Common
Shares are deemed to be beneficially owned by a
person if such person directly or indirectly has or shares the
power to vote or dispose of our Common Shares, whether or not
such person has any pecuniary interest in our Common Shares, or
the right to acquire the power to vote or dispose of our Common
Shares within 60 days, including any right to acquire
through the exercise of any option, warrant or right. As of
March 3, 2008, we had 60,512,869 Common Shares issued and
outstanding, this figure includes 11,693,333 Common Shares held
by a wholly-owned subsidiary of the Company. As of March 3,
2008, 43,166,291 Voting Shares and 17,346,578 Non-Voting Shares
were issued and outstanding. |
|
(2) |
|
Based on information reported on Schedule 13G/A, as filed
by AIG with the SEC on December 18, 2007, the 2,000,000
Voting Shares reported as beneficially owned by AIG in the table
above are issuable upon the exercise of a warrant. The warrant
is exercisable, in whole or in part, only (1) in connection
with a contemporaneous sale by AIG of Common Shares or
(2) to avoid a reduction of AIGs equity ownership
percentage below 19.8%. Based upon the percentage of currently
outstanding Common Shares, AIG may currently exercise the
warrant with respect to 2,000,000 Common Shares. |
|
(3) |
|
Based on information reported on Schedule 13G/A, as filed
by Chubb with the SEC on February 14, 2008, and information
we received from our transfer agent. Of the aggregate amount of
9,636,931 Common Shares shown as beneficially owned by Chubb in
the table above, (i) 1,266,995 shares are Voting
Shares, (ii) 8,078,005 shares are Non-Voting Shares
and (iii) 291,931 shares are Non-Voting Shares
issuable upon exercise of a warrant held by Chubb. A total of
2,000,000 Common Shares are issuable upon exercise of this
warrant, but the warrant is exercisable, in whole or in part,
only (1) in connection with the contemporaneous sale by
Chubb of Common Shares or (2) to avoid a reduction of
Chubbs equity ownership percentage below 15.8%. Based upon
the percentage of currently outstanding Common Shares, the
number of Common Shares with respect to which Chubb may
currently exercise the warrant, other than for purposes of the
contemporaneous sale of Common Shares, is 291,931 Common Shares. |
|
(4) |
|
The Goldman Sachs Funds have converted all of the Voting Shares
they owned prior to the IPO to Non-Voting Shares. The warrants
held by each of the Goldman Sachs Funds were amended so that
they may only be exercised into Non-Voting Shares. In addition,
under our Bye-Laws, all Voting Shares held by the Goldman Sachs
Funds and their affiliates automatically convert to Non-Voting
Shares. |
|
|
|
Based on previously received information, we believe that:
(i) affiliates of The Goldman Sachs Group, Inc. (the
Goldman Sachs Group) and Goldman Sachs, which is a
broker-dealer, are the general partner, managing general partner
or managing limited partner of the Goldman Sachs Funds; and
(ii) Goldman Sachs is the investment manager for certain of
the Goldman Sachs Funds. Each of the Goldman Sachs Group and
Goldman Sachs has previously disclaimed beneficial ownership of
the Common Shares owned by the Goldman Sachs Funds, except to
the extent of the Goldman Sachs Groups and Goldman
Sachs pecuniary interest therein, if any. Based on
previously received information, we also believe that the
Goldman Sachs Group, Goldman Sachs and the Goldman Sachs Funds
share voting power and investment power with certain of their
respective affiliates and Goldman Sachs is a direct and
indirect, wholly-owned subsidiary of the Goldman Sachs Group. |
|
|
|
Each of the Goldman Sachs Funds owns warrants that are
exercisable into Non-Voting Shares. The number of warrants held
by each Goldman Sachs Fund is reported in Certain
Relationships and Related Transactions Founding
Shareholders. Each Goldman Sachs Fund may exercise its
respective warrant, in whole or in part, only (1) in
connection with a contemporaneous sale by such Goldman Sachs
Fund of Common Shares or (2) to avoid a reduction of such
Goldman Sachs Funds equity ownership percentage as of the
date the Company completed the IPO. Based upon the percentage of
currently outstanding Common Shares, the number of Common Shares
with respect to which each Goldman Sachs Fund may currently
exercise its respective warrant, other than for purposes of the
contemporaneous sale of Common Shares, is reflected in footnotes
5 through 10 below. |
|
(5) |
|
Includes warrants currently exercisable to purchase up to
approximately 131,579 Non-Voting Shares. |
|
(6) |
|
Includes warrants currently exercisable to purchase up to
approximately 45,359 Non-Voting Shares. |
|
(7) |
|
Includes warrants currently exercisable to purchase up to
approximately 39,493 Non-Voting Shares. |
|
(8) |
|
Includes warrants currently exercisable to purchase up to
approximately 5,086 Non-Voting Shares. |
29
|
|
|
(9) |
|
Includes warrants currently exercisable to purchase up to
approximately 3,723 Non-Voting Shares. |
|
(10) |
|
Includes warrants currently exercisable to purchase up to
approximately 1,859 Non-Voting Shares. |
|
(11) |
|
Based on information reported on Schedule 13G, as filed by
Wellington Asset Management, LLP, an investment advisor
(Wellington), with the SEC on February 14,
2008, Wellington is the beneficial owner of 3,810,227 Voting
Shares held by its clients who had the right to receive, or the
power to direct the receipt of, dividends from, or the proceeds
from the sale of, such securities. No such client was known to
have such right or power with respect to more than 5% of the
class of the Voting Shares. According to this Schedule 13G,
Wellington Asset Management, LLP had the following dispositive
powers with respect to the Voting Shares: (a) sole voting
power: none; (b) shared voting power: 3,263,817;
(c) sole dispositive power: none; and (d) shared
dispositive power: 3,810,227. |
|
(12) |
|
Includes stock options exercisable to purchase 103,333 Voting
Shares. |
|
(13) |
|
Includes stock options exercisable to purchase 116,667 Voting
Shares. |
|
(14) |
|
Includes stock options exercisable to purchase 16,666 Voting
Shares. |
|
(15) |
|
Includes stock options exercisable to purchase 12,500 Voting
Shares. |
|
(16) |
|
Includes stock options exercisable to purchase 7,915 Voting
Shares. |
|
(17) |
|
Includes stock options exercisable to purchase 28,542 Voting
Shares. |
|
(18) |
|
Includes stock options exercisable to purchase 302,081 Voting
Shares. |
EXECUTIVE
OFFICERS
Our executive officers are elected by and serve at the
discretion of your Board. The following table identifies the
executive officers of the Company, including their respective
ages and positions as of the date hereof.
|
|
|
|
|
|
|
Name
|
|
Age
|
|
Position
|
|
Scott A. Carmilani(1)
|
|
|
43
|
|
|
President, Chief Executive Officer and Chairman of the Board
|
Joan H. Dillard(2)
|
|
|
56
|
|
|
Senior Vice President and Chief Financial Officer
|
Wesley D. Dupont(2)
|
|
|
39
|
|
|
Senior Vice President, General Counsel and Secretary
|
Marshall J. Grossack
|
|
|
48
|
|
|
Senior Vice President Chief Corporate Actuary
|
Richard E. Jodoin(2)
|
|
|
56
|
|
|
President, Allied World Assurance Company (U.S.) Inc. and Allied
World National Assurance Company
|
W. Gordon Knight
|
|
|
49
|
|
|
President, U.S. Operations, Distribution and Marketing, Allied
World National Assurance Company
|
John T. Redmond(2)
|
|
|
52
|
|
|
President Allied World Assurance Company (Europe)
Limited and Allied World Assurance Company (Reinsurance) Limited
|
|
|
|
(1) |
|
Please see Mr. Carmilanis biography under
Election of Directors elsewhere in this Proxy
Statement. |
|
(2) |
|
Please see the biographies of Ms. Dillard and
Messrs. Dupont, Jodoin and Redmond under Approval of
Eligible Subsidiary Directors elsewhere in this Proxy
Statement. |
Marshall J. Grossack has been our Senior Vice
President Chief Corporate Actuary since July 2004.
From June 2002 until July 2004, Mr. Grossack was a Vice
President and Actuary for American International Company
Limited, a subsidiary of AIG, and provided services to us
pursuant to a former administrative services contract with
American International Company Limited. From June 1999 until
June 2002, Mr. Grossack worked as the Southwest Region
Regional Actuary for subsidiaries of AIG in Dallas, Texas.
W. Gordon Knight joined Allied World National
Assurance Company as President, U.S. Operations,
Distribution and Marketing in January 2008. Prior to joining our
Company, Mr. Knight held various global management and
underwriting positions for AIG and its subsidiaries since 1982,
most recently as President of Sales &
30
Marketing for AIG Domestic Brokerage Group from 2005 to January
2008. Mr. Knight began his career as a casualty underwriter
at Hartford Insurance Company in 1981.
EXECUTIVE
COMPENSATION
Compensation
Discussion and Analysis
Executive
Summary
Overview. The Company is a Bermuda-based
specialty insurance and reinsurance company that underwrites a
diversified portfolio of property and casualty insurance and
reinsurance lines of business. The Company became a public
company in July 2006 after the successful completion of its IPO.
In anticipation of its IPO, the Company reconstituted the Board
and appointed five new independent board members, three of whom
serve on the current Compensation Committee in accordance with
the rules of the NYSE. The Board also adopted a Compensation
Committee Charter discussed elsewhere in this Proxy Statement.
The Compensation Committee oversees our compensation programs
and makes all final compensation decisions regarding the NEOs.
The Company has achieved considerable growth since its inception
in November 2001 and its compensation programs and plans have
been designed to reward executives who contribute to the
continuing success of the Company.
Compensation Philosophy. The Compensation
Committee believes than an effective executive compensation
program is one that is designed to reward strong Company and
individual performance, which serves to align the interests of
the NEO and the Companys shareholders and which balances
the objectives of pay-for-performance and retention. The
insurance and reinsurance industry is very competitive, cyclical
and often volatile, and the Companys success depends in
substantial part on its ability to attract and retain
successful, high-achieving employees who will remain motivated
and committed to the Company during all insurance industry
cycles.
2007 NEO Compensation Structure. In keeping
with this philosophy, our NEO compensation structure is
comprised of cash compensation primarily consisting of base
salary and annual cash bonus, and long-term equity-based
compensation consisting of RSUs granted under the Companys
Stock Incentive Plan and performance-based awards granted under
the Companys LTIP. For 2007, the Compensation Committee
targeted total cash compensation at approximately the
50th percentile
and total direct compensation (including both cash compensation
and equity-based compensation) at approximately the
75th percentile
of our Bermuda Peer Group described herein, with actual pay
delivered dependent on Company and individual performance. The
Compensation Committee believes that setting total cash
compensation at approximately the
50th percentile
of our Bermuda Peer Group enables the Company to remain
competitive with our Bermuda Peer Group in attracting and
retaining employees. Setting total direct compensation at
approximately the
75th percentile
of our Bermuda Peer Group means that a substantial portion of
each NEOs compensation is in the form of long-term equity
awards, much of which is at risk with vesting
dependent on the Company achieving certain performance targets
that should benefit shareholders as well. The Compensation
Committee believes that by having a substantial portion of NEO
compensation in the form of these long-term equity awards, the
Company pays for performance and the interests of the NEOs and
the Companys shareholders are better aligned.
Compensation
Objectives
The Compensation Committees objectives for the
Companys compensation programs include:
|
|
|
|
|
Driving and rewarding employee performance that supports the
Companys business objectives and financial success;
|
|
|
|
Attracting and retaining talented and highly-skilled employees;
|
|
|
|
Aligning NEO compensation with the Companys financial
success by having a substantial portion of compensation in
long-term, performance-based equity awards, particularly at the
senior officer level where such person can more directly affect
the Companys financial success; and
|
31
|
|
|
|
|
Remaining competitive with other insurance and reinsurance
companies, particularly other Bermuda insurance and reinsurance
companies with which the Company competes for talent.
|
Compensation
Oversight and Process
The Compensation Committee has established a number of processes
to assist it in ensuring that NEO compensation is achieving its
objectives. Among those are:
|
|
|
|
|
Assessment of Company performance;
|
|
|
|
Assessment of individual performance via interactions with the
CEO and other NEOs;
|
|
|
|
Benchmarking and engagement of a compensation
consultant; and
|
|
|
|
Total compensation review, which includes base salary, annual
cash bonuses, long-term incentive compensation, perquisites and
contributions to retirement plans.
|
In determining the level of compensation for the NEOs in 2007,
both quantitative and qualitative factors of the Companys
and each NEOs performance were analyzed.
Assessment
of Company Performance
The Companys performance was assessed using various
factors that the Compensation Committee believed were relevant
to creating value for its shareholders. These factors include
growth in book value, earnings before interest and taxes, return
on equity and the Companys combined ratio. The
Companys performance was considered in light of the
current market conditions in the insurance industry, which
include increased competition, decreasing rates for new and
renewal business and, for the casualty segment of the
Companys business, pressure on insurance policy terms and
conditions to broaden coverage.
Assessment
of Individual Performance
Each NEOs performance is reviewed annually by
Mr. Carmilani, our CEO, on his or her individual skills and
qualifications, management responsibilities and initiatives,
staff development and the achievement of departmental,
geographic
and/or
established business goals and objectives, depending on the role
of the NEO. Each NEOs performance was also assessed in
light of current market conditions in the insurance industry. In
2007, these performance reviews formed the basis on which
compensation-related decisions were made for annual cash bonuses
and grants of RSUs under the Companys Stock Incentive Plan
as well as 2008 base salaries and grants of performance-based
awards granted under the Companys LTIP. Due to the
volatility of the insurance industry and thus the Companys
financial results, the Compensation Committee believes that pure
quantitative performance measures are not the most appropriate
measure of rewarding NEO performance.
The CEOs Role. The Compensation
Committee determines the Companys compensation philosophy
and objectives and sets the framework for the NEOs
compensation structure. Within this framework,
Mr. Carmilani, our CEO, is responsible for recommending to
the Compensation Committee all aspects of compensation for each
NEO, excluding himself. He reviews the recommendations, survey
data and other materials provided to him by Watson Wyatt (our
independent compensation consultant) as well as proxy statements
and other publicly available information, and consults with our
Senior Vice President of Human Resources in making his
recommendations. He also assesses the Companys and each
NEOs performance as described above. The conclusions and
recommendations resulting from these reviews and consultations,
including proposed salary adjustments, annual cash bonus amounts
and equity award amounts, are then presented to the Compensation
Committee for its consideration and approval. The Compensation
Committee has discretion to modify any recommendation it
receives from management, but strongly relies on
Mr. Carmilanis recommendations.
The Board and NEO Interactions. The Board has
the opportunity to meet with the NEOs regularly during the year.
In 2007, the Companys NEOs met with and made many
presentations to the Board regarding their respective business
lines or responsibilities. The Company believes that the
interaction among its NEOs and the Board is important in
enabling the Board, including the members of the Compensation
Committee, to form its own assessment of each NEOs
performance.
32
Timing of Awards. The Compensation Committee
believes that compensation decisions regarding employees should
be made after year-end results have been determined to better
align employee compensation with Company performance and
shareholder value. This requires that annual cash bonuses,
equity awards and base salary adjustments be determined after
year-end financials have been prepared and completed. The
Compensation Committees policy is to approve compensation
decisions at its regularly scheduled meeting during the first
quarter of the year.
Benchmarking
The Role of Watson Wyatt, Our Independent Compensation
Consultant. The Company has engaged Watson Wyatt
for the benefit of the Compensation Committee to conduct
analyses on key aspects of NEO and other senior officer pay and
performance, and to provide recommendations about compensation
plan design. Watson Wyatt reports directly to the Compensation
Committee. Watson Wyatt meets with members of senior management
to gain a greater understanding of key issues facing the Company
and its equity and retirement plans and other benefits. The
Compensation Committee meets separately with Watson Wyatt to
review in detail all compensation-related decisions regarding
the CEO. During this review, the Compensation Committee receives
Watson Wyatts recommendations, surveys (including Bermuda
Peer Group compensation information) and other materials.
The survey data and other information provided by Watson Wyatt
is used as a frame of reference for setting the total cash and
total direct compensation of our NEOs. With the aid of this
data, the Compensation Committee has sought to target cash
compensation (base salary and annual cash bonus) at
approximately the
50th percentile
and total direct compensation (both cash and equity-based
compensation) at approximately the
75th percentile
among the Bermuda Peer Group. Setting compensation targets based
on data provided by an independent third party is intended to
ensure that our compensation practices are both prudent and
effective.
Compensation Benchmarking to Bermuda Peer
Group. The Companys Bermuda Peer Group
consists of seven companies that were reviewed with Watson Wyatt
and adopted by the Compensation Committee based on being within
the range of annual revenue, market to book value, net income,
total assets and return on equity similar to the Company. The
Bermuda Peer Group includes: Arch Capital Group Ltd., Aspen
Insurance Holdings Limited, Axis Capital Holdings Limited,
Endurance Specialty Holdings Ltd., Max Capital Group, Ltd.,
Montpelier Re Holdings Ltd. and Platinum Underwriters Holdings,
Ltd. Watson Wyatt compared key aspects of these companies
executive compensation programs and also compared the pay of
individual executives where the jobs are sufficiently similar to
make the comparison meaningful.
Total
Compensation Review
In 2007, the Compensation Committee reviewed a summary report or
tallysheet prepared by the Company for each NEO as
well as other senior officers. The purpose of a tallysheet is to
show the aggregate dollar value of each officers total
annual compensation, including base salary, annual cash bonus,
equity-based compensation, perquisites and all other
compensation. The tallysheet also shows amounts payable to each
NEO upon termination of his or her employment under various
severance and
change-in-control
scenarios. Tallysheets are reviewed by our Compensation
Committee for primarily informational purposes and are not a
material factor in making determinations as to compensation
amounts.
Components
of Executive Compensation
For 2007, total compensation for the NEOs consisted of the
following components:
|
|
|
|
|
Base salary;
|
|
|
|
Annual cash bonus;
|
|
|
|
Equity compensation, through grants of RSUs and
performance-based awards;
|
|
|
|
Perquisites, particularly reimbursement for housing expenses and
a cost of living allowance for the Companys senior
officers residing in Bermuda; and
|
|
|
|
Retirement, health and welfare benefits.
|
33
Cash
Compensation
Base
Salary
Overview. Base salary is the guaranteed
element of the NEOs annual cash compensation. Having
competitive base salaries is an important part of attracting and
retaining key employees. Base salaries are benchmarked to our
Bermuda Peer Group and are also impacted by the NEOs
performance as well as the Companys performance. In 2007,
the Compensation Committee wanted to reward the NEOs and our
other senior officers for their and the Companys strong
performance in 2006. The Compensation Committee reviewed the
base salaries of our NEOs with the objective of benchmarking
total cash compensation (base salaries and annual cash bonuses)
at approximately the
50th percentile
of the Bermuda Peer Group. The base salaries of the NEOs were
increased effective retroactive to January 1, 2007 and are
reflected in the Summary Compensation Table below.
Based on the market comparison data and survey data reviewed by
the Compensation Committee, our NEOs were relatively close to
the
50th percentile
for base salaries, other than Mr. Carmilani whose base
salary was significantly below the median. The Compensation
Committee decided to raise Mr. Carmilanis salary to
be closer to the median, to compensate him for his greater level
of responsibilities compared to the other NEOs, to recognize his
leadership role in developing, and executing on, the
Companys business plan and to help ensure his retention
with the Company. For 2006 and 2007, the annualized base salary
rates for the NEOs are summarized below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Annualized
|
|
Name
|
|
Fiscal Year 2006
|
|
|
Fiscal Year 2007
|
|
|
Percent Increase
|
|
|
Scott A. Carmilani
|
|
$
|
550,000
|
|
|
$
|
900,000
|
|
|
|
63.6
|
%
|
Joan H. Dillard
|
|
$
|
300,000
|
|
|
$
|
320,000
|
|
|
|
6.7
|
%
|
Wesley D. Dupont
|
|
$
|
265,000
|
|
|
$
|
276,500
|
|
|
|
4.3
|
%
|
Marshall J. Grossack
|
|
$
|
258,000
|
|
|
$
|
275,000
|
|
|
|
6.6
|
%
|
Richard E. Jodoin
|
|
$
|
300,000
|
|
|
$
|
315,000
|
|
|
|
5.0
|
%
|
Annual
Cash Bonus
Overview. The Company pays annual cash bonuses
pursuant to its cash bonus program, which is designed to align
individual performance with the Companys performance and
earnings growth objectives for the year. The Companys
annual cash bonus program is another important element in
retaining talented employees and rewarding performance. Cash
bonuses paid to our NEOs for 2007 appear in the Summary
Compensation Table under the Non-Equity Incentive Plan
Compensation column.
After extensive internal reviews and discussions, as well as
consultations with Watson Wyatt, the Company established a
structured, yet still flexible, cash bonus program that has been
implemented by the Compensation Committee.
Cash Bonus Program. The cash bonus program has
two facets: (1) an overall cash bonus pool that is funded
and out of which individual annual cash bonuses are paid; and
(2) a process by which individual annual cash bonuses are
determined. For each senior officer eligible to participate in
the cash bonus program, a target bonus percentage was
established during the first quarter of 2007. Each
officers 2007 target bonus was based on a percentage of
his or her base salary. Target bonus percentages for the NEOs
and other senior officers were recommended by the CEO and
approved by the Compensation Committee. The CEOs target
bonus percentage was determined solely by the Compensation
Committee. These bonus targets below were established so that
total cash compensation (base salaries and annual cash bonuses)
of each NEO was at approximately the
50th percentile
of the Bermuda Peer Group. Our NEOs were eligible to receive an
annual cash bonus based on a percentage of their annual base
salary as follows:
|
|
|
|
|
|
|
Bonus Target
|
|
Name
|
|
Percentage
|
|
|
Scott A. Carmilani
|
|
|
100
|
%
|
Joan H. Dillard
|
|
|
75
|
%
|
Wesley D. Dupont
|
|
|
50
|
%
|
Marshall J. Grossack
|
|
|
50
|
%
|
Richard E. Jodoin
|
|
|
50
|
%
|
34
The methodology used to determine the annual cash bonus pool
from which individual bonuses are paid contains both a formulaic
element and a discretionary element. The formulaic element makes
up 50% of the cash bonus pool funding, and the discretionary
element makes up the other 50% of this pool. The objective is to
provide structure and predictability for the Companys
senior officers while also permitting the Compensation Committee
to take actions when necessary in light of the cyclicality and
volatility of the insurance and reinsurance industry.
The Formulaic Element. For the 2007 fiscal
year, the annual cash bonus pool used earnings before interest
and taxes (EBIT) as the financial metric to
establish funding targets in one of three categories:
(1) Minimum Target, (2) Target and (3) Maximum
Target. The Minimum Target category was the lowest EBIT number
that could be reached and still obtain funding of the formulaic
element. The annual cash bonus pool is only 50% funded if the
Minimum Target is reached. The Target category is where EBIT
meets the goal set by the Compensation Committee, and if the
Company reaches this category, the annual cash bonus pool is
100% funded. The Maximum Target occurs when the Company equals
or exceeds 120% of its EBIT goal and the cash bonus pool is 150%
funded.
For 2007, the following EBIT amounts and annual cash bonus pool
funding were approved:
|
|
|
|
|
|
|
Performance
|
|
Minimum
|
|
|
|
Maximum
|
Versus Goal
|
|
Target
|
|
Target
|
|
Target
|
|
EBIT
|
|
$282 million
|
|
$353 million
|
|
$424 million
|
EBIT as a Percentage Goal
|
|
80%
|
|
100%
|
|
120%
|
Bonus Pool Funding
|
|
50%
|
|
100%
|
|
150%
|
Why use EBIT as the financial metric? The
Compensation Committee selected the EBIT financial metric for
the 2007 fiscal year because they believed it was the most
relevant measure of the Companys annual results.
How is EBIT calculated? EBIT is calculated by
taking the Companys net income and adding back interest
expense and tax expense. In 2007, EBIT was derived as follows
(based on approximate totals): $469.2 million of net
income, plus $37.8 million of interest expense, plus
$1.1 million of income tax expense equals
$508.1 million of EBIT. Based on the $424 million
Maximum Target reflected in the table above, the Company
exceeded the maximum target by approximately $84.1 million,
or 19.8%.
How were the targets determined? The targets
for 2007 for the annual cash bonus pool were the same targets
established in 2006, which was a record year for the Company.
Given the significant increase in competition and reduced
insurance rates in some lines of business, the Compensation
Committee did not adjust the 2007 targets from the prior year.
The factors that primarily contributed to the Company exceeding
the maximum target in 2007 included the benign level of
catastrophe activity in the United States during the year,
favorable releases of reserves from prior loss years and
increased investment income due to interest rate movements. For
2008, the target is based on budgeted EBIT for the Company,
which budgeted amount is an increase over 2007.
The Discretionary Element. As stated above,
the discretionary portion of the award is intended to give the
Compensation Committee flexibility in light of the cyclicality
and volatility of the insurance and reinsurance industry. The
Compensation Committee first funds the annual cash bonus pool
based on EBIT and then funds 50% of the annual cash bonus pool
based on various discretionary considerations. The Compensation
Committee then determines each senior officers annual cash
bonus, which is paid out of the total pool.
Depending on the overall cash bonus pool funding level, awards
to individual officers are made based on the CEOs and
Compensation Committees assessment of individual
performance.
The Compensation Committee sought to reward the NEOs for their
performance and achievements in 2007, including:
|
|
|
|
|
Acquiring approximately 11.7 million Common Shares held by
AIG, one of our founding shareholders;
|
|
|
|
Posting by the Company of a strong annualized net income return
on average equity of 21.7%;
|
|
|
|
Expanding the Companys business in the United States;
|
|
|
|
Commencing a U.S. reinsurance platform;
|
35
|
|
|
|
|
Entering into two credit facilities during the year, consisting
of (1) a collaterized $750 million amended letter of
credit facility with Citibank Europe plc; and (2) a
five-year $800 million senior credit facility consisting of
a $400 million unsecured facility and a $400 million
secured facility, with Bank of America, N.A., acting as
syndication agent and Wachovia Bank, National Association,
acting as administrative agent, fronting bank and letter of
credit agent;
|
|
|
|
Filing with the SEC a universal shelf registration statement on
Form S-3
pursuant to which the Company registered various securities that
it may issue to raise capital in the future; and
|
|
|
|
Settling for $2.1 million all matters relating to the
investigation of the Company by the Antitrust and Civil Medicaid
Fraud Division of the Office of the Attorney General of Texas.
|
Based on the EBIT calculations above, the annual cash bonus pool
was funded at 150% of the Target column in the table
above. The annual cash bonus earned for 2007 by each of the NEOs
as a percentage of his or her salary and as a percentage of
target bonus is as follows:
|
|
|
|
|
|
|
|
|
|
|
Bonus as a Percentage
|
|
|
Bonus as a Percentage
|
|
Name
|
|
of Salary
|
|
|
of Target
|
|
|
Scott A. Carmilani
|
|
|
150.0
|
%
|
|
|
150.0
|
%
|
Joan H. Dillard
|
|
|
112.5
|
%
|
|
|
150.0
|
%
|
Wesley D. Dupont
|
|
|
75.9
|
%
|
|
|
151.9
|
%
|
Marshall J. Grossack
|
|
|
74.5
|
%
|
|
|
149.1
|
%
|
Richard E. Jodoin
|
|
|
74.6
|
%
|
|
|
149.2
|
%
|
Equity
Compensation
For the NEOs in 2007, the Companys long-term incentive
compensation was structured under:
|
|
|
|
|
the Stock Incentive Plan; and
|
|
|
|
the LTIP.
|
Overview. The Compensation Committee believes
that a substantial portion of each NEOs compensation
should be in the form of long-term equity awards, the largest
portion of which should be at risk awards with
vesting dependent on the Company achieving certain performance
targets. Equity awards serve to align the interests of the NEOs
and the Companys shareholders. Equity awards also help to
ensure a strong connection between NEO compensation and the
Companys financial performance because the value of the
award depends on the Companys future performance and share
price. Long-term equity awards, meaning awards that vest over a
period of years, also serve as a management retention tool. The
Compensation Committee utilizes equity awards to accomplish its
compensation objectives while recognizing its duty to the
Companys shareholders to limit equity dilution. The
Compensation Committee has received analysis from Watson Wyatt
on relevant factors of its equity compensation program,
including the values of the vested and unvested equity stakes,
burn rates and comparisons to the equity compensation programs
of the Bermuda Peer Group.
RSU Awards. An RSU gives a holder the right to
receive a specified number of Common Shares at no cost if the
holder remains employed at the Company through the applicable
vesting date. Although an RSUs value may increase or
decrease with changes in the share price during the period
before vesting, an RSU will have value in the long term,
encouraging retention. While the bulk of the Companys RSU
awards to NEOs have historically been made pursuant to our
annual grant program, the Compensation Committee retains the
discretion to make additional awards at other times. In July
2006, the Board awarded special retention RSUs to key employees
of the Company, including the NEOs, prior to the IPO. The
Compensation Committee wanted to ensure the long-term retention
of our senior officers, including the NEOs. The objectives of
these RSU awards primarily were to motivate and retain senior
officers, including the NEOs, by increasing their unvested
equity stakes, and to ensure continuity of management as the
Company approached its IPO. The RSUs were awarded under the
Stock Incentive Plan with vesting terms as follows: 50% vest
after the fourth anniversary of the date of grant and the
remaining 50% vest after the fifth anniversary.
36
The Company also grants RSUs as part of its equity compensation
package to its employees, including the NEOs. Generally these
RSUs vest pro rata over four years. The Company granted the
following awards in the fiscal years 2007 and 2008 to date:
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|
|
|
|
|
|
|
|
|
RSUs Granted
|
|
|
RSUs Granted
|
|
|
|
in 2007 for 2006
|
|
|
in 2008 for 2007
|
|
Name
|
|
Performance
|
|
|
Performance
|
|
|
Scott A. Carmilani
|
|
|
12,000
|
|
|
|
16,667
|
|
Joan H. Dillard
|
|
|
5,000
|
|
|
|
5,000
|
|
Wesley D. Dupont
|
|
|
3,000
|
|
|
|
4,000
|
|
Marshall J. Grossack
|
|
|
3,000
|
|
|
|
3,000
|
|
Richard E. Jodoin
|
|
|
4,000
|
|
|
|
4,000
|
|
LTIP Awards. Each LTIP award represents the
right to receive a number of the Companys Common Shares in
the future, based upon the achievement of established
performance criteria during an applicable three-year performance
period. Awards issued in 2007 will vest after the fiscal year
ending December 31, 2009 in accordance with the terms and
performance conditions of the LTIP as described in more detail
below. The LTIP awards are at risk, meaning
should the Company fail to perform at a minimum prescribed
level, no LTIP awards will vest and no compensation will be
derived by the NEOs from these awards. The Compensation
Committee believes that the performance-based LTIP awards serve
to promote the Companys growth and profitability over the
long term. By having a three-year vesting period, the LTIP
awards also encourage employee retention.
Financial Metric. The Compensation Committee
selected adjusted book value as the financial metric
for the 2007 grant of performance-based LTIP awards because it
believes this metric correlated best with long-term shareholder
value and the long-term health of the Company.
For 2007, vesting of the performance shares is based on an
average annual growth in the adjusted book value of the
Companys Common Shares as follows:
|
|
|
|
|
|
|
|
|
Performance
|
|
|
|
|
|
|
|
|
Versus Goal
|
|
Below Threshold
|
|
Threshold
|
|
Target
|
|
Maximum
|
|
2007-2009
Average Per Annum
Adjusted Book Value Growth
|
|
Below 9%
|
|
9%
|
|
12%
|
|
15%
|
Number of Shares Earned
|
|
0
|
|
50%
|
|
100%
|
|
150%
|
|
|
|
|
of Targeted
Shares
|
|
of Targeted
Shares
|
|
of Targeted
Shares
|
No performance-based equity awards vest if the Companys
average annual growth in adjusted book value for the three-year
period ending December 31, 2009 falls below 9%. The
Compensation Committee believes that even at this threshold
amount, there is a significant increase in value to the
Companys shareholders, and the NEOs and
shareholders interests are aligned because the NEOs
receipt of Common Shares is conditioned upon the Company
performing well. LTIPs were first awarded in 2006 and again in
2007. None of these LTIP awards have vested because the
performance metric is not measured until after the completion of
the third year.
In 2007, each of the Companys NEOs received an award of
performance shares as follows:
|
|
|
|
|
Name
|
|
Target Shares
|
|
|
Scott A. Carmilani
|
|
|
50,000
|
|
Joan H. Dillard
|
|
|
30,000
|
|
Wesley D. Dupont
|
|
|
17,500
|
|
Marshall J. Grossack
|
|
|
17,500
|
|
Richard E. Jodoin
|
|
|
15,000
|
|
37
How is Adjusted Book Value calculated? For
purposes of vesting performance shares under the LTIP, adjusted
book value is defined as total shareholders
equity adjusted for (1) any special, one-time
dividends declared; (2) accumulated other comprehensive
income (consisting primarily of unrealized gains and losses on
the investment portfolio); and (3) any capital events (such
as capital contributions or share repurchases).
Is there a Discretionary Element? In addition
to the above three factors, the Compensation Committee may
consider in its discretion any other extraordinary events that
may affect year-end results.
The number of performance-based awards available for grant each
year is determined by the Compensation Committee. In making its
determination, the Compensation Committee may consider the
number of available shares remaining under the LTIP, the number
of employees who will be participating in the LTIP, market data
from competitors with respect to the percentage of outstanding
shares made available for annual grants to employees and the
need to retain and motivate key employees. In 2007,
performance-based awards and RSUs were granted in an aggregate
amount to each of our NEOs so that his or her total direct
compensation (including both cash compensation and equity-based
compensation) was at approximately the
75th percentile
of our Bermuda Peer Group.
Benefits
and Perquisites
The location of our global headquarters in Bermuda affects our
ability to attract and retain talented employees as well as the
ways in which we compensate these employees. Because many of our
NEOs are non-Bermudians who have relocated to Bermuda, we
believe it is important to remain competitive with other Bermuda
insurance and reinsurance companies regarding compensation in
order to attract and retain talented employees to grow our
business. Many of the benefits and perquisites discussed below
are offered only to those NEOs who have relocated to Bermuda.
Some of the NEOs have not received one or more of the benefits
or perquisites in 2007. Mr. Jodoin was not eligible to
receive the benefits and perquisites described below because he
is a U.S. citizen based out of the Companys Boston
office.
Perquisites. Our NEOs receive various
perquisites paid by the Company. In 2007, these perquisites
included a housing allowance, cost of living allowance
(COLA), club membership and return flights to their
home country for executives and their family members who are in
Bermuda. Many of these perquisites are typical of perquisites
provided to the Companys other expatriate employees
located in Bermuda. Similar perquisites are provided by the
Companys competitors for employees in a similar position
and have been necessary for recruitment and retention purposes.
The Companys perquisites generally include:
Housing Allowance. Non-Bermudians are
significantly restricted by law from owning property in Bermuda.
This has resulted in a housing market that is largely based on
renting to expatriates who work on the island. Housing
allowances are a near universal practice for expatriates. The
Company bases its housing allowances on available rental market
information and the Companys knowledge of the housing
rental market in general. Each housing allowance is based on the
level of the employment position and the size of the
employees family living in Bermuda compared with such
market data.
COLA. In addition to the base salary, the NEOs
and other senior officers who work on the island also receive a
monthly COLA based upon the amount of base salary that would
have been spent on a basket of goods and services
had such individual not relocated to Bermuda versus the cost of
the same basket of goods and services in Bermuda.
Factors in determining COLA also include the level of base
salary (capped at $300,000) and the size of the senior
officers family living in Bermuda. The Compensation
Committee recently reviewed this benefit and decided to
eliminate in 2008 the COLA as a separate benefit and instead
combine the amount of COLA each senior officer was receiving
with his or her annual base salary.
Club Membership. The provision of a club
membership or financial assistance with joining a club in
Bermuda is common practice in the marketplace and enables the
NEOs and other employees who are expatriates to settle into the
community. It also has the benefit of enabling the NEOs to
establish social networks with clients and others.
Home Leave. Reimbursement for airfare to a
home country is common practice for expatriates who are working
in Bermuda. The Company believes that this helps the expatriate
and his or her family to better keep in
38
touch with relatives and other social networks. Such a benefit
is provided by the Bermuda Peer Group companies and is necessary
for both recruitment and retention purposes.
Financial and Tax Planning. Because many of
the Companys senior officers are non-Bermudians and are
subject to complicated tax issues from working abroad, the
Company provides reimbursement or payment of the cost of
financial and tax planning to certain of the senior officers,
including its NEOs. The Company believes this perquisite is
necessary for retention purposes and is important for the
financial welfare of the Companys expatriated employees.
Tax
Gross-Ups. In
2006, the U.S. Tax Increase Prevention and Reconciliation
Act of 2005 (the Tax Act) was passed, which
significantly increased the amount of U.S. federal tax our
employees that are U.S. citizens have to pay. As a result
of the Tax Act, the Company agreed to gross-up
U.S. taxpayers who are employees working in Bermuda in
connection with these additional tax obligations. The Company
believes this perquisite is important in retaining employees
affected by the Tax Act.
Aircraft Usage. One of the Companys
subsidiaries leases the fractional use of one aircraft and
fractionally owns another. The Company determined that these
aircraft were necessary primarily to facilitate directors
attending Board meetings in Bermuda. During 2007, certain of the
NEOs used these aircraft from time to time for business
purposes. If the aircraft are used for personal reasons, the
incremental cost for such use, not including fixed costs, shall
be included in total perquisites for the NEO. During 2007,
certain of our NEOs did use the aircraft for personal reasons.
See Summary Compensation Table below for more
information.
Retirement,
Health and Welfare Benefits
The Company offers a variety of health and welfare programs to
all eligible employees. The NEOs are generally eligible for the
same benefit programs on the same basis as the rest of the
Companys employees. The health and welfare programs are
intended to protect employees against catastrophic loss and
include medical, pharmacy, dental, vision, life insurance,
accidental death and disability, and short- and long-term
disability. The Company provides full-time employees with these
benefits at no cost to the employee. We offer a qualified 401(k)
savings and retirement plan for our employees who are
U.S. citizens (wherever they may be located) and similar
plans for our other employees. All Company employees, including
the NEOs, are generally eligible for these plans. The Company
contributes to such employees accounts as well.
We have established the Allied World Assurance Company (U.S.)
Inc. Supplemental Executive Retirement Plan (the
SERP), effective as of January 1, 2005, for
certain of our employees who are U.S. citizens (generally
assistant vice presidents and up) wherever they may be located.
Each of our NEOs participates in the SERP. Under the SERP, the
Company or its subsidiaries will make a contribution equal to
10% of a participants annual salary, and participants may
voluntarily contribute up to 25% of their annual salary (for
these purposes annual salary is currently capped at $200,000).
Participant contributions to the SERP vest immediately. There is
a five-year cumulative vesting period for all Company
contributions so that upon completion of five years of service,
a participant will be 100% vested in all prior and future
contributions made on his or her behalf by the Company or its
subsidiaries. The Company contributions shall also fully vest
upon a participants retiring after attaining the age of
65. Executives may defer receipt of part or all of their cash
compensation under the SERP. The program allows
U.S. officers to save for retirement in a tax-effective way
at minimal cost to the Company. The investment alternatives
under the SERP are the same choices available to all
participants under the 401(k) plan, and the NEOs do not receive
preferential treatment on their investments. The Company
believes that contributing to a participants retirement
and having a five-year cumulative vesting for the Companys
contributions on behalf of a participant attracts senior
officers who want to remain with the Company for the long term
and help it achieve its business objectives.
Stock
Ownership Policy
In order to promote equity ownership and further align the
interests of management with our shareholders, in 2007 the Board
adopted a stock ownership policy for senior employees. Under
this policy, all of our employees with
39
titles of vice president and above are expected to own within
five years after his or her joining us or after a promotion,
equity interests in the Company, expressed as a multiple of base
salary as follows:
|
|
|
|
|
|
|
Multiple of
|
|
Title
|
|
Base Salary
|
|
|
Chief Executive Officer
|
|
|
5 times
|
|
Executive Vice President,
Senior Vice President or Presidents
|
|
|
2 times
|
|
Vice President
|
|
|
1 time
|
|
Under the Companys Policy Regarding Insider Trading for
all Directors, Officers and Employees and its Code of Conduct
and Business Ethics, employees are prohibited from engaging in
speculative or in and out trading in securities of
the Company. In addition, the Company also prohibits hedging and
derivative transactions in its securities (other than
transactions in the Companys employee stock options).
These transactions are characterized by short sales, buying or
selling publicly traded options, swaps, collars or similar
derivative transactions.
Employment
Agreements/Severance Arrangements
The Company has entered into employment agreements with each of
Messrs. Carmilani, Dupont and Grossack and
Ms. Dillard the four NEOs who reside in
Bermuda. Apart from name, title, base salary and housing
allowance, the employment agreements of these NEOs are identical
to each other as well as to other senior officers. The Company
believes that entering into these employment agreements supports
its compensation objectives of attracting and retaining talented
and highly-skilled employees and remaining competitive with
other insurance and reinsurance companies in Bermuda that offer
similar benefits.
Generally, these employment agreements provide each NEO with two
years base salary and annual bonus, among other things,
should he or she be terminated by the Company without cause or
should he or she terminate the employment agreement with good
reason. Should an NEOs employment be terminated for these
reasons, in order to receive this payout they are subject to two
year non-compete and non-solicitation provisions, which serve to
protect the Company and its business objectives.
The two-year period for base salary and annual bonus increases
to three should such termination occur within 12 months of
a change in control. The Company believes that the change in
control provisions are appropriate for certain of the NEOs to
further align their interests and shareholders interests
when considering corporate transactions that may be in the best
interests of the shareholders without causing undue concern over
whether the transaction may jeopardize the NEOs own
employment.
In addition, all equity-based awards shall fully vest
immediately prior to such change in control, regardless of
whether or not the NEO is terminated. The Board approved the
acceleration of vesting of equity awards in the event of a
change in control to permit the NEOs to participate in the
transaction in the same manner that all other shareholders will
be participating, without being exposed to continuing vesting
risk. As the full vesting of equity awards does not occur until
immediately prior to the change in control, the acceleration
provision also has a retention element in that it helps to
ensure that the NEOs will remain with the Company through the
entire transaction process. The increase in the Severance
Multiplier (from two to three) upon a qualified termination
within 12 months of a change in control also provides a
greater incentive for the NEO to remain with the Company through
the change in control regardless of potential redundancies in
executive personnel. Please see Narrative
Disclosure Regarding Equity Plans and Employment
Agreements Employment Agreements for more
information.
40
Summary
Compensation Table
The following table provides information concerning the
compensation for services in all capacities earned by the NEOs
for fiscal years 2007 and 2006.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock
|
|
|
Option
|
|
|
Incentive Plan
|
|
|
All Other
|
|
|
|
|
|
|
|
|
|
|
|
|
Awards
|
|
|
Awards
|
|
|
Compensation
|
|
|
Compensation
|
|
|
|
|
Name and Principal Position
|
|
Year
|
|
|
Salary ($)
|
|
|
($)(2)
|
|
|
($)(3)
|
|
|
($)(4)
|
|
|
($)(5)
|
|
|
Total ($)
|
|
|
Scott A. Carmilani(1)
|
|
|
2007
|
|
|
$
|
900,000
|
|
|
$
|
2,804,225
|
|
|
$
|
78,965
|
|
|
$
|
1,350,000
|
|
|
$
|
447,117
|
|
|
$
|
5,580,307
|
|
President, Chief Executive Officer and Chairman of the
Board
|
|
|
2006
|
|
|
$
|
550,000
|
|
|
$
|
1,457,120
|
|
|
$
|
209,105
|
|
|
$
|
900,000
|
|
|
$
|
418,633
|
|
|
$
|
3,534,858
|
|
Joan H. Dillard
|
|
|
2007
|
|
|
$
|
320,000
|
|
|
$
|
1,102,419
|
|
|
$
|
100,589
|
|
|
$
|
360,000
|
|
|
$
|
253,472
|
|
|
$
|
2,136,480
|
|
Senior Vice President and Chief Financial Officer
|
|
|
2006
|
|
|
$
|
300,000
|
|
|
$
|
325,117
|
|
|
$
|
100,589
|
|
|
$
|
330,000
|
|
|
$
|
238,333
|
|
|
$
|
1,294,039
|
|
Wesley D. Dupont
|
|
|
2007
|
|
|
$
|
276,500
|
|
|
$
|
833,637
|
|
|
$
|
75,442
|
|
|
$
|
210,000
|
|
|
$
|
298,100
|
|
|
$
|
1,693,679
|
|
Senior Vice President, General Counsel and Secretary
|
|
|
2006
|
|
|
$
|
265,000
|
|
|
$
|
303,518
|
|
|
$
|
75,442
|
|
|
$
|
155,000
|
|
|
$
|
279,702
|
|
|
$
|
1,078,662
|
|
Marshall J. Grossack(6)
|
|
|
2007
|
|
|
$
|
275,000
|
|
|
$
|
541,806
|
|
|
$
|
29,044
|
|
|
$
|
205,000
|
|
|
$
|
291,859
|
|
|
$
|
1,342,709
|
|
Senior Vice President Chief Corporate Actuary
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Richard E. Jodoin
|
|
|
2007
|
|
|
$
|
315,000
|
|
|
$
|
749,117
|
|
|
$
|
13,246
|
|
|
$
|
235,000
|
|
|
$
|
34,580
|
|
|
$
|
1,346,943
|
|
President, Allied World Assurance Company (U.S.) Inc. and
Allied World National Assurance Company
|
|
|
2006
|
|
|
$
|
300,000
|
|
|
$
|
322,481
|
|
|
$
|
58,385
|
|
|
$
|
225,000
|
|
|
$
|
37,075
|
|
|
$
|
942,941
|
|
|
|
|
(1) |
|
Mr. Carmilani receives no additional compensation for
serving as one of our directors. |
|
(2) |
|
The amounts shown in the Stock Awards column equal
the dollar amount recognized by us during the applicable year as
compensation expense for financial statement reporting purposes
as a result of RSU and LTIP awards made in such year and in
prior years in accordance with FAS 123(R). Pursuant to the
SEC rules, the amounts shown exclude the impact of estimated
forfeitures related to service-based vesting conditions. For
RSUs and LTIP awards issued in 2007 and in 2006 subsequent to
the IPO, the fair value has been calculated using the closing
price of the Companys Common Shares on the date of grant.
For RSUs issued prior to the IPO, the incremental fair value as
a result of the IPO and modification of the plans has been
calculated using the difference between the IPO price of $34.00
per share and the book value immediately prior to the IPO. For
additional information on the calculation of the compensation
expense, please refer to note 9(b) and (c) of the
Companys consolidated financial statements contained in
the
Form 10-K
for the year ended December 31, 2007, as filed with the
SEC. These amounts reflect the Companys accounting expense
for these awards and do not correspond to the actual value that
may be recognized by the NEOs. For more information on RSU and
performance-based awards under our LTIP made to the NEOs during
2007, please see the Grants of Plan-Based Awards
table below. |
|
(3) |
|
The amounts shown in the Option Awards column equal
the dollar amount recognized by us during the applicable year as
compensation expense for financial reporting purposes as a
result of options granted in such year in accordance with
FAS 123(R). Pursuant to the SEC rules, the amounts shown
exclude the impact of estimated forfeitures related to
service-based vesting conditions. For all stock option awards
issued, the fair value has been calculated by using the
Black-Scholes option-pricing model. For additional information
on the calculation of the compensation expense including the
valuation assumptions used within the option-pricing model,
please refer to note 9(a) of the Companys
consolidated financial statements contained in the
Form 10-K
for the year ended December 31, 2007, as filed with the
SEC. These amounts reflect the Companys accounting expense
for these awards and do not correspond to the actual value that
may be recognized by the NEOs. For more information on option
grants made to the NEOs during 2007, please see the Grants
of Plan-Based Awards table below. |
|
(4) |
|
The amounts shown in the Non-Equity Incentive Plan
Compensation column represent cash bonuses earned under
our 2007 and 2006 cash bonus plans and were paid in February
2008 and 2007, respectively. For a description of our annual
cash bonus plan, see Compensation Discussion
and Analysis Cash Compensation Annual
Cash Bonus. |
41
|
|
|
(5) |
|
The amounts shown in the All Other Compensation
column are attributable to perquisites and other personal
benefits or compensation not reported elsewhere in the Summary
Compensation Table. The table below shows certain components of
the All Other Compensation column. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
401(k)/
|
|
|
SERP
|
|
|
|
|
|
Tax
|
|
|
Aggregate All
|
|
|
|
|
|
|
Company
|
|
|
Company
|
|
|
|
|
|
Gross-
|
|
|
Other
|
|
Name
|
|
Year
|
|
|
Contributions
|
|
|
Contributions
|
|
|
Perquisites(a)
|
|
|
Ups(b)
|
|
|
Compensation
|
|
|
Scott A. Carmilani
|
|
|
2007
|
|
|
$
|
11,250
|
|
|
$
|
20,000
|
|
|
$
|
321,282
|
|
|
$
|
94,585
|
|
|
$
|
447,117
|
|
Joan H. Dillard
|
|
|
2007
|
|
|
$
|
11,250
|
|
|
$
|
20,000
|
|
|
$
|
181,353
|
|
|
$
|
40,869
|
|
|
$
|
253,472
|
|
Wesley D. Dupont
|
|
|
2007
|
|
|
$
|
11,250
|
|
|
$
|
20,000
|
|
|
$
|
211,995
|
|
|
$
|
54,855
|
|
|
$
|
298,100
|
|
Marshall J. Grossack
|
|
|
2007
|
|
|
$
|
11,250
|
|
|
$
|
20,000
|
|
|
$
|
204,231
|
|
|
$
|
56,378
|
|
|
$
|
291,859
|
|
Richard E. Jodoin
|
|
|
2007
|
|
|
$
|
11,250
|
|
|
$
|
20,000
|
|
|
$
|
3,330
|
|
|
|
|
|
|
$
|
34,580
|
|
|
|
|
(a) |
|
Perquisites in 2007 for the NEOs include reimbursements for
amounts for certain home leave travel expenses, housing
allowances, utilities, club dues, life insurance premiums, tax
preparation, parking, storage expenses, company-leased or
fractionally-owned airplane usage and cost of living allowances.
Not all of these perquisites are applicable to all of our NEOs.
For 2007, Mr. Carmilani received a housing allowance of
$192,000 and a cost of living allowance of $63,171;
Ms. Dillard received a housing allowance of $98,600 and a
cost of living allowance of $59,548; Mr. Dupont received a
housing allowance of $119,100 and a cost of living allowance of
$63,178; and Mr. Grossack received a housing allowance of
$120,000 and a cost of living allowance of $63,178. We lease the
fractional use of one aircraft and fractionally own another. We
also lease aircraft outside of this arrangement on an as
needed basis. The incremental cost of the personal use of
these aircraft is based on the variable operating costs to us,
including fuel costs, mileage, trip-related maintenance, federal
excise tax, landing/ramp fees and other miscellaneous variable
costs. Fixed costs that do not change based on usage, such as
the lease and ownership costs and the cost of maintenance not
related to trips, are excluded. During 2007, Mr. Carmilani
used the aircraft on three occasions for personal use, the
incremental cost of which was $42,307. The incremental costs of
such uses are included in the aggregate amount of perquisites he
received in 2007. For more information on personal benefits and
perquisites, please see Compensation
Discussion and Analysis Benefits and
Perquisites. |
|
(b) |
|
We agreed to
gross-up
our employees residing in Bermuda who are U.S. taxpayers for
additional tax obligations incurred in 2007 as a result of the
Tax Act. The amounts provided in the table above for Tax
Gross-Ups
are estimates based on advice from an independent tax advisor
and our current understanding of the Tax Act. The application of
the Tax Act to the applicable NEOs has not been finalized and
the
gross-up
amounts provided above are subject to revision. For more
information on personal benefits and perquisites, please see
Compensation Discussion and
Analysis Benefits and Perquisites. |
|
|
|
(6) |
|
Mr. Grossack was not one of our NEOs in 2006 and, in
accordance with SEC requirements, compensation information is
being provided for him only for 2007. |
42
Grants of
Plan-Based Awards
The following table provides information concerning grants of
share-based awards made to our NEOs in fiscal year 2007.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All
|
|
|
All
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
|
|
|
Other
|
|
|
|
|
|
Grant
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock
|
|
|
Option
|
|
|
Exercise
|
|
|
Date Fair
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Awards:
|
|
|
Awards:
|
|
|
or Base
|
|
|
Value of
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of
|
|
|
Number of
|
|
|
Price of
|
|
|
Stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Estimated Future Payouts Under
|
|
|
Shares of
|
|
|
Securities
|
|
|
Option
|
|
|
and
|
|
|
|
Grant
|
|
|
Estimated Future Payouts Under Non-Equity Incentive Plan
Awards(1)
|
|
|
Equity Incentive Plan Awards(2)
|
|
|
Stock or
|
|
|
Underlying
|
|
|
Awards
|
|
|
Option
|
|
Name
|
|
Date
|
|
|
Threshold ($)
|
|
|
Target ($)
|
|
|
Maximum ($)
|
|
|
Threshold (#)
|
|
|
Target (#)
|
|
|
Maximum (#)
|
|
|
Units (#)
|
|
|
Options (#)
|
|
|
($/Sh)
|
|
|
Awards
|
|
|
Scott A. Carmilani
|
|
|
2/26/2007
|
|
|
$
|
450,000
|
|
|
$
|
900,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2/26/2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
25,000
|
|
|
|
50,000
|
|
|
|
75,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
3,255,000
|
|
|
|
|
2/28/2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12,000
|
(3)
|
|
|
|
|
|
|
|
|
|
$
|
500,280
|
|
Joan H. Dillard
|
|
|
2/26/2007
|
|
|
$
|
120,000
|
|
|
$
|
240,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2/26/2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15,000
|
|
|
|
30,000
|
|
|
|
45,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,953,000
|
|
|
|
|
2/28/2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,000
|
(3)
|
|
|
|
|
|
|
|
|
|
$
|
208,450
|
|
Wesley D. Dupont
|
|
|
2/26/2007
|
|
|
$
|
69,125
|
|
|
$
|
138,250
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2/26/2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,750
|
|
|
|
17,500
|
|
|
|
26,250
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,139,250
|
|
|
|
|
2/28/2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,000
|
(3)
|
|
|
|
|
|
|
|
|
|
$
|
125,070
|
|
Marshall J. Grossack
|
|
|
2/26/2007
|
|
|
$
|
68,750
|
|
|
$
|
137,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2/26/2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,750
|
|
|
|
17,500
|
|
|
|
26,250
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,139,250
|
|
|
|
|
2/28/2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,000
|
(3)
|
|
|
|
|
|
|
|
|
|
$
|
125,070
|
|
Richard E. Jodoin
|
|
|
2/26/2007
|
|
|
$
|
78,750
|
|
|
$
|
157,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2/26/2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,500
|
|
|
|
15,000
|
|
|
|
22,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
976,500
|
|
|
|
|
2/28/2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,000
|
(3)
|
|
|
|
|
|
|
|
|
|
$
|
166,760
|
|
|
|
|
(1) |
|
The Companys 2007 cash bonus plan provided for funding of
the pool based on target EBIT goals. The NEOs are eligible for
annual cash bonuses as a percentage of their base salaries. For
more information on the target EBIT goals and percentages, see
Compensation Discussion and
Analysis Cash Compensation Annual Cash
Bonus. |
|
|
|
The amounts provided in the Estimated Future Payouts Under
Non-Equity Incentive Plan Awards columns above assume that
the same percentage of funding of the annual cash bonus pool
will be applied to each NEO. |
|
|
|
Threshold. The amounts provided in the
applicable threshold column above assume that the
annual cash bonus pool will be 50% funded and that each NEO will
receive 50% of the target cash bonus that he or she is eligible
to receive. Accordingly, we have reduced by 50% the amount each
NEO would be eligible to receive based on his or her target
bonus as a percentage of base salary, as reflected below in the
adjusted bonus column below. |
|
|
|
|
|
|
|
|
|
|
|
Bonus Target as a
|
|
|
Adjusted Bonus Target as
|
|
|
|
Percentage of
|
|
|
a Percentage of
|
|
Name
|
|
Base Salary
|
|
|
Base Salary
|
|
|
Scott A. Carmilani
|
|
|
100
|
%
|
|
|
50.0
|
%
|
Joan H. Dillard
|
|
|
75
|
%
|
|
|
37.5
|
%
|
Wesley D. Dupont
|
|
|
50
|
%
|
|
|
25.0
|
%
|
Marshall J. Grossack
|
|
|
50
|
%
|
|
|
25.0
|
%
|
Richard E. Jodoin
|
|
|
50
|
%
|
|
|
25.0
|
%
|
|
|
|
|
|
The amounts provided in the applicable threshold
column above indicates the dollar amount calculated by
multiplying the adjusted bonus target as a percentage of
base salary (as set forth in the table in this footnote)
by the NEOs base salary. |
|
|
|
Target. The amounts provided in the
applicable target column above assume that the
annual cash bonus pool will be 100% funded and that each NEO
will receive the full amount of the cash bonus that he or she is
eligible to receive. The dollar amount for each NEO is
calculated by multiplying the bonus target as a percentage
of base salary (as set forth in the table in this
footnote) by the NEOs base salary. |
|
|
|
Maximum. Individual bonuses under the
2007 cash bonus plan are not capped or subject to any maximums.
Accordingly, no information appears in the applicable column
above. |
43
|
|
|
(2) |
|
The vesting of performance-based awards under the LTIP is
currently based on average per annum adjusted book
value growth, which is described in greater detail in
Compensation Discussion and
Analysis Equity Compensation LTIP
Awards. The vested share amounts disclosed in the
applicable threshold, target and
maximum columns of the Estimated Future
Payouts Under Equity Incentive Plan Awards heading assume
an average per annum growth in adjusted book value of 9%, 12%
and 15%, respectively. Each of the performance-based awards made
under the LTIP had a grant date fair value equal to the closing
price of the Common Shares on February 26, 2007 ($43.40).
In calculating the grant date value, it was assumed that the
maximum performance target regarding such awards will be
attained, and accordingly, the grant date value has been
increased to 150% of the value based on the target
performance-based awards issued. |
|
(3) |
|
Represents each NEOs annual grant of RSUs on
February 28, 2007. In accordance with FAS 123(R), the
grant date fair value included in the table reflects the closing
price of the Common Shares on such date ($41.69) multiplied by
the number of RSUs granted to the NEO. |
Narrative
Disclosure Regarding Equity Plans and Employment
Agreements
Stock
Option Plan
The following description of the Stock Option Plan does not
include any of the proposed changes to this plan as set forth in
the Companys Second Amended and Restated 2001 Employee
Stock Option Plan, which is attached as Appendix A
to this Proxy Statement and which is also described under
the proposal Approval of the Allied World Assurance
Company Holdings, Ltd Second Amended and Restated 2001 Employee
Stock Option Plan elsewhere in this Proxy Statement. We
implemented the Stock Option Plan, under which up to 2,000,000
Common Shares may be issued, subject to adjustment as described
below. Of that amount, 590,656 Common Shares remained available
for issuance as of December 31, 2007. During 2007, the
Company granted stock options to purchase 261,650 Common Shares
under the Stock Option Plan. These stock options are exercisable
in certain limited conditions, expire after ten years and
generally vest pro rata over four years from the date of grant.
Awards may be made to any of our directors, officers, employees
(including prospective employees), consultants and other
individuals who perform services for us, as determined by the
Compensation Committee in its discretion. The Compensation
Committee may grant non-qualified stock options to purchase
Common Shares (at the price set forth in the award agreement,
but in no event less than 100% of the fair market value of the
Common Shares on the date of grant) subject to the terms and
conditions as it may determine. While the Board retains the
right to terminate the Stock Option Plan at any time, in any
case the Stock Option Plan will terminate on the tenth
anniversary of the approval of its amendment and restatement.
The shares subject to the Stock Option Plan are authorized but
unissued Common Shares. If any award is forfeited or is
otherwise terminated or canceled without the delivery of Common
Shares, if Common Shares are surrendered or withheld from any
award to satisfy a grantees income tax or other
withholding obligations or if Common Shares owned by a grantee
are tendered to pay the exercise price of stock option awards,
then such shares will again become available under the Stock
Option Plan. Generally, the maximum number of Common Shares with
respect to which options may be granted to an individual grantee
in any one year is 16,667 (subject to the adjustment described
below) and any one grantee may not be granted options, in the
aggregate, relating to more than 9% of the Common Shares
authorized for issuance under the Stock Option Plan. Our
Compensation Committee has the authority to adjust the terms of
any outstanding awards and the number of Common Shares issuable
under the Stock Option Plan for any increase or decrease in the
number of issued Common Shares resulting from a stock split,
reverse stock split, stock dividend, recapitalization,
combination or reclassification of the Common Shares, or any
other event that the Compensation Committee determines affects
our capitalization, other than regular cash dividends. In the
event of a merger, amalgamation, consolidation, reorganization,
liquidation or sale of a majority of the Companys
securities, the Compensation Committee will have the discretion
to provide, as an alternative to the adjustment described above,
for the accelerated vesting of options prior to such an event or
the cancellation of options in exchange for a payment based on
the per-share consideration being paid in connection with the
event.
Stock
Incentive Plan
The following description of the Stock Incentive Plan does not
include any proposed changes to this plan as set forth in the
Companys Second Amended and Restated 2004 Stock Incentive
Plan, which is attached as Appendix B to this Proxy
Statement and which is also described under the proposal
Approval of the Allied World Assurance
44
Company Holdings, Ltd Second Amended and Restated 2004 Stock
Incentive Plan elsewhere in this Proxy Statement. We
implemented the Stock Incentive Plan, under which up to
2,000,000 Common Shares may be issued, subject to adjustment as
described below. Of that amount, 1,141,393 Common Shares
remained available for issuance as of December 31, 2007.
During 2007, the Company granted 196,158 RSUs under the Stock
Incentive Plan. The Stock Incentive Plan provides for awards of
restricted stock, RSUs, dividend equivalent rights and other
equity-based or equity-related awards. We will not grant stock
options pursuant to the plan. Awards under the Stock Incentive
Plan may be made to any of our directors, officers, employees
(including prospective employees), consultants and other
individuals who perform services for us, as determined by the
Compensation Committee in its discretion. Only RSUs have been
granted under the Stock Incentive Plan and these RSUs generally
vest in the fourth or fifth year from the original grant date,
or pro rata over four years from the date of grant. For
additional information regarding RSUs granted under the Stock
Incentive Plan, see Compensation Discussion
and Analysis Equity Compensation RSU
Awards. While the Board retains the right to terminate the
Stock Incentive Plan at any time, the plan will automatically
terminate on May 27, 2014.
The shares subject to the Stock Incentive Plan may be either
authorized but unissued Common Shares or Common Shares
previously issued and reacquired by the Company. If any award
expires, terminates or otherwise lapses, in whole or in part,
any Common Shares subject to such award will again become
available for issuance under the Stock Incentive Plan.
Generally, the maximum number of Common Shares with respect to
which awards may be granted to an individual grantee in any one
year is 16,667 and any one grantee may not be granted stock
appreciation rights with respect to more than 16,667 Common
Shares in any calendar year. Our Compensation Committee has the
authority to adjust the terms of any outstanding awards as it
deems appropriate and the number of Common Shares issuable under
the Stock Incentive Plan for any increase or decrease in the
number of issued Common Shares resulting from a stock split,
stock dividend, recapitalization, combination or exchange of the
Common Shares, merger, amalgamation, consolidation, rights
offering, separation, reorganization or liquidation, or any
other change in the corporate structure or Common Shares. In the
event of a merger, amalgamation, consolidation, reorganization,
liquidation or a sale of a majority of the Companys
securities, the Compensation Committee will have the discretion
to provide, as an alternative to the adjustment described above,
for the accelerated vesting of awards prior to such an event or
the cancellation of awards in exchange for a payment based on
the per-share consideration being paid in connection with the
event.
Long-Term
Incentive Plan
On May 22, 2006, the Board adopted the Long-Term Incentive
Plan. On November 7, 2007, the Board adopted the Amended
and Restated Long-Term Incentive Plan to make certain changes
necessary to comply with Section 409A of the Code. Under
the LTIP, up to 2,000,000 Common Shares may be issued pursuant
to the terms of the plan. Of that amount, 1,379,166 Common
Shares remained available for issuance as of December 31,
2007. Participation in the LTIP is limited to employees who are
selected by the Compensation Committee. During 2007, the Company
granted 392,500 performance-based equity awards under the LTIP.
See Compensation Discussion and
Analysis Equity Compensation LTIP
Awards for more information about the performance-based
awards made under the LTIP.
The LTIP provides for grants of long-term incentive awards that
are earned based upon the achievement of applicable performance
conditions over a three consecutive fiscal-year period.
Performance conditions are selected by the Compensation
Committee or the Board prior to the commencement of an
applicable performance period from a list of permissible
financial metrics, including (i) consolidated earnings
before or after taxes (including earnings before interest,
taxes, depreciation and amortization); (ii) net income;
(iii) operating income; (iv) earnings per share;
(v) book value per share; (vi) return on
shareholders equity; (vii) return on investment;
(viii) stock price; (ix) improvements in capital
structure; (x) revenue or sales; and (xi) total return
to shareholders. Awards are expressed as a target amount
representing the number of shares to be issued upon 100%
achievement of applicable performance conditions, with the
actual number of shares delivered ranging from 0% to 150% of the
target amount based on the level of actual achievement of
applicable performance conditions.
The shares subject to the LTIP shall be authorized but unissued
Common Shares. If any award expires or is canceled, forfeited or
otherwise terminated, any Common Shares subject to such award
will again become available
45
for issuance under the LTIP. The Compensation Committee has the
authority to adjust the terms of any outstanding awards, as it
deems appropriate, and the number of Common Shares issuable
under awards for any increase or decrease in the number of
issued Common Shares resulting from a stock split, stock
dividend, recapitalization, combination or exchange of the
Common Shares, merger, consolidation or reorganization, or any
other change in the capital structure or Common Shares.
Equity
Compensation Plan Information
The following table presents information concerning our equity
compensation plans as of December 31, 2007.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of Securities
|
|
|
|
Number of Securities
|
|
|
|
|
|
Remaining Available
|
|
|
|
to be Issued
|
|
|
Weighted-Average
|
|
|
for Future Issuance
|
|
|
|
Upon Exercise of
|
|
|
Exercise Price of
|
|
|
Under Equity Compensation
|
|
|
|
Outstanding Options,
|
|
|
Outstanding Options,
|
|
|
Plans (Excluding Securities
|
|
Plan Category
|
|
Warrants and Rights(1)
|
|
|
Warrants and Rights
|
|
|
Reflected in the First Column)
|
|
|
Equity compensation plans approved by shareholders
|
|
|
1,223,875
|
|
|
$
|
31.03
|
|
|
|
1,732,049(2
|
)
|
Equity compensation plans not approved by shareholders(3)
|
|
|
|
|
|
|
|
|
|
|
1,379,166
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
1,223,875
|
|
|
$
|
31.03
|
|
|
|
3,111,215
|
|
|
|
|
(1) |
|
Represents stock options granted under the Stock Option Plan,
which have a weighted average remaining contractual life of
6.65 years. |
|
(2) |
|
Includes 590,656 Common Shares available for issuance pursuant
to stock options granted under the Stock Option Plan, with the
remaining Common Shares available for issuance pursuant to RSUs
awarded under the Stock Incentive Plan. |
|
(3) |
|
Represents Common Shares available for issuance under the LTIP. |
Employment
Agreements
Effective as of November 1, 2006, the Company entered into
employment agreements with Messrs. Carmilani and Dupont and
Ms. Dillard. Effective as of December 1, 2006, the
Company entered into an employment agreement with
Mr. Grossack. Mr. Jodoin does not have an employment
agreement. Apart from name, title, base salary and housing
allowance, the employment agreements for Messrs. Carmilani,
Dupont, Grossack and Ms. Dillard are identical. Under their
respective employment agreements, each NEO receives an
enumerated base salary that may be increased only upon approval
of the Board. In addition, each NEO is eligible for a
discretionary annual cash bonus.
The employment agreements provide for a cost of living allowance
in addition to base salary, financial and tax planning, expense
reimbursement for housing, club membership fees for a club in
Bermuda and other business expenses, subject to applicable
limits set forth in each employment agreement and the policies
of the Company as approved from time to time by the Board. As
discussed above under Compensation Discussion
and Analysis Benefits and Perquisites, these
types of perquisites are standard in the compensation packages
of executives among the Companys Bermuda Peer Group and
other Bermuda companies.
Under the employment agreements, during the term of employment
and ending on the
24-month
anniversary following any termination of employment, the NEO is
subject to a non-interference covenant. Generally, the
non-interference covenant prevents the NEO from soliciting or
hiring employees or other service providers of the Company or
its subsidiaries and from inducing any customer, supplier,
licensee or other business relation of the Company or its
subsidiaries to cease doing business, or reduce the amount of
business conducted, with the Company or its subsidiaries, or in
any other manner interfering with the Companys or its
subsidiaries relationship with these parties. During the
term of employment and ending following the Non-Compete Period
(as defined below), the NEO is subject to a non-competition
covenant. Generally, the non-competition covenant prevents the
NEO from
46
engaging in activities that are competitive with the business of
the Company or its subsidiaries in certain jurisdictions. Each
employment agreement also contains standard confidentiality and
assignment of inventions provisions. In addition, each
employment agreement provides that the Company shall generally
indemnify the NEO to the fullest extent permitted by Bermuda
law, except in certain limited circumstances.
The Non-Compete Period means the period commencing
on the date of the employment agreement and (i) in the case
of the NEOs termination of employment by the Company with
cause, ending on the date of such termination; (ii) in the
case of a NEOs termination of employment by the Company
without cause or by the NEO for good reason, ending on the
24-month
anniversary of the date of such termination; and (iii) in
the case of a NEOs termination of employment by the NEO
without good reason or as a result of a disability, ending on
the date of such termination; provided, however, in the
case of clause (iii) above, the Company may elect to extend
the
Non-Compete
Period up to an additional 12 months following the date of
such termination, during which period the Company will be
required to continue to pay the NEO his or her base salary and
provide coverage under the Companys health and insurance
plans (or the economic equivalent of such coverage, including
its cash value).
Each employment agreement terminates upon the earliest to occur
of (i) the NEOs death, (ii) a termination by
reason of a disability, (iii) a termination by the Company
with or without cause and (iv) a termination by the NEO
with or without good reason. Upon any termination of the
NEOs employment for any reason, except as may otherwise be
requested by the Company in writing and agreed upon in writing
by the NEO, the NEO will resign from any and all directorships,
committee memberships or any other positions the NEO holds with
the Company or any of its subsidiaries.
Upon termination of the NEOs employment with the Company
for any reason, including a termination by the Company with
cause or by the NEO without good reason, the NEO will be
entitled to all prior accrued obligations. Upon termination of
the NEOs employment due to his or her death or disability,
the NEO (or his or her estate or beneficiaries), in addition to
all prior accrued obligations, will be entitled to any
(i) unpaid annual bonus in respect to any completed fiscal
year prior to such termination, (ii) a pro rata annual
bonus if such termination occurs during a fiscal year and
(iii) vesting, as of the date of termination, in the number
of equity-based awards that otherwise would have vested during
the one-year period immediately following such termination.
Upon termination of the NEOs employment by the Company
without cause or by the NEO with good reason, in addition to any
prior accrued obligations and unpaid annual bonus, the NEO will
receive (i) an amount equal to the Severance Multiplier (as
defined below) multiplied by the sum of the NEOs base
salary and annual bonus to be paid in substantially equal
monthly installments over the period beginning on the
termination date and ending one day prior to two and one-half
months following the end of the Companys fiscal year in
which such termination occurs, (ii) continuation of
coverage under the Companys health and insurance plans (or
the economic equivalent of such coverage, including its cash
value) for a period of years equal to the Severance Multiplier
and (iii) vesting, as of the date of termination, in the
number of equity-based awards that otherwise would have vested
during the two-year period immediately following such
termination. The Severance Multiplier will equal
two; provided, however, if the NEOs termination
occurs within the
12-month
period following a change in control, the Severance Multiplier
will equal three. The Company may require the NEO to execute a
general release prior to payment of any amount or provision of
any benefit as a result of termination of employment by the
Company without cause or by the NEO for good reason. In
addition, upon the occurrence of a change in control, all
equity-based awards received by the NEO will fully vest
immediately prior to such change in control.
47
Outstanding
Equity Awards at Fiscal Year-End
The following table summarizes the number of securities
underlying awards for each NEO at December 31, 2007.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
|
Stock Awards
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity Incentive
|
|
|
Equity Incentive Plan
|
|
|
|
Number of
|
|
|
Number of
|
|
|
|
|
|
|
|
|
|
|
|
Market Value
|
|
|
Plan Awards:
|
|
|
Awards: Market or
|
|
|
|
Securities
|
|
|
Securities
|
|
|
|
|
|
|
|
|
Number of
|
|
|
of Shares
|
|
|
Number of
|
|
|
Payout Value of
|
|
|
|
Underlying
|
|
|
Underlying
|
|
|
|
|
|
|
|
|
Shares or
|
|
|
or Units of
|
|
|
Unearned Shares,
|
|
|
Unearned Shares,
|
|
|
|
Unexercised
|
|
|
Unexercised
|
|
|
Option
|
|
|
Option
|
|
|
Units of Stock
|
|
|
Stock That Have
|
|
|
Units, or Other
|
|
|
Units, or Other
|
|
|
|
Options (#)
|
|
|
Options (#)
|
|
|
Exercise
|
|
|
Expiration
|
|
|
That Have
|
|
|
Not Vested
|
|
|
Rights That Have
|
|
|
Rights That Have
|
|
Name
|
|
Exercisable
|
|
|
Unexercisable
|
|
|
Price(1)($)
|
|
|
Date
|
|
|
Not Vested (#)
|
|
|
($)(8)
|
|
|
Not Vested (#)(8)
|
|
|
Not Vested ($)(8)
|
|
|
Scott A. Carmilani
|
|
|
61,667
|
|
|
|
|
|
|
$
|
24.27
|
|
|
|
11/21/2011
|
|
|
|
16,667
|
(2)
|
|
$
|
836,183
|
|
|
|
60,000
|
(9)
|
|
$
|
3,010,200
|
|
|
|
|
13,333
|
|
|
|
|
|
|
$
|
23.61
|
|
|
|
01/02/2013
|
|
|
|
8,333
|
(3)
|
|
$
|
418,067
|
|
|
|
50,000
|
(10)
|
|
$
|
2,508,500
|
|
|
|
|
13,333
|
|
|
|
|
|
|
$
|
29.52
|
|
|
|
12/31/2013
|
|
|
|
50,000
|
(4)
|
|
$
|
2,508,500
|
|
|
|
|
|
|
|
|
|
|
|
|
10,000
|
|
|
|
10,000
|
|
|
$
|
32.70
|
|
|
|
01/03/2015
|
|
|
|
12,000
|
(5)
|
|
$
|
602,040
|
|
|
|
|
|
|
|
|
|
Joan H. Dillard
|
|
|
16,666
|
|
|
|
16,667
|
|
|
$
|
28.32
|
|
|
|
12/01/2015
|
|
|
|
1,667
|
(6)
|
|
$
|
83,633
|
|
|
|
13,333
|
(9)
|
|
$
|
668,917
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20,000
|
(4)
|
|
$
|
1,003,400
|
|
|
|
30,000
|
(10)
|
|
$
|
1,505,100
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,000
|
(5)
|
|
$
|
250,850
|
|
|
|
|
|
|
|
|
|
Wesley D. Dupont
|
|
|
12,500
|
|
|
|
12,500
|
|
|
$
|
28.32
|
|
|
|
12/01/2015
|
|
|
|
1,667
|
(6)
|
|
$
|
83,633
|
|
|
|
10,000
|
(9)
|
|
$
|
501,700
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
30,000
|
(4)
|
|
$
|
1,505,100
|
|
|
|
17,500
|
(10)
|
|
$
|
877,975
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,000
|
(5)
|
|
$
|
150,510
|
|
|
|
|
|
|
|
|
|
Marshall J. Grossack
|
|
|
3,750
|
|
|
|
1,250
|
|
|
$
|
31.77
|
|
|
|
07/01/2014
|
|
|
|
833
|
(3)
|
|
$
|
41,792
|
|
|
|
17,500
|
(10)
|
|
$
|
877,975
|
|
|
|
|
1,666
|
|
|
|
1,667
|
|
|
$
|
32.70
|
|
|
|
01/03/2015
|
|
|
|
1,251
|
(7)
|
|
$
|
62,763
|
|
|
|
|
|
|
|
|
|
|
|
|
833
|
|
|
|
2,500
|
|
|
$
|
28.32
|
|
|
|
01/03/2016
|
|
|
|
15,000
|
(4)
|
|
$
|
752,550
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,000
|
(5)
|
|
$
|
150,510
|
|
|
|
|
|
|
|
|
|
Richard E. Jodoin
|
|
|
22,500
|
|
|
|
|
|
|
$
|
24.27
|
|
|
|
11/21/2011
|
|
|
|
1,667
|
(2)
|
|
$
|
83,633
|
|
|
|
13,333
|
(9)
|
|
$
|
668,917
|
|
|
|
|
1,667
|
|
|
|
|
|
|
$
|
23.61
|
|
|
|
01/02/2013
|
|
|
|
1,667
|
(3)
|
|
$
|
83,633
|
|
|
|
15,000
|
(10)
|
|
$
|
752,550
|
|
|
|
|
2,500
|
|
|
|
|
|
|
$
|
29.52
|
|
|
|
12/31/2013
|
|
|
|
17,500
|
(4)
|
|
$
|
877,975
|
|
|
|
|
|
|
|
|
|
|
|
|
1,250
|
|
|
|
1,250
|
|
|
$
|
32.70
|
|
|
|
01/03/2015
|
|
|
|
4,000
|
(5)
|
|
$
|
200,680
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
The table below shows the vesting dates of each stock option: |
|
|
|
Stock Option
|
|
|
Exercise Price
|
|
Vesting Dates
|
|
$24.27
|
|
Fully vested
|
$23.61
|
|
Fully vested
|
$29.52
|
|
Fully vested
|
$32.70
|
|
Pro rata on January 3, 2008 and 2009
|
$28.32
|
|
Pro rata on December 1, 2008 and 2009 (Pro rata
on January 3, 2008, 2009 and 2010 for Mr. Grossack only)
|
$31.77
|
|
July 1, 2008
|
|
|
|
(2) |
|
These RSUs vest on May 27, 2008. |
|
(3) |
|
These RSUs vest on January 3, 2009. |
|
(4) |
|
These RSUs vest as follows: 50% on July 11, 2010 and 50% on
July 11, 2011. |
|
(5) |
|
These RSUs vest pro rata on February 28, 2008, 2009, 2010
and 2011. |
|
(6) |
|
These RSUs vest pro rata on December 1, 2008 and 2009. |
|
(7) |
|
These RSUs vest pro rata on January 3, 2008, 2009 and 2010. |
|
(8) |
|
Assumes a price of $50.17 per Common Share, the closing price as
of December 31, 2007. |
|
(9) |
|
These performance-based equity awards, or LTIP Awards, are not
eligible to vest until after December 31, 2008. These
performance-based awards vest upon the achievement of
established performance criteria during an applicable three-year
period. The share amounts reflected in the table above represent
the target performance goals. For additional information
regarding LTIP Awards, see Compensation Discussion
and Analysis Equity Compensation. |
48
|
|
|
(10) |
|
These performance-based equity awards, or LTIP awards, are not
eligible to vest until after December 31, 2009. These
performance-based awards vest upon the achievement of
established performance criteria during an applicable three-year
period. The share amounts reflected in the table above represent
the target performance goals. For additional information
regarding LTIP Awards, see Compensation Discussion
and Analysis Equity Compensation. |
Option
Exercises and Stock Vested
The following table summarizes information underlying each
exercise of stock options or vesting of RSUs for each NEO in
2007.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
|
Stock Awards
|
|
|
|
Number of Shares
|
|
|
Value
|
|
|
Number of Shares
|
|
|
Value
|
|
|
|
Acquired on
|
|
|
Realized on
|
|
|
Acquired on
|
|
|
Realized on
|
|
Name
|
|
Exercise (#)
|
|
|
Exercise ($)
|
|
|
Vesting (#)
|
|
|
Vesting ($)
|
|
|
Scott A. Carmilani
|
|
|
5,000
|
|
|
$
|
111,650
|
(1)
|
|
|
|
|
|
|
|
|
Joan H. Dillard
|
|
|
|
|
|
|
|
|
|
|
833
|
|
|
$
|
38,551
|
(2)
|
Wesley D. Dupont
|
|
|
|
|
|
|
|
|
|
|
833
|
|
|
$
|
38,551
|
(2)
|
Marshall J. Grossack
|
|
|
|
|
|
|
|
|
|
|
416
|
|
|
$
|
18,096
|
(3)
|
Richard E. Jodoin
|
|
|
27,500
|
|
|
$
|
526,625
|
(4)
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Assumes a price of $46.60 per Common Share, the closing price on
November 5, 2007, the date of exercise. |
|
(2) |
|
Assumes a price of $46.28 per Common Share, the closing price on
November 30, 2007, the last trading date before vesting. |
|
(3) |
|
Assumes a price of $43.50 per Common Share, the closing price on
January 3, 2007, the vesting date. |
|
(4) |
|
Assumes a price of $43.42 per Common Share, the closing price on
February 9, 2007, the date of exercise. |
Non-Qualified
Deferred Compensation
The following table summarizes information regarding each
NEOs participation in the SERP in 2007.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Executive
|
|
|
Registrant
|
|
|
Aggregate
|
|
|
|
|
|
Aggregate
|
|
|
|
Contributions
|
|
|
Contributions
|
|
|
Earnings
|
|
|
Aggregate
|
|
|
Balance at
|
|
|
|
in Last
|
|
|
in Last
|
|
|
in Last
|
|
|
Withdrawals/
|
|
|
Last Fiscal
|
|
|
|
Fiscal Year
|
|
|
Fiscal Year
|
|
|
Fiscal Year
|
|
|
Distributions
|
|
|
Year-End
|
|
Name
|
|
($)(1)
|
|
|
($)(2)
|
|
|
($)(3)
|
|
|
($)
|
|
|
($)
|
|
|
Scott A. Carmilani
|
|
$
|
50,000
|
|
|
$
|
20,000
|
|
|
$
|
5,300
|
|
|
|
|
|
|
$
|
241,991
|
|
Joan H. Dillard
|
|
$
|
48,000
|
|
|
$
|
20,000
|
|
|
$
|
1,192
|
|
|
|
|
|
|
$
|
116,272
|
|
Wesley D. Dupont
|
|
|
|
|
|
$
|
20,000
|
|
|
$
|
235
|
|
|
|
|
|
|
$
|
41,112
|
|
Marshall J. Grossack
|
|
|
|
|
|
$
|
20,000
|
|
|
$
|
7,172
|
|
|
|
|
|
|
$
|
85,401
|
|
Richard E. Jodoin
|
|
|
|
|
|
$
|
20,000
|
|
|
$
|
11,502
|
|
|
|
|
|
|
$
|
129,070
|
|
|
|
|
(1) |
|
Reflects amount of base salary deferred by the NEO under the
SERP in 2007. |
|
(2) |
|
Reflects amounts contributed by us on behalf of the NEO. All
amounts that we contributed on behalf of the NEO have been
reported in the Summary Compensation Table. |
|
(3) |
|
Represents capital gains and dividends on and earnings from the
investments made in one or more mutual funds selected by the
NEO, less any losses incurred from one or more selected mutual
funds during 2007. |
Provisions of the SERP. Under the SERP, we
will make a contribution equal to 10% of the NEOs annual
salary and the NEO may voluntarily contribute up to 25% of his
or her annual salary (for these purposes annual salary is
currently capped at $200,000). NEO contributions to the SERP
vest immediately. There is a five-year cumulative vesting period
for all contributions we make on behalf of the NEO, so that upon
completion of five years of service, an NEO will be 100% vested
in all prior and future contributions made on his or her behalf.
Contributions we make on behalf of the NEO shall also fully vest
upon an NEO retiring after attaining the age of 65, the
49
termination of employment on account of the NEOs death or
disability, the termination of the SERP or a change in control
of the Company. These events are deemed distribution events
under the SERP, and all contributions made on behalf of the NEO
may be distributed to him or her upon the occurrence of any such
event. The SERP complies with Section 409(A) of the Code.
Investment Alternatives Under the SERP. Under
the SERP, each NEO has the option to select a variety of mutual
funds that are used to determine the additional amounts to be
credited to his or her account. These mutual funds are the same
as those offered under our 401(k) plan. Each NEO is permitted to
change, on a monthly basis, the mutual funds to be used to
determine the additional amounts to be credited to his or her
account.
Payouts and Withdrawals. Each NEO may elect to
receive at retirement amounts deferred and contributions
credited to his account in either a lump sum or in annual
installments over a period of up to ten years. For more
information regarding the SERP, please see
Compensation Discussion and
Analysis Retirement, Health and Welfare
Benefits.
Potential
Payments Upon a Termination or Change in Control
The table below reflects the amount of compensation and benefits
payable to each NEO in the event of (i) a termination by
the NEO without good reason (a voluntary
termination), (ii) a termination without cause or
with good reason (involuntary termination),
(iii) a change in control, (iv) a termination due to
death and (v) a termination due to disability. The amounts
shown assume that the applicable triggering event occurred on
December 31, 2007, and therefore are estimates of the
amounts that would be paid to the applicable NEO upon the
occurrence of such triggering event, assuming a price of $50.17
per Common Share, the closing price as of December 31, 2007.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Voluntary
|
|
|
Involuntary
|
|
|
Change in
|
|
|
|
|
|
|
|
Name
|
|
Type of Payment
|
|
|
Termination(1)
|
|
|
Termination(2)
|
|
|
Control(3)
|
|
|
Death(4)
|
|
|
Disability(5)
|
|
|
Scott A. Carmilani
|
|
|
Cash Severance:
|
|
|
$
|
900,000
|
|
|
$
|
3,600,000
|
|
|
$
|
5,400,000
|
|
|
$
|
900,000
|
|
|
$
|
1,800,000
|
|
|
|
|
Continued Benefits:
|
|
|
$
|
16,995
|
|
|
$
|
33,990
|
|
|
$
|
50,985
|
|
|
$
|
700,000
|
|
|
$
|
16,995
|
|
|
|
|
Equity Acceleration:
|
|
|
$
|
|
|
|
$
|
7,248,607
|
|
|
$
|
10,058,190
|
|
|
$
|
8,176,815
|
|
|
$
|
4,798,718
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL:
|
|
|
$
|
916,995
|
|
|
$
|
10,882,597
|
|
|
$
|
15,509,175
|
|
|
$
|
9,776,815
|
|
|
$
|
6,615,713
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Joan H. Dillard
|
|
|
Cash Severance:
|
|
|
$
|
320,000
|
|
|
$
|
1,300,000
|
|
|
$
|
1,950,000
|
|
|
$
|
330,000
|
|
|
$
|
650,000
|
|
|
|
|
Continued Benefits:
|
|
|
$
|
12,915
|
|
|
$
|
25,830
|
|
|
$
|
38,745
|
|
|
$
|
640,000
|
|
|
$
|
12,915
|
|
|
|
|
Equity Acceleration:
|
|
|
$
|
|
|
|
$
|
2,747,249
|
|
|
$
|
3,876,074
|
|
|
$
|
2,747,249
|
|
|
$
|
1,513,870
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL:
|
|
|
$
|
332,915
|
|
|
$
|
4,073,079
|
|
|
$
|
5,864,819
|
|
|
$
|
3,717,249
|
|
|
$
|
2,176,785
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Wesley D. Dupont
|
|
|
Cash Severance:
|
|
|
$
|
276,500
|
|
|
$
|
863,000
|
|
|
$
|
1,294,500
|
|
|
$
|
155,000
|
|
|
$
|
431,500
|
|
|
|
|
Continued Benefits:
|
|
|
$
|
15,780
|
|
|
$
|
31,560
|
|
|
$
|
47,340
|
|
|
$
|
500,000
|
|
|
$
|
15,780
|
|
|
|
|
Equity Acceleration:
|
|
|
$
|
|
|
|
$
|
1,811,638
|
|
|
$
|
3,392,043
|
|
|
$
|
2,733,561
|
|
|
$
|
1,073,738
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL:
|
|
|
$
|
292,280
|
|
|
$
|
2,706,198
|
|
|
$
|
4,733,883
|
|
|
$
|
3,388,561
|
|
|
$
|
1,521,018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Marshall J. Grossack
|
|
|
Cash Severance:
|
|
|
$
|
275,000
|
|
|
$
|
920,000
|
|
|
$
|
1,380,000
|
|
|
$
|
185,000
|
|
|
$
|
460,000
|
|
|
|
|
Continued Benefits:
|
|
|
$
|
15,763
|
|
|
$
|
31,526
|
|
|
$
|
47,289
|
|
|
$
|
500,000
|
|
|
$
|
15,763
|
|
|
|
|
Equity Acceleration:
|
|
|
$
|
|
|
|
$
|
1,146,259
|
|
|
$
|
2,013,207
|
|
|
$
|
1,354,726
|
|
|
$
|
384,789
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL:
|
|
|
$
|
290,763
|
|
|
$
|
2,097,785
|
|
|
$
|
3,440,496
|
|
|
$
|
2,039,726
|
|
|
$
|
860,552
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Richard E. Jodoin
|
|
|
Cash Severance:
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
|
|
Continued Benefits:
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
500,000
|
|
|
$
|
|
|
|
|
|
Equity Acceleration:
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
1,790,381
|
|
|
$
|
544,459
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL:
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
2,290,381
|
|
|
$
|
544,459
|
|
|
|
|
(1) |
|
Under the employment agreements by and between the Company and
each NEO (other than Mr. Jodoin, who has no employment
agreement), in the case of a termination of employment by the
NEO without good reason, |
50
|
|
|
|
|
the NEO is entitled only to the prior accrued obligations.
However, for purposes of precluding the NEO from joining an
organization that competes with the Company, the Company may
elect to extend a non-compete period for up to 12 months
from the date employment is terminated by the NEO without good
reason. The amounts included in the voluntary termination column
above under Cash Severance represent the NEOs
2007 base salary (the amount to which the NEO would be entitled
for the non-compete period) and the amounts included under
Continued Benefits represent participation in the
Companys health and insurance plans, based on current
health and insurance premiums for the NEO projected over the
applicable period, and such amounts assume that the Company has
elected to extend the non-compete period for the full
12 months. Please see Narrative
Disclosure Regarding Equity Plans and Employment
Agreements Employment Agreements for more
information on the employment agreements. |
|
|
|
(2) |
|
Under the employment agreements executed by and between the
Company and each NEO, involuntary terminations
consist of terminations of employment by the Company without
cause and by the NEO with good reason. In such circumstances,
the NEO is entitled to: (i) his or her base salary and the
highest annual cash bonus paid or payable for the two
immediately prior fiscal years multiplied by two,
(ii) participation in the Companys health and
insurance plans (or the economic equivalent of such
participation) for a period of two years from the date of such
termination and (iii) vesting in the number of equity
awards held by the NEO that otherwise would have vested during
the two-year period from the date of such termination. The
dollar value reflected under the Involuntary Termination column
above for Equity Acceleration assumes all equity
awards vested, were exercised and sold as of December 31,
2007. |
|
(3) |
|
Under the employment agreements executed by and between the
Company and each NEO, upon the occurrence of a change in control
of the Company all equity awards held by the NEO shall fully
vest immediately prior to such change in control. If within
12 months of a change in control the NEO is terminated by
the Company without cause or the NEO terminates his or her
employment with good reason, the NEO is entitled to:
(i) his or her base salary and the highest annual cash
bonus paid or payable for the two immediately prior fiscal years
multiplied by three and (ii) participation in the
Companys health and insurance plans (or the economic
equivalent of such participation) for a period of three years
from the date of such termination. The dollar value reflected
under the Change in Control column above for Equity
Acceleration assumes all equity awards vested, were
exercised and sold as of December 31, 2007. |
|
(4) |
|
The amounts included under the Death column above for Cash
Severance represent the highest cash bonus paid or payable
for the two immediately prior fiscal years to which the NEO
would be entitled under his or her employment agreement and
which would be received by the NEOs estate or beneficiary.
Under the employment agreement, upon the NEOs death, the
NEOs estate or beneficiary is also entitled to receive a
pro rata annual bonus for that portion of the year that the NEO
worked. |
|
|
|
Each employee of the Company has life insurance paid by the
Company for the benefit of his or her estate or beneficiaries.
Assuming the death of each NEO as of December 31, 2007, the
estate or beneficiaries of such NEO would be entitled to the
amounts reflected under the Death column above for
Continued Benefits for the NEOs. |
|
|
|
Under the employment agreements, as of the date of the
NEOs death, his or her estate or beneficiaries would also
be entitled to the number of equity awards held by the NEO that
otherwise would have vested during the one-year period following
such date. In addition, the Stock Option Plan and the Stock
Incentive Plan provide for the accelerated vesting of all stock
options and RSUs, respectively, held by the NEO in the event of
his or her death. The LTIP provides for vesting on a
proportional basis depending on the date of death in relation to
the three-year performance period. If the NEO were to die in the
first fiscal year of the three-year performance period, the NEO
would be entitled to 25% of the award; in the second fiscal year
of the three-year performance period, the NEO would be entitled
to 50% of the award; and in the third fiscal year of the
three-year performance period, the NEO would be entitled to 75%
of the award. The dollar value reflected under the Death column
above for Equity Acceleration assumes all equity
awards vested, were exercised and sold as of December 31,
2007. |
|
(5) |
|
Under the employment agreements by and between the Company and
each NEO, in the case of a termination of employment as a result
of the NEOs disability, the NEO is entitled to:
(i) his or her highest annual cash bonus paid or payable
for the two immediately prior fiscal years and (ii) the
number of equity awards held by the NEO |
51
|
|
|
|
|
that otherwise would have vested during the one-year period
following the date of disability. For purposes of precluding the
NEO from joining an organization that competes with the Company,
the Company may elect to extend a non-compete period for up to
12 months from the date the NEOs employment is
terminated as a result of a disability. The amounts included in
the disability column above under Cash Severance
represent the NEOs 2007 base salary and the highest annual
cash bonus paid or payable for the two immediately prior fiscal
years and Continued Benefits represent participation
in the Companys health and insurance plans (or the
economic equivalent of such participation) and assumes that the
Company has elected to extend the Non-Compete Period for the
full 12 months. The Company pays on behalf of our
employees, including the NEOs, short-term and long-term
disability insurance. Under this insurance, if the NEO (other
than Mr. Jodoin) is considered disabled, he or she will be
entitled to 100% of his or her base salary for the first
90 days after a disability and thereafter he or she will be
entitled to 75% of his or her base salary up to a maximum of
$15,000 per month until the age of 65. Mr. Jodoin will be
entitled to $2,000 per week for the first 26 weeks after a
disability and thereafter he will be entitled to $10,000 per
month until the age of 65. |
|
|
|
The Stock Option Plan provides for the accelerated vesting of
all stock options held by the NEO in the event of his or her
disability. Under the Stock Incentive Plan, there is no
acceleration of vesting of the RSUs; however, the NEO would not
forfeit his or her RSUs upon being disabled and the RSUs will
vest according to the schedule established on the date of grant.
The LTIP provides for vesting on a proportional basis depending
on the date of disability in relation to the three-year
performance period. If the NEO were to be disabled in the first
year of the three-year performance period, the NEO would be
entitled to 25% of the award; in the second fiscal year of the
three-year performance period, the NEO would be entitled to 50%
of the award; and in the third fiscal year of the three-year
performance period, the NEO would be entitled to 75% of the
award. The dollar value reflected under the Disability column
above for Equity Acceleration assumes all equity
awards vested, were exercised and sold as of December 31,
2007. |
Under the employment agreements, if the NEO is terminated for
cause, he or she is entitled only to the prior accrued
obligations. Under the employment agreements, the NEO is subject
to certain restrictive covenants, including non-compete,
non-interference, confidentiality and assignment of inventions
provisions. In the case where the NEO is terminated by the
Company without cause or by the NEO with good reason, should the
NEO breach these restrictive covenants, the payments and
benefits described above (other than the vesting of equity
awards) would cease immediately.
Under the RSU Award Agreement to the Stock Incentive Plan, each
employee agrees that the Company may terminate the NEOs
right to any RSU he or she holds (whether or not vested) upon
the occurrence of: (i) any event that constitutes cause;
(ii) the NEO violating the non-solicitation provision set
forth in the RSU Award Agreement; or (iii) the NEO
interfering with a relationship between the Company and one of
its clients.
Under the Stock Option Plan, a participant retiring after
attaining the age of 65 is entitled to accelerated vesting of
all stock options held by them. Under the Stock Incentive Plan,
there is no acceleration of vesting of the RSUs; however, a
participant would not forfeit his or her RSUs upon retirement
after attaining the age of 65 and these RSUs will vest according
to the schedule established on the date of grant. Under the
employment agreements, there are no additional compensation
provisions for retirement. None of our NEOs was 65 as of
December 31, 2007. Accordingly, if any of our NEOs had
retired as of December 31, 2007, he or she would not have
been entitled to the acceleration of vesting of equity awards or
any additional compensation.
In addition to the payments and benefits described above, upon
the NEOs retirement at or after age 65, termination
of employment (other than with cause), change in control or
death or disability of the NEO, the NEO (or his or her estate or
beneficiaries) would be entitled to the distribution of the
vested contributions we made to the SERP on his or her behalf.
The NEO would also be entitled to receive his or her own
contributions to the SERP.
Compensation
Committee Interlocks and Insider Participation
None of our directors or executive officers has a relationship
with us or any other Company that the SEC defines as a
compensation committee interlock or insider participation that
should be disclosed to shareholders. Our Compensation Committee
is comprised solely of independent directors.
52
Compensation
Committee Report on Executive Compensation
The following report of the Compensation Committee does not
constitute soliciting material and should not be deemed filed or
incorporated by reference into any other Company filing under
the Securities Act or the Exchange Act, except to the extent the
Company specifically incorporates this report by reference
therein.
We have reviewed and discussed with management the Compensation
Discussion and Analysis required by Item 402(b) of
Regulation S-K.
Based on such review and discussion, we recommended to the Board
that the Compensation Discussion and Analysis be included in the
Proxy Statement.
Mark R. Patterson (Chairman)
Bart Friedman
Scott Hunter
Audit
Committee Report
The following report of the Audit Committee does not
constitute soliciting material and should not be deemed filed or
incorporated by reference into any other Company filing under
the Securities Act or the Exchange Act, except to the extent the
Company specifically incorporates this report by reference
therein.
The Audit Committee is comprised of Messrs. Scott Hunter
(Chairman), James F. Duffy and Samuel J. Weinhoff,
each of whom has been determined by the Board to be
independent under the rules of the NYSE,
Section 10A(m)(3) of the Exchange Act and
Rule 10A-3
promulgated under the Exchange Act. The Board adopted an Audit
Committee Charter, which is available on our website at
www.awac.com under Corporate Governance
Charters.
The role of the Audit Committee is to assist the Board in its
oversight of the Companys financial reporting process. The
management of the Company is responsible for the preparation,
presentation and integrity of the Companys financial
statements, the Companys accounting and financial
reporting principles and policies, and its internal controls and
procedures. The independent auditors are responsible for
auditing the Companys financial statements, reviewing the
Companys quarterly financial statements, annually auditing
managements assessment of the effectiveness of internal
controls over financial reporting and other procedures. Members
of the Audit Committee are entitled to rely without independent
verification on the information provided to them and on the
representations made by management and the independent auditors.
The independent auditors have access to the Audit Committee to
discuss any matters they deem appropriate.
As set forth in the Audit Committee Charter, in the performance
of its oversight function, the Audit Committee reviews and
discusses the Companys audited financial statements with
management and the independent auditors. The Audit Committee
also discusses with the independent auditors the matters
required to be discussed by Statement on Auditing Standards
No. 61, Communication with Audit Committees. Finally, the
Audit Committee receives the written disclosures and the letter
from the independent auditors required by Independence Standards
Board Standard No. 1, Independence Discussions with Audit
Committees, considers whether the provision of non-audit
services by the independent auditors to the Company is
compatible with maintaining the auditors independence and
discusses with the auditors the auditors independence.
Based upon the reviews and discussions described in this report,
and subject to the limitations on the role and responsibilities
of the Audit Committee referred to above and in the Audit
Committee Charter, the Audit Committee recommended to the Board
that the audited financial statements be included in the
Companys Annual Report on
Form 10-K
for the year ended December 31, 2007 that was filed with
the SEC.
Scott Hunter (Chairman)
James F. Duffy
Samuel J. Weinhoff
53
SHAREHOLDER
COMMUNICATION
Shareholders and other interested parties may communicate
directly with the Board by sending written notice to the
Companys General Counsel at the executive offices of the
Company. The notice may specify whether the communication is
directed to the entire Board, to a committee of the Board, to
the non-management directors, to the presiding director of the
non-management directors or to any other director. Except as
provided below, if any written communication is received by the
Company and addressed to the persons listed above (or addressed
to the General Counsel of the Company with a request to be
forwarded to the persons listed above), the General Counsel of
the Company shall be responsible for promptly forwarding the
correspondence to the appropriate persons. Obvious marketing
materials or other general solicitations will not be forwarded.
Directors will generally respond in writing, or cause the
Company to respond, to bona fide shareholder and other
interested party communications that express legitimate concerns
or questions about us.
The Board does not have a formal policy regarding the attendance
of directors at meetings of shareholders; however, it encourages
all directors to attend the Annual General Meeting of
Shareholders. Seven of the Companys directors attended the
Annual General Meeting in 2007.
SHAREHOLDER
PROPOSALS FOR 2009 ANNUAL GENERAL MEETING
If you wish to submit a proposal to be considered for inclusion
in the proxy materials for the 2009 Annual General Meeting or
propose a nominee for the Board, please send such proposal to
the Secretary, Allied World Assurance Company Holdings, Ltd, 27
Richmond Road, Pembroke HM 08, Bermuda. Under the rules of the
SEC, proposals must be received by no later than
November [ ], 2008 to be eligible for inclusion
in the 2009 Annual General Meeting proxy statement. If a
shareholder wishes to submit a proposal to the 2009 Annual
General Meeting without including such proposal in the proxy
statement for that meeting, that proposal will be considered
untimely if the Company is not notified in writing of such
proposal between January 8, 2009 and February 7, 2009.
In that case, the proxies solicited by the Board will confer
discretionary authority on the persons named in the accompanying
form of proxy to vote on that proposal as they see fit.
OTHER
MATTERS
Your Board does not know of any matters that may be presented at
the Annual General Meeting other than those specifically set
forth in the Notice of Annual General Meeting attached hereto.
If matters other than those set forth in the Notice of Annual
General Meeting come before the meeting and at any adjournment
or postponement thereof, the persons named in the accompanying
form of proxy and acting thereunder will vote in their
discretion with respect to such matters.
SECTION 16(a)
BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires our directors
and executive officers, and persons who own more than 10% of a
registered class of our equity securities, to file reports of
ownership of, and transactions in, our equity securities with
the SEC. Such directors, executive officers and shareholders are
also required to furnish us with copies of all
Section 16(a) reports they file. Purchases and sales of our
equity securities by such persons are published on our website.
Based on a review of the copies of such reports, and on written
representations from our reporting persons, we believe that all
Section 16(a) filing requirements applicable to our
directors, executive officers and shareholders were complied
with during the period such persons were subject to
Section 16 of the Exchange Act.
NOTICE OF
INTERNET AVAILABILITY OF PROXY MATERIALS
Important Notice Regarding the Availability of Proxy
Materials for the 2008 Annual General Meeting to be held on
Thursday, May 8, 2008. The Proxy Statement and Annual
Report are available at
http://www.awac.com/proxy.aspx.
For the date, time and location of the Annual General Meeting,
please see General Meeting Information. For
information on how to attend and vote in person at the Annual
General Meeting, an identification of the matters to be voted
upon at the Annual General Meeting and the Boards
recommendations regarding those matters, please also refer to
General Meeting Information.
54
APPENDIX A
ALLIED
WORLD ASSURANCE COMPANY HOLDINGS, LTD
SECOND
AMENDED AND RESTATED 2001 EMPLOYEE STOCK OPTION PLAN
1. Purpose. As of
May 8, 2008 (the Second Amendment and Restatement
Effective Date), the Allied World Assurance Company
Holdings, Ltd Amended and Restated 2001 Employee Stock Option
Plan was amended and restated and renamed the Allied World
Assurance Company Holdings, Ltd Second Amended and Restated 2001
Employee Stock Option Plan (the Plan). The purpose
of the Plan is to advance the interest of Allied World Assurance
Company Holdings, Ltd (Allied World) and its
subsidiaries (collectively, the Company) by
providing certain Key Persons (as defined below) with the
opportunity to acquire a proprietary interest in the success of
the Company, to enhance the long-term performance of the
Company, as well as to attract people with training, experience
and ability to the Company and its subsidiaries and affiliates.
2. Definitions of Certain Terms.
(i) Award means a stock option
granted pursuant to the Plan, including Prior Grants. Stock
options granted under the Plan are not intended to qualify as
incentive stock options meeting the requirements of
Section 422 of the Code.
(ii) Award Agreement means the
written document by which each Award is evidenced.
(iii) Board means the Board of
Directors of Allied World.
(iv) Code means the Internal
Revenue Code of 1986, as amended from time to time, and the
applicable rulings and regulations thereunder.
(v) Committee has the meaning set
forth in Section 3.a.
(vi) Common Shares means the
common shares of Allied World.
(vii) Covered Person has the
meaning set forth in Section 3.c.
(viii) Fair Market Value means,
with respect to a Common Share on any day, the fair market value
as determined in accordance with a valuation methodology
approved by the Committee and consistent with the requirements
of Section 409A of the Code, or if there is a public market
for the shares on such date, the closing price of the Common
Shares on such stock exchange on which the shares are
principally trading on the date in question, or, if there were
no sales on such date, on the closest preceding date on which
there were sales of shares.
(ix) Key Persons means officers,
directors, employees (including prospective employees),
consultants and others who may perform services for the Company.
For purposes of the Plan, if a Key Person provides services to
the Company in a non-employee capacity, references herein to
employee shall instead refer to service
provider and references herein to employment
or similar terms shall instead refer to service or
similar terms.
(x) Prior Grants means stock
options and warrants granted prior to the Second Amendment and
Restatement Effective Date under previous versions of the Plan.
3. Administration.
a. Except as otherwise provided herein, the Plan shall be
administered by a committee (the Committee) of the
Board to be drawn solely from members of the Board who are not
and have not been officers of the Company. The Committee is
authorized, subject to the provisions of the Plan, to establish
such rules and regulations as it deems necessary for the proper
administration of the Plan and to make such determinations and
interpretations and to take such action in connection with the
Plan and any Award granted hereunder as it deems necessary or
advisable. All determinations and interpretations made by the
Committee shall be final, binding and conclusive on all grantees
and on their legal representatives and beneficiaries. The
Committee shall have the authority, in its absolute discretion,
to determine which Key Persons shall receive Awards, the time
when Awards shall be issued, the terms of
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such Awards and the number of shares for which Awards shall be
issued; provided, however, that the Board shall have the
sole authority to make such determinations with respect to
Awards, if any, to be issued to the members of the Committee.
Unless otherwise expressly provided in the Plan or an Award
Agreement, the Committee shall have the authority, in its
absolute discretion, to (i) amend any outstanding Award
Agreement in any respect, subject to the consent of any grantee
where the rights of the grantee of such Award are adversely
affected, including, without limitation, to accelerate the time
or times at which the Award becomes vested, unrestricted or may
be exercised, waive or amend any restrictions or conditions set
forth in such Award Agreement, or impose new restrictions and
conditions, or reflect a change in the grantees
circumstances; and (ii) determine whether, to what extent
and under what circumstances and method or methods
(A) Awards may be (1) settled in cash, Common Shares,
other securities, other Awards or other property or
(2) canceled, forfeited or suspended, (B) Common
Shares, other securities, other Awards or other property, and
other amounts payable with respect to an Award may be deferred
either automatically or at the election of the grantee thereof
or of the Committee and (C) Awards may be settled by the
Company or any of its designees. Notwithstanding anything to the
contrary contained herein, the Board may, in its sole
discretion, at any time and from time to time, grant Awards
(including grants to members of the Board who are not employees
of the Company) or administer the Plan, in which case the Board
shall have all of the authority and responsibility granted to
the Committee herein.
b. Actions of the Committee may be taken by the vote of a
majority of its members. The Committee may allocate among its
members and delegate to any person who is not a member of the
Committee any of its powers, responsibilities or duties in
accordance with applicable law.
c. No member of the Board or the Committee or any employee
of the Company (each such person a Covered Person)
shall have any liability to any person (including any grantee)
for any action taken or omitted to be taken or any determination
made in good faith with respect to the Plan or any Award. Each
Covered Person shall be indemnified and held harmless by Allied
World against and from any loss, cost, liability or expense
(including attorneys fees) that may be imposed upon or
incurred by such Covered Person in connection with or resulting
from any action, suit or proceeding to which such Covered Person
may be a party or in which such Covered Person may be involved
by reason of any action taken or omitted to be taken under the
Plan or any Award Agreement and against and from any and all
amounts paid by such Covered Person, with Allied Worlds
approval, in settlement thereof, or paid by such Covered Person
in satisfaction of any judgment in any such action, suit or
proceeding against such Covered Person, provided that Allied
World shall have the right, at its own expense, to assume and
defend any such action, suit or proceeding and, once Allied
World gives notice of its intent to assume the defense, Allied
World shall have sole control over such defense with counsel of
Allied Worlds choice. The foregoing right of
indemnification shall not be available to a Covered Person to
the extent that a court of competent jurisdiction in a final
judgment or other final adjudication, in either case, not
subject to further appeal, determines that the acts or omissions
of such Covered Person giving rise to the indemnification claim
resulted from such Covered Persons fraud or dishonesty.
The foregoing right of indemnification shall not be exclusive of
any other rights of indemnification to which Covered Persons may
be entitled under Allied Worlds Memorandum of Association
or Bye-laws, as a matter of law, or otherwise, or any other
power that Allied World may have to indemnify such persons or
hold them harmless.
4. Common Shares Available for Awards;
Adjustments.
a. Common Shares Available for
Awards. The total number of Common Shares
that may be issued pursuant to Awards granted under the Plan
shall not exceed four million (4,000,000) Common Shares (the
Maximum Number) as adjusted pursuant to the
provisions of Section 4.b. Common Shares issued upon
exercise of Prior Grants shall count against the Maximum Number.
Awards may be granted to Key Persons in such number and at such
times during the term of this Plan as the Committee or the Board
shall determine; provided, however, that during any time
that the Company is subject to Section 162(m) of the Code,
the maximum number of Common Shares with respect to which Awards
may be granted to any individual in any one year shall not
exceed the maximum number of Common Shares available for issue
hereunder, as such number may change from time to time. Shares
granted pursuant to this Plan may be authorized but unissued
Common Shares or authorized and issued Common Shares held by the
Company or acquired by the Company for the purposes of the Plan.
If any Award granted under this Plan or any Prior Grant is
forfeited or otherwise terminates or is canceled without the
delivery of Common Shares, then the Common Shares covered by
such forfeited, terminated or canceled Award or Prior Grant
shall again become available for transfer pursuant to Awards
granted or to be granted under this Plan. Without
A-2
affecting the number of Common Shares reserved or available
hereunder, the Committee may authorize under the Plan the
issuance of Awards or the assumption of awards granted under
plans of other entities in connection with any amalgamation,
merger, consolidation, acquisition of property or stock, or
reorganization upon such terms and conditions as it may deem
appropriate, and any other applicable laws or stock exchange
rules.
b. Capitalization Adjustments. The
aggregate number of Common Shares which may be granted or
purchased pursuant to Awards granted hereunder, the number of
Common Shares covered by each outstanding Award, and the price
per share thereof in each such Award shall be equitably and
proportionally adjusted or substituted, as determined by the
Committee in good faith and in its sole discretion, as to the
number, price or kind of Common Shares or other consideration
subject to such Awards or as otherwise determined by the
Committee in good faith to be fair and equitable (i) in the
event of changes in the outstanding Common Shares or in the
capital structure of the Company by reason of stock dividends,
stock splits, reverse stock splits, recapitalizations,
reorganizations, mergers, consolidations, combinations,
exchanges or other relevant changes in capitalization occurring
after the date of grant of any such Award; (ii) in the
event of any change in applicable laws or any change in
circumstances which results in or would result in any
substantial dilution or enlargement of the rights granted to, or
available for, participants in the Plan; or (iii) for any
other reason which the Committee determines, in its sole
discretion and acting in good faith, to otherwise warrant
equitable adjustment.
c. Corporate
Events. Notwithstanding subsection (b)
above, in the event of (i) a merger, amalgamation or
consolidation involving the Company in which the Company is not
the surviving corporation; (ii) a merger, amalgamation or
consolidation involving the Company in which the Company is the
surviving corporation but the holders of Common Shares receive
securities of another corporation
and/or other
property, including cash; (iii) the sale of greater than
fifty percent (50%) of the securities of the Company entitled to
vote in the election of directors to the Board; or (iv) the
reorganization or liquidation of the Company (each, a
Corporate Event), in lieu of providing the
adjustment set forth in subsection (b) above, the Committee
may, in its discretion, provide that all outstanding Awards
shall terminate as of the consummation of such Corporate Event,
and either (x) accelerate the exercisability of, and cause
all vesting restrictions to lapse on, all outstanding Awards to
a date at least ten days prior to the date of such Corporate
Event, such that holders may exercise all such Awards prior to
the Corporate Event, or (y) provide that holders of Awards
will receive a payment in respect of cancellation of their
Awards based on the amount of the per share consideration being
paid for the Common Shares in connection with such Corporate
Event less the applicable exercise price. Payments to holders
pursuant to the preceding sentence shall be made in cash, or, in
the sole discretion of the Committee, in such other
consideration necessary for a holder of an Award to receive
property, cash or securities as such holder would have been
entitled to receive upon the occurrence of the transaction if
the holder had been, immediately prior to such transaction, the
holder of the number of Common Shares covered by the Award at
such time.
d. Fractional Shares. Any such
adjustment may provide for the elimination of any fractional
share which might otherwise become subject to an Award.
5. Eligibi1ity. Awards under
the Plan may be made to such Key Persons as the Committee may
select in its discretion.
6. Grant of Awards. The
Committee is authorized to grant Awards only in the form of
stock options to purchase Common Shares from the Company, to
such Key Persons, in such amounts and subject to such terms and
conditions, as the Committee shall determine in its discretion.
7. Terms and Conditions of Award
Agreements. Each Award granted under the Plan
shall be evidenced by a written document which shall contain
such provisions and conditions as the Committee deems
appropriate. By accepting an Award pursuant to the Plan, a
grantee thereby agrees that the Award shall be subject to all of
the terms and provisions of the Plan and the applicable Award
Agreement. All Awards granted under the Plan shall be subject to
the following terms and conditions:
a. Exercise Price. The exercise
price per share with respect to each Award shall be determined
by the Committee or the Board but shall not be less than 100% of
the Fair Market Value of the Common Shares on the date the Award
is granted.
A-3
b. Term of Award. In no event
shall any Award be exercisable after the expiration of
10 years from the date on which the Award is issued.
c. Termination of
Employment. Except as otherwise provided by
the Committee or the Board, no part of any Award issued to an
employee (including an officer) may be exercised after the
termination of his or her employment with the Company, except
that:
(i) if such termination of employment is on or after the
date the employee attains age sixty-five (65) or due to
disability or death, any portion of an Award, whether or not
exercisable at the time of such termination, may be exercised by
the grantee (or in case of death by the person or persons to
whom the grantees rights under such Award are transferred
by will or the laws of descent and distribution) at any time
within the term of the Award; and
(ii) if such termination of employment is not at or after
normal retirement age or due to disability or death, any portion
of an Award may be exercised by the grantee within 90 days
after such termination, but only to the extent such Award was
exercisable at the time of such termination, and any portion of
such Award that remains unvested at the time of such termination
shall terminate and no longer be exercisable at any time.
8. Term of Plan. The Plan
shall terminate on, and no Awards shall be issued pursuant to
the Plan after, May 8, 2018; provided, however, that
Awards granted theretofore may extend beyond such date and the
terms and conditions of the Plan shall continue to apply thereto.
9. Termination or Amendment of
Plan. The Board may at any time terminate the
Plan with respect to any Common Shares of Allied World not at
the time subject to an Award, and may from time to time alter or
amend the Plan or any part thereof. Unless otherwise determined
by the Board, shareholder approval of any suspension,
discontinuance, revision or amendment shall be obtained only to
the extent necessary to comply with any applicable law or stock
exchange listing requirement; provided, however, that
unless approved by the Companys shareholders or as
otherwise specifically provided under Section 4(a) hereof,
no adjustments or reduction of the exercise price of any
outstanding Awards shall be made in the event of a decline in
stock price, either by reducing the exercise price of
outstanding Awards or through cancellation of outstanding Awards
in connection with a re-granting of Awards at a lower price to
the same individual.
10. Employment Status and Rights; Waiver of
Claims. The granting of any Award does not
alter the at-will nature of any grantees employment with
the Company. In addition, prior to being granted an Award, no
employee of the Company has any right to any benefits hereunder.
Accordingly, in consideration of a Key Persons selection
to receive an Award under the Plan and by acceptance of the
grant of such Award, such Key Person expressly waives any right
to contest the number of Awards issued to him or her, the terms
of the Plan or the Award Agreement, any determination, action or
omission under the Plan or any Award Agreement by Allied World,
the Board or the Committee, or any amendment to the Plan or any
Award Agreement (other than an amendment to the Plan or an Award
Agreement to which his or her consent is expressly required by
the express terms of an Award Agreement).
11. Confidentiality. In
consideration of the grantees acceptance of any Award, the
grantee hereby agrees to keep confidential the existence of, and
any information concerning, any dispute arising in connection
with any Award, the Plan and any related matters, except that
the grantee may disclose information concerning such dispute to
the court that is considering such dispute or to the
grantees legal counsel (provided that such counsel agrees
not to disclose any such information other than as necessary to
the prosecution or defense of the dispute).
12. Tax Withholding. As a
condition to the delivery of any Common Shares pursuant to any
Award, or in connection with any other event that gives rise to
a federal or other governmental tax withholding obligation on
the part of the Company relating to an Award (including, without
limitation, FICA tax), (a) the Company may deduct or
withhold (or cause to be deducted or withheld) from any payment
or distribution to a grantee whether or not pursuant to the Plan
or (b) the Committee shall be entitled to require that the
grantee remit cash to the Company (through payroll deduction or
otherwise), in each case in an amount sufficient in the opinion
of the Company to satisfy such withholding obligation.
A-4
13. Required Consents and Legends.
a. If the Committee shall at any time determine that any
consent (as hereinafter defined) is necessary or desirable as a
condition of, or in connection with, the granting of any Award,
the delivery of Common Shares or the delivery of any cash,
securities or other property under the Plan, or the taking of
any other action hereunder (each such action being hereinafter
referred to as a Plan Action), then such Plan Action
shall not be taken, in whole or in part, unless and until such
consent shall have been effected or obtained to the full
satisfaction of the Committee. The Committee may direct that any
certificate evidencing shares delivered pursuant to the Plan
shall bear a legend setting forth such restrictions on
transferability as the Committee may determine to be necessary
or desirable, and may advise the transfer agent to place a stop
transfer order against any legended shares.
b. The term consent as used in this
Section 13 with respect to any Plan Action includes
(i) any and all listings, registrations or qualifications
in respect thereof upon any securities exchange or under any
federal, state or local law, or law, rule or regulation of a
jurisdiction outside the United States; (ii) or any other
matter, which the Committee may deem necessary or desirable to
comply with the terms of any such listing, registration or
qualification or to obtain an exemption from the requirement
that any such listing, qualification or registration be made;
(iii) any and all other consents, clearances and approvals
in respect of a Plan Action by any governmental or other
regulatory body or any stock exchange or self-regulatory agency;
and (iv) any and all consents required by the Committee.
Nothing herein shall require Allied World to list, register or
qualify the Common Shares on any securities exchange.
14. Nonassignability; No
Hedging. Except to the extent otherwise
expressly provided in the applicable Award Agreement or
determined by the Committee, no Award (or any rights and
obligations thereunder) granted to any person under the Plan may
be sold, exchanged, transferred, assigned, pledged, hypothecated
or otherwise disposed of or hedged, in any manner (including
through the use of any cash-settled instrument), whether
voluntarily or involuntarily and whether by operation of law or
otherwise, other than by will or by the laws of descent and
distribution, and all such Awards (and any rights thereunder)
shall be exercisable during the life of the grantee only by the
grantee or the grantees legal representative. Any sale,
exchange, transfer, assignment, pledge, hypothecation or other
disposition in violation of the provisions of this
Section 14 shall be null and void and any Award which is
hedged in any manner shall immediately be forfeited. All of the
terms and conditions of this Plan and the Award Agreements shall
be binding upon any permitted successors and assigns.
15. Successor Entity. Unless
otherwise provided in the applicable Award Agreement and except
as otherwise determined by the Committee, in the event of a
merger, amalgamation, consolidation, mandatory share exchange or
other similar business combination of Allied World with or into
any other entity or any transaction in which another person or
entity acquires all of the issued and outstanding Common Shares
of Allied World, or all or substantially all of the assets of
Allied World, outstanding Awards may be assumed or a
substantially equivalent award may be substituted by such
successor entity or a parent or subsidiary of such successor
entity.
16. Nature of Payments.
a. Any and all grants of Awards and deliveries of Common
Shares, cash, securities or other property under the Plan shall
be in consideration of services performed or to be performed for
the Company by the grantee. Awards under the Plan may, in the
discretion of the Committee, be made in substitution in whole or
in part for cash or other compensation otherwise payable to a
grantee by the Company. Only whole Common Shares shall be
delivered under the Plan. Awards shall, to the extent reasonably
practicable, be aggregated in order to eliminate any fractional
shares. Fractional shares shall be rounded down to the nearest
whole share and any such fractional shares shall be forfeited.
b. All such grants and deliveries shall constitute a
special discretionary incentive payment to the grantee and shall
not be required to be taken into account in computing the amount
of salary or compensation of the grantee for the purpose of
determining any contributions to or any benefits under any
pension, retirement, profit-sharing, bonus, life insurance,
severance or other benefit plan of the Company or under any
agreement with the grantee, unless the Company specifically
provides otherwise.
17. Non-Uniform
Determinations. The Committees
determinations under the Plan and Award Agreements need not be
uniform and may be made by it selectively among persons who
receive, or are eligible to receive,
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Awards under the Plan (whether or not such persons are similarly
situated). Without limiting the generality of the foregoing, the
Committee shall be entitled, among other things, to make
non-uniform and selective determinations under Award Agreements,
and to enter into non-uniform and selective Award Agreements, as
to (a) the persons to receive Awards, (b) the terms
and provisions of Awards and (c) whether a grantees
employment has been terminated for purposes of the Plan.
18. Other Payments or
Awards. Nothing contained in the Plan shall
be deemed in any way to limit or restrict the Company from
making any award or payment to any person under any other plan,
arrangement or understanding, whether now existing or hereafter
in effect.
19. Plan Headings. The
headings in this Plan are for the purpose of convenience only
and are not intended to define or limit the construction of the
provisions hereof.
20. Governing Law;
Venue. THIS PLAN SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
IN CONSIDERATION OF THE GRANTEES ACCEPTANCE OF THE
ISSUANCE OF ANY AWARD, THE GRANTEE HEREBY EXPRESSLY SUBMITS TO
THE EXCLUSIVE JURISDICTION OF AND VENUE IN THE COURTS OF BERMUDA
WITH RESPECT TO ANY SUIT OR CLAIM INSTITUTED BY THE COMPANY OR
THE GRANTEE RELATING TO THIS PLAN OR THE AWARD.
21. Severability; Entire
Agreement. If any of the provisions of this
Plan or any Award Agreement is finally held to be invalid,
illegal or unenforceable (whether in whole or in part), such
provision shall be deemed modified to the extent, but only to
the extent, of such invalidity, illegality or unenforceability
and the remaining provisions shall not be affected thereby;
provided, that if any of such provisions is finally held to be
invalid, illegal, or unenforceable because it exceeds the
maximum scope determined to be acceptable to permit such
provision to be enforceable, such provision shall be deemed to
be modified to the minimum extent necessary to modify such scope
in order to make such provision enforceable hereunder. The Plan
and any Award Agreements contain the entire agreement of the
parties with respect to the subject matter thereof and supersede
all prior agreements, promises, covenants, arrangements,
communications, representations and warranties between them,
whether written or oral with respect to the subject matter
thereof.
22. No Third Party
Beneficiaries. Except as expressly provided
therein, neither the Plan nor any Award Agreement shall confer
on any person other than Allied World and the grantee of any
Award any rights or remedies thereunder. The exculpation and
indemnification provisions of Section 3.c shall inure to
the benefit of a Covered Persons estate and beneficiaries
and legatees.
23. Successors and Assigns of Allied
World. The terms of this Plan shall be
binding upon and inure to the benefit of Allied World and any
successor entity contemplated by Section 15.
24. Date of Adoption. This
Plan was adopted effective on February 28, 2008 by the
Board, subject to approval by the shareholders of Allied World
at a General Meeting of Shareholders on May 8, 2008.
A-6
APPENDIX B
ALLIED
WORLD ASSURANCE COMPANY HOLDINGS, LTD
SECOND
AMENDED
AND RESTATED
2004 STOCK INCENTIVE PLAN
TABLE OF
CONTENTS
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ARTICLE I GENERAL
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B-1
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1.1 Purpose
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B-1
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1.2 Definitions of Certain Terms
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B-1
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1.3 Administration
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B-1
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1.4 Persons Eligible for Awards
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B-2
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1.5 Types of Awards Under Plan
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B-2
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1.6 Common Shares Available for Awards
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B-2
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ARTICLE II AWARDS UNDER THE PLAN
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B-3
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2.1 Agreements Evidencing Awards
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B-3
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2.2 No Rights as a Shareholder
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B-4
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2.3 Grant of Restricted Common Shares
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B-4
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2.4 Grant of Restricted Stock Units
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B-4
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2.5 Grant of Dividend Equivalent Rights
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B-4
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2.6 Other Stock-Based Awards
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B-4
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2.7 Certain Restrictions
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B-4
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ARTICLE III MISCELLANEOUS
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B-5
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3.1 Amendment of the Plan
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B-5
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3.2 Confidentiality
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B-5
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3.3 Tax Withholding
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B-5
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3.4 Required Consents and Legends
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B-5
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3.5 Nonassignability; No Hedging
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B-5
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3.6 Successor Entity
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B-6
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3.7 Right of Discharge Reserved
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B-6
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3.8 Nature of Payments
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B-6
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3.9 Non-Uniform Determinations
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B-6
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3.10 Other Payments or Awards
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B-6
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3.11 Plan Headings
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B-7
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3.12 Termination of Plan
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B-7
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3.13 Governing Law; Venue
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B-7
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3.14 Severability; Entire Agreement
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B-7
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3.15 Waiver of Claims
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B-7
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3.16 No Third Party Beneficiaries
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B-7
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3.17 Successors and Assigns of Allied World
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B-7
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3.18 Date of Adoption and Approval of Shareholders
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B-8
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3.19 Section 409A
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B-8
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ALLIED
WORLD ASSURANCE COMPANY HOLDINGS, LTD
SECOND
AMENDED
AND RESTATED
2004
STOCK INCENTIVE PLAN
ARTICLE I
GENERAL
The purpose of the Allied World Assurance Company Holdings, Ltd
Second
Amended and Restated 2004 Stock Incentive Plan is to
attract, retain and motivate officers, directors, employees
(including prospective employees), consultants and others who
may perform services for the Company, to compensate them for
their contributions to the long-term growth and profits of the
Company, and to encourage them to acquire a proprietary interest
in the success of the Company.
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1.2
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Definitions
of Certain Terms
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ALLIED WORLD means Allied World Assurance Company
Holdings, Ltd or a successor entity contemplated by
Section 3.6.
AWARD means an award made pursuant to the Plan.
AWARD AGREEMENT means the written document by which
each Award is evidenced.
BOARD means the Board of Directors of Allied World.
CERTIFICATE means a share certificate (or other
appropriate document or evidence of ownership) representing
Common Shares of Allied World.
COMMITTEE has the meaning set forth in
Section 1.3.1.
COMMON SHARES mean the common shares of Allied World.
COMPANY means Allied World and its subsidiaries.
COVERED PERSON has the meaning set forth in
Section 1.3.3.
EMPLOYMENT means a grantees performance of
services for the Company, as determined by the Committee. The
terms employ and employed shall have
their correlative meanings.
EXCHANGE ACT means the Securities Exchange Act of
1934, as amended from time to time, and the applicable rules and
regulations thereunder.
PLAN means the Allied World Assurance Company
Holdings,
Ltd
Second
Amended and Restated 2004 Stock Incentive
Plan, as described herein and as hereafter amended from time to
time.
1.3.1 Except, as otherwise provided herein, the Plan shall
be administered by a committee (the Committee) of
the Board to be drawn solely from members of the Board who are
not and have not been officers of the Company. The Committee is
authorized, subject to the provisions of the Plan, to establish
such rules and regulations as it deems necessary for the proper
administration of the Plan and to make such determinations and
interpretations and to take such action in connection with the
Plan and any Award granted thereunder as it deems necessary or
advisable. All determinations and interpretations made by the
Committee shall be final, binding and conclusive on all grantees
and on their legal representatives and beneficiaries. The
Committee shall have the authority, in its absolute discretion,
to determine the persons who shall receive Awards, the time when
Awards shall be granted, the terms of such Awards and the number
of Common Shares, if any, which shall be subject to such Awards.
Unless otherwise provided in an Award Agreement, the Committee
shall have the authority, in its absolute discretion, to
(i) amend any outstanding Award Agreement in any respect,
whether or not the rights of the grantee of such Award
B-1
are adversely affected, including, without limitation, to
accelerate the time or times at which the Award becomes vested,
unrestricted or may be exercised, waive or amend any goals,
restrictions or conditions set forth in such Award Agreement, or
impose new goals, restrictions and conditions, or reflect a
change in the grantees circumstances; and
(ii) determine whether, to what extent and under what
circumstances and method or methods (A) Awards may be
(1) settled in cash, Common Shares, other securities, other
Awards or other property or (2) canceled, forfeited or
suspended, (B) Common Shares, other securities, other
Awards or other property, and other amounts payable with respect
to an Award may be deferred either automatically or at the
election of the grantee thereof or of the Committee and
(C) Awards may be settled by the Company or any of its
designees. Notwithstanding anything to the contrary contained
herein, the Board may, in its sole discretion, at any time and
from time to time, grant Awards (including grants to members of
the Board who are not employees of the Company) or administer
the Plan, in which case the Board shall have all of the
authority and responsibility granted to the Committee herein.
1.3.2 Actions of the Committee may be taken by the vote of
a majority of its members. The Committee may allocate among its
members and delegate to any person who is not a member of the
Committee any of its powers, responsibilities or duties in
accordance with applicable law.
1.3.3 No member of the Board or the Committee or any
employee of the Company (each such person a Covered
Person) shall have any liability to any person (including
any grantee) for any action taken or omitted to be taken or any
determination made in good faith with respect to the Plan or any
Award. Each Covered Person shall be indemnified and held
harmless by Allied World against and from any loss, cost,
liability or expense (including attorneys fees) that may
be imposed upon or incurred by such Covered Person in connection
with or resulting from any action, suit or proceeding to which
such Covered Person may be a party or in which such Covered
Person may be involved by reason of any action taken or omitted
to be taken under the Plan or any Award Agreement and against
and from any and all amounts paid by such Covered Person, with
Allied Worlds approval, in settlement thereof, or paid by
such Covered Person in satisfaction of any judgment in any such
action, suit or proceeding against such Covered Person, provided
that Allied World shall have the right, at its own expense, to
assume and defend any such action, suit or proceeding and, once
Allied World gives notice of its intent to assume the defense,
Allied World shall have sole control over such defense with
counsel of Allied Worlds choice. The foregoing right of
indemnification shall not be available to a Covered Person to
the extent that a court of competent jurisdiction in a final
judgment or other final adjudication, in either case, not
subject to further appeal, determines that the acts or omissions
of such Covered Person giving rise to the indemnification claim
resulted from such Covered Persons fraud or dishonesty.
The foregoing right of indemnification shall not be exclusive of
any other rights of indemnification to which Covered Persons may
be entitled under Allied Worlds Memorandum of Association
or Bye-Laws, as a matter of law, or otherwise, or any other
power that Allied World may have to indemnify such persons or
hold them harmless.
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1.4
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Persons
Eligible for Awards
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Awards under the Plan may be made to such officers, directors,
employees (including prospective employees), consultants and
other individuals who may perform services for the Company, as
the Committee may select.
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1.5
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Types of
Awards Under Plan
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Awards may be made under the Plan in the form of
(a) restricted stock, (b) restricted stock units,
(c) dividend equivalent rights and (d) other
equity-based or equity-related Awards that the Committee
determines to be consistent with the purposes of the Plan and
the interests of the Company. Allied World, however, will not
grant stock options pursuant to the Plan.
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1.6
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Common
Shares Available for Awards
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1.6.1 Subject to adjustment as provided in
Section 1.6.2 hereof, the maximum number of shares that may
be issued under the Plan is two million (2,000,000) Common
Shares. Such Common Shares may, in the discretion of the
Committee, be either authorized but unissued shares or shares
previously issued and reacquired by Allied World. If any Award
shall expire, terminate or otherwise lapse, in whole or in part,
any Common Shares subject to such Award (or portion thereof)
shall again be available for issuance under the Plan. Any Common
Shares delivered by
B-2
Allied World, any Common Shares with respect to which Awards are
made by Allied World and any Common Shares with respect to which
Allied World becomes obligated to make Awards, through the
assumption of, or in substitution for, outstanding awards
previously granted by an acquired entity, shall not be counted
against the shares available for Awards under this Plan.
1.6.2 The Committee shall adjust the number of Common
Shares authorized pursuant to Section 1.6.1 and the terms
of any outstanding Awards (including, without limitation, the
number of Common Shares covered by each outstanding Award, the
type of property to which the Award is subject and the exercise
or strike price of any Award), in such manner as it deems
appropriate to preserve the benefits or potential benefits
intended to be made available to grantees of Awards, for any
increase or decrease in the number of issued Common Shares
resulting from a recapitalization, stock split, stock dividend,
combination or exchange of Common Shares, merger, amalgamation,
consolidation, rights offering, separation, reorganization or
liquidation, or any other change in the corporate structure or
shares of Allied World. After any adjustment made pursuant to
this Section 1.6.2, the number of Common Shares subject to
each outstanding Award shall be rounded down to the nearest
whole number. Notwithstanding the foregoing, in the event of
(i) a merger, amalgamation or consolidation involving
Allied World in which Allied World is not the surviving
corporation; (ii) a merger, amalgamation or consolidation
involving Allied World in which Allied World is the surviving
corporation but the holders of shares of Common Shares receive
securities of another corporation
and/or other
property, including cash; (iii) a the sale of greater than
fifty percent (50%) of the securities of Allied World entitled
to vote in the election of directors to the Board; or
(iv) the reorganization or liquidation of Allied World
(each, a Corporate Event), in lieu of providing the
adjustment set forth in subsection (b) above, the Committee
may, in its discretion, provide that all outstanding Awards
shall terminate as of the consummation of such Corporate Event,
and either (x) accelerate the vesting of, and cause all
vesting restrictions to lapse on, all outstanding Awards to a
date at least ten days prior to the date of such Corporate
Event, or (y) provide that holders of Awards will receive a
payment in respect of cancellation of their Awards based on the
amount of the per share consideration being paid for the Common
Shares in connection with such Corporate Event. Payments to
holders pursuant to the preceding sentence shall be made in
cash, or, in the sole discretion of the Committee, in such other
consideration necessary for a holder of an Award to receive
property, cash or securities as such holder would have been
entitled to receive upon the occurrence of the transaction if
the holder had been, immediately prior to such transaction, the
holder of the number of Common Shares covered by the Award at
such time.
1.6.3 There shall be no limit on the amount of cash,
securities (other than Common Shares as provided in this
Section 1.6) or other property that may be delivered
pursuant to the Plan or any Award;
provided, however,
that
Awards with respect to no more than 16,667 Common
Shares may be granted to any one grantee in any calendar year,
and provided further, that Awards of stock appreciation rights
with respect to no more than 16,667 Common Shares may be granted
to any one grantee in any calendar year
during
any time that the Company is subject to Section 162(m) of
the Code, the maximum number of Common Shares with respect to
which Awards may be granted to any individual in any one year
shall not exceed the maximum number of Common Shares available
for issue hereunder, as such number may change from time to
time.
ARTICLE II
AWARDS
UNDER THE PLAN
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2.1
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Agreements
Evidencing Awards
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Each Award granted under the Plan shall be evidenced by a
written document that shall contain such provisions and
conditions as the Committee deems appropriate. The Committee may
grant Awards in tandem with or in substitution for any other
Award or Awards granted under this Plan or any award granted
under any other plan of the Company. By accepting an Award
pursuant to the Plan, a grantee thereby agrees that the Award
shall be subject to all of the terms and provisions of the Plan
and the applicable Award Agreement.
B-3
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2.2
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No Rights
as a Shareholder
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No grantee of an Award shall have any of the rights of a
shareholder of Allied World with respect to Common Shares
subject to such Award until the delivery of such shares. Except
as otherwise provided in Section 1.6.2, no adjustments
shall be made for dividends, distributions or other rights
(whether ordinary or extraordinary, and whether in cash, Common
Shares, other securities or other property) for which the record
date is prior to the date such shares are delivered.
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2.3
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Grant of
Restricted Common Shares
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The Committee may grant or offer for sale restricted Common
Shares in such amounts and subject to Section 2.7 and such
terms and conditions as the Committee shall determine. Upon the
delivery of such shares, the grantee shall have the rights of a
shareholder with respect to the restricted stock, subject to
Section 2.7 and any other restrictions and conditions as
the Committee may include in the applicable Award Agreement. In
the event that a Certificate is issued in respect of restricted
Common Shares, such Certificate may be registered in the name of
the grantee but may be held by Allied World or its designated
agent until the time the restrictions lapse.
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2.4
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Grant of
Restricted Stock Units
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The Committee may grant Awards of restricted stock units in such
amounts and subject to Section 2.7 and such terms and
conditions as the Committee shall determine. A grantee of a
restricted stock unit will have only the rights of a general
unsecured creditor of Allied World until delivery of Common
Shares, cash or other securities or property is made as
specified in the applicable Award Agreement. On the delivery
date specified in the Award Agreement, the grantee of each
restricted stock unit not previously forfeited or terminated
shall receive one Common Share, or cash, securities or other
property equal in value to a Common Share or a combination
thereof as specified by the Committee.
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2.5
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Grant of
Dividend Equivalent Rights
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The Committee may include in the Award Agreement with respect to
any Award a dividend equivalent right entitling the grantee to
receive amounts equal to all or any portion of the dividends
that would be paid on the Common Shares covered by such Award if
such shares had been delivered pursuant to such Award. The
grantee of a dividend equivalent right will have only the rights
of a general unsecured creditor of Allied World until payment of
such amounts is made as specified in the applicable Award
Agreement. In the event such a provision is included in an Award
Agreement, the Committee shall determine whether such payments
shall be made in cash, in Common Shares or in another form,
whether they shall be conditioned upon the exercise of the Award
to which they relate, the time or times at which they shall be
made, and such other terms and conditions as the Committee shall
deem appropriate.
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2.6
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Other
Stock-Based Awards
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The Committee may grant other types of equity-based or
equity-related Awards (including the grant or offer for sale of
unrestricted Common Shares) in such amounts and subject to such
terms and conditions, as the Committee shall determine. Such
Awards may entail the transfer of actual Common Shares to Award
recipients, or payment in cash or otherwise of amounts based on
the value of Common Shares, and may include, without limitation,
Awards designed to comply with or take advantage of the
applicable local laws of jurisdictions other than the United
States.
In the case of an Award in the form of restricted stock or
restricted stock units, at least one year must elapse before the
delivery or payment of Common Shares, cash or other property,
except in the case of (i) termination of employment due to
death, disability, retirement at or after age 65 or change
of control; or (ii) an Award that the Committee determines
is performance based, in which case at least one year must
elapse.
B-4
ARTICLE III
MISCELLANEOUS
3.1
Amendment of the Plan
3.1.1 Unless otherwise provided in an Award Agreement, the
Board may from time to time suspend, discontinue, revise or
amend the Plan in any respect whatsoever, including in any
manner that adversely affects the rights, duties or obligations
of any grantee of an Award.
3.1.2 Unless otherwise determined by the Board, shareholder
approval of any suspension, discontinuance, revision or
amendment shall be obtained only to the extent necessary to
comply with any applicable law or stock exchange listing
requirement.
3.2
Confidentiality
In consideration of the grantees acceptance of any Award,
the grantee hereby agrees to keep confidential the existence of,
and any information concerning, any dispute arising in
connection with any Award, the Plan and any related matters,
except that the grantee may disclose information concerning such
dispute to the court that is considering such dispute or to the
grantees legal counsel (provided that such counsel agrees
not to disclose any such information other than as necessary to
the prosecution or defense of the dispute).
3.3 Tax
Withholding
As a condition to the delivery of any Common Shares pursuant to
any Award or the lifting or lapse of restrictions on any Award,
or in connection with any other event that gives rise to a
federal or other governmental tax withholding obligation on the
part of the Company relating to an Award (including, without
limitation, FICA tax), (a) the Company may deduct or
withhold (or cause to be deducted or withheld) from any payment
or distribution to a grantee whether or not pursuant to the Plan
or (b) the Committee shall be entitled to require that the
grantee remit cash to the Company (through payroll deduction or
otherwise), in each case in an amount sufficient in the opinion
of the Company to satisfy such withholding obligation.
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3.4
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Required
Consents and Legends
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3.4.1 If the Committee shall at any time determine that any
consent (as hereinafter defined) is necessary or desirable as a
condition of, or in connection with, the granting of any Award,
the delivery of Common Shares or the delivery of any cash,
securities or other property under the Plan, or the taking of
any other action thereunder (each such action being hereinafter
referred to as a plan action), then such plan action
shall not be taken, in whole or in part, unless and until such
consent shall have been effected or obtained to the full
satisfaction of the Committee. The Committee may direct that any
Certificate evidencing shares delivered pursuant to the Plan
shall bear a legend setting forth such restrictions on
transferability as the Committee may determine to be necessary
or desirable, and may advise the transfer agent to place a stop
transfer order against any legended shares.
3.4.2 The term consent as used in this
Section 3.4 with respect to any plan action includes
(a) any and all listings, registrations or qualifications
in respect thereof upon any securities exchange or under any
federal, state or local law, or law, rule or regulation of a
jurisdiction outside the United States; (b) or any other
matter, which the Committee may deem necessary or desirable to
comply with the terms of any such listing, registration or
qualification or to obtain an exemption from the requirement
that any such listing, qualification or registration be made;
(c) any and all other consents, clearances and approvals in
respect of a plan action by any governmental or other regulatory
body or any stock exchange or self-regulatory agency; and
(d) any and all consents required by the Committee. Nothing
herein shall require Allied World to list, register or qualify
the Common Shares on any securities exchange.
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3.5
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Nonassignability;
No Hedging
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Except to the extent otherwise expressly provided in the
applicable Award Agreement or determined by the Committee, no
Award (or any rights and obligations thereunder) granted to any
person under the Plan may be sold,
B-5
exchanged, transferred, assigned, pledged, hypothecated or
otherwise disposed of or hedged, in any manner (including
through the use of any cash-settled instrument), whether
voluntarily or involuntarily and whether by operation of law or
otherwise, other than by will or by the laws of descent and
distribution, and all such Awards (and any rights thereunder)
shall be exercisable during the life of the grantee only by the
grantee or the grantees legal representative. Any sale,
exchange, transfer, assignment, pledge, hypothecation or other
disposition in violation of the provisions of this
Section 3.5 shall be null and void and any Award which is
hedged in any manner shall immediately be forfeited. All of the
terms and conditions of this Plan and the Award Agreements shall
be binding upon any permitted successors and assigns.
Unless otherwise provided in the applicable Award Agreement and
except as otherwise determined by the Committee, in the event of
a merger, amalgamation, consolidation, mandatory share exchange
or other similar business combination of Allied World with or
into any other entity or any transaction in which another person
or entity acquires all of the issued and outstanding Common
Shares of Allied World, or all or substantially all of the
assets of Allied World, outstanding Awards may be assumed or a
substantially equivalent award may be substituted by such
successor entity or a parent or subsidiary of such successor
entity.
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3.7
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Right of
Discharge Reserved
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Nothing in the Plan or in any Award Agreement shall confer upon
any grantee the right to continued Employment by the Company or
affect any right that the Company may have to terminate such
Employment.
3.8.1 Any and all grants of Awards and deliveries of Common
Shares, cash, securities or other property under the Plan shall
be in consideration of services performed or to be performed for
the Company by the grantee. Awards under the Plan may, in the
discretion of the Committee, be made in substitution in whole or
in part for cash or other compensation otherwise payable to a
grantee by the Company. Only whole Common Shares shall be
delivered under the Plan. Awards shall, to the extent reasonably
practicable, be aggregated in order to eliminate any fractional
shares. Fractional shares shall be rounded down to the nearest
whole share and any such fractional shares shall be forfeited.
3.8.2 All such grants and deliveries shall constitute a
special discretionary incentive payment to the grantee and shall
not be required to be taken into account in computing the amount
of salary or compensation of the grantee for the purpose of
determining any contributions to or any benefits under any
pension, retirement, profit-sharing, bonus, life insurance,
severance or other benefit plan of the Company or under any
agreement with the grantee, unless the Company specifically
provides otherwise.
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3.9
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Non-Uniform
Determinations
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The Committees determinations under the Plan and Award
Agreements need not be uniform and may be made by it selectively
among persons who receive, or are eligible to receive, Awards
under the Plan (whether or not such persons are similarly
situated). Without limiting the generality of the foregoing, the
Committee shall be entitled, among other things, to make
non-uniform and selective determinations under Award Agreements,
and to enter into non-uniform and selective Award Agreements, as
to (a) the persons to receive Awards, (b) the terms
and provisions of Awards and (c) whether a grantees
Employment has been terminated for purposes of the Plan.
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3.10
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Other
Payments or Awards
|
Nothing contained in the Plan shall be deemed in any way to
limit or restrict the Company from making any award or payment
to any person under any other plan, arrangement or
understanding, whether now existing or hereafter in effect.
B-6
The headings in this Plan are for the purpose of convenience
only and are not intended to define or limit the construction of
the provisions hereof.
The Board reserves the right to terminate the Plan at any time;
provided, however, that in any case, the Plan shall
terminate on May
27,
2014,
8,
2018,
and provided further, that all Awards made
under the Plan prior to its termination shall remain in effect
until such Awards have been satisfied or terminated in
accordance with the terms and provisions of the Plan and the
applicable Award Agreements.
3.13
Governing Law; Venue
THIS PLAN
SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS
OF THE STATE OF NEW YORK. IN CONSIDERATION OF THE GRANTEES
ACCEPTANCE OF THE ISSUANCE OF ANY AWARD, THE GRANTEE HEREBY
EXPRESSLY SUBMITS TO THE EXCLUSIVE JURISDICTION OF AND VENUE IN
THE COURTS OF BERMUDA WITH RESPECT TO ANY SUIT OR CLAIM
INSTITUTED BY THE COMPANY OR THE GRANTEE RELATING TO THIS PLAN
OR THE AWARD.
|
|
3.14
|
Severability;
Entire Agreement
|
If any of the provisions of this Plan or any Award Agreement is
finally held to be invalid, illegal or unenforceable (whether in
whole or in part), such provision shall be deemed modified to
the extent, but only to the extent, of such invalidity,
illegality or unenforceability and the remaining provisions
shall not be affected thereby; provided, that if any of such
provisions is finally held to be invalid, illegal or
unenforceable because it exceeds the maximum scope determined to
be acceptable to permit such provision to be enforceable, such
provision shall be deemed to be modified to the minimum extent
necessary to modify such scope in order to make such provision
enforceable hereunder. The Plan and any Award Agreements contain
the entire agreement of the parties with respect to the subject
matter thereof and supersede all prior agreements, promises,
covenants, arrangements, communications, representations and
warranties between them, whether written or oral with respect to
the subject matter thereof.
Each grantee of an Award recognizes and agrees that prior to
being selected by the Committee to receive an Award he or she
has no right to any benefits hereunder. Accordingly, in
consideration of the grantees receipt of any Award
hereunder, he or she expressly waives any right to contest the
amount of any Award, the terms of any Award Agreement, any
determination, action or omission hereunder or under any Award
Agreement by the Committee, Allied World or the Board, or any
amendment to the Plan or any Award Agreement (other than an
amendment to this Plan or an Award Agreement to which his or her
consent is expressly required by the express terms of an Award
Agreement).
|
|
3.16
|
No Third
Party Beneficiaries
|
Except as expressly provided therein, neither the Plan nor any
Award Agreement shall confer on any person other than Allied
World and the grantee of any Award any rights or remedies
thereunder. The exculpation and indemnification provisions of
Section 1.3.3 shall inure to the benefit of a Covered
Persons estate and beneficiaries and legatees.
|
|
3.17
|
Successors
and Assigns of Allied World
|
The terms of this Plan shall be binding upon and inure to the
benefit of Allied World and any successor entity contemplated by
Section 3.6.
B-7
|
|
3.18
|
Date of
Adoption and Approval of Shareholders
|
The Plan was
originally adopted
effective
on February
19,
200428,
2008,
by the Board
and
approved,
subject to approval
by the shareholders of
Allied World at the 2004
Annualthe
Company at a
General Meeting of Shareholders
,
and was amended and restated by the Board on May 22, 2006
and approved by the shareholders of Allied World at a Special
General Meeting of Shareholders on June 9,
2006.
on May 8, 2008.
3.19 Section 409A
The Plan and all Awards granted hereunder are intended to be
exempt from the provisions of Section 409A of the Internal
Revenue Code of 1986, as amended
(Section 409A). To the extent that any Awards,
payments or benefits provided hereunder are considered deferred
compensation subject to Section 409A, the Company intends
for this Plan and all Awards to comply with the standards for
nonqualified deferred compensation established by 409A (the
409A Standards). Notwithstanding anything herein to
the contrary, to the extent that any terms of the Plan or any
Award would subject recipient of an Award to gross income
inclusion, interest or an additional tax pursuant to
Section 409A, those terms are, to that extent, superseded
by the 409A Standards. The Company reserves the right to amend
Awards granted hereunder to cause such Awards to comply with or
be exempt from Section 409A.
B-8
APPENDIX C
ALLIED
WORLD ASSURANCE COMPANY HOLDINGS, LTD
2008
EMPLOYEE SHARE PURCHASE PLAN
Allied World Assurance Company Holdings, Ltd, hereby adopts the
Allied World Assurance Company Holdings, Ltd 2008 Employee Share
Purchase Plan (the Plan), effective as of
February 28, 2008 (the Effective Date),
subject to the approval of the shareholders of the Company.
1. Purpose. The purposes of
the Plan are as follows:
a. To assist Eligible Employees in acquiring an ownership
interest in the Company pursuant to a plan that is intended to
qualify as an employee stock purchase plan within
the meaning of Section 423(b) of the Code; and
b. To help such Eligible Employees provide for their future
security and to encourage them to remain in the employment of
the Company and its Subsidiaries.
2. Definitions.
(i) Administrator shall mean the
Compensation Committee of the Board.
(ii) Board shall mean the Board
of Directors of the Company.
(iii) Code shall mean the
Internal Revenue Code of 1986, as amended, and the applicable
rulings and regulations thereunder.
(iv) Common Shares shall mean the
common shares of the Company, $0.03 par value per share.
Common Shares shall also include any other
securities of the Company that may be substituted for Common
Shares pursuant to Section 19 hereof.
(v) Company shall mean Allied
World Assurance Company Holdings, Ltd, a Bermuda exempted
company, or any successor corporation.
(vi) Compensation shall mean all
base straight time gross earnings and commissions, exclusive of
payments for overtime, shift premiums, incentive compensation,
incentive payments, bonuses, expense reimbursements, fringe
benefits and other compensation.
(vii) Eligible Employee shall
mean an Employee of the Company or a Subsidiary (i) who
would not, immediately after an option is granted to him
hereunder, own shares possessing 5% or more of the total
combined voting power or value of all classes of shares of the
Company, a Parent, or a Subsidiary (as determined under
Section 423(b)(3) of the Code); (ii) whose customary
employment is for more than 20 hours per week; and
(iii) whose customary employment is for more than five
months in any calendar year. For purposes of clause (i) of
this subsection (g), the rules of Section 424(d) of the
Code with regard to the attribution of share ownership shall
apply in determining the share ownership of an individual, and
shares which an Employee may purchase under outstanding options
shall be treated as shares owned by the Employee.
(viii) Employee shall mean any
person who renders services to the Company or a Subsidiary in
the status of an employee within the meaning of Code
Section 3401(c). Employee shall not include any
director of the Company or a Subsidiary who does not render
services to the Company or a Subsidiary in the status of an
employee within the meaning of Code Section 3401(c). For
purposes of the Plan, the employment relationship shall be
treated as continuing intact while the individual is on sick
leave or other leave of absence approved by the Company or
Subsidiary and meeting the requirements of Treasury
Regulation Section 1.421-7(h)(2). Where the period of leave
exceeds 90 days and the individuals right to
reemployment is not guaranteed either by statute or by contract,
the employment relationship shall be deemed to have terminated
on the 91st day of such leave.
(ix) Employer shall mean, as to
any particular Employee, the company or corporation which
employs such Employee, whether it be the Company or a Subsidiary.
(x) Enrollment Date shall mean
the first Trading Day of each Offering Period.
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(xi) Exercise Date shall mean the
last Trading Day of each Offering Period.
(xii) Fair Market Value shall
mean, as of any date, the value of a Common Share determined as
follows:
(i) If the Common Shares are traded on an exchange, Fair
Market Value shall be the closing sales price for one Common
Share as reported in The Wall Street Journal (or such other
source as the Administrator may deem reliable for such purposes)
for such date, or if no sale occurred on such date, the first
Trading Day immediately prior to such date during which a sale
occurred;
(ii) If the Common Shares are not traded on an exchange but
are quoted on a quotation system, Fair Market Value shall be the
mean between the closing representative bid and asked prices for
one Common Share on such date, or if no sale occurred on such
date, the first date immediately prior to such date on which
sales prices or bid and asked prices, as applicable, are
reported by such quotation system; or
(iii) In the absence of an established market for the
Common Shares, Fair Market Value shall be determined in good
faith by the Administrator.
(xiii) Offering Period shall mean
each period of approximately six months commencing on each
January 1 and July 1 and terminating on the next occurring June
30 or December 31, as applicable. The duration and timing
of Offering Periods may be changed pursuant to Section 4 of
this Plan, but in no event may an Offering Period have a
duration in excess of 27 months.
(xiv) Parent means any
corporation, other than the Company, in an unbroken chain of
corporations ending with the Company if, at the time of the
determination, each of the corporations other than the Company
owns shares possessing 50% or more of the total combined voting
power of all classes of shares in one of the other corporations
in such chain.
(xv) Participant means an
Eligible Employee who participates in the Plan pursuant to
Section 5 hereof.
(xvi) Purchase Price shall mean
85% of the Fair Market Value of one Common Share on the Exercise
Date; provided, however, that the Purchase Price may be adjusted
by the Administrator pursuant to Section 19 hereof;
provided, further, that the Purchase Price shall not be less
than the par value of one Common Share.
(xvii) Subsidiary shall mean any
corporation, other than the Company, in an unbroken chain of
corporations beginning with the Company if, at the time of the
determination, each of the corporations other than the last
corporation in an unbroken chain owns shares possessing 50% or
more of the total combined voting power of all classes of shares
in one of the other corporations in such chain.
(xviii) Trading Day shall mean a
day on which the principal exchange on which the Common Shares
are traded is open for trading.
3. Eligibility.
a. Any Employee who is an Eligible Employee on the
Enrollment Date for an Offering Period shall be eligible to
participate in the Plan during such Offering Period, subject to
the requirements of Section 5 hereof and the limitations
imposed by Section 423(b) of the Code.
b. No Eligible Employee shall be granted an option under
the Plan to purchase Common Shares, or under any other employee
share purchase plan to purchase shares of the Company, any
Parent, or any Subsidiary subject to Section 423 of the
Code, to accrue at a rate which exceeds $25,000 of the Fair
Market Value of such shares (determined at the time the option
is granted) for each calendar year in which the option is
outstanding at any time. For purposes of the limitation imposed
by this subsection, the right to purchase shares under an option
accrues when the option (or any portion thereof) first becomes
exercisable during the calendar year, the right to purchase
shares under an option accrues at the rate provided in the
option, but in no case may such rate exceed $25,000 of the Fair
Market Value of such shares (determined at the time such option
is granted) for any one calendar year, and a right to purchase
shares which has accrued under an option may not be carried over
to any other option. This limitation shall be applied in
accordance with Section 423(b)(8) of the Code.
4. Offering Periods. Subject
to approval by shareholders of the Company, the Plan shall be
implemented by consecutive Offering Periods beginning on
July 1, 2008, and shall continue until it expires or is
terminated in
C-2
accordance with Section 20 hereof. The Administrator shall
have the power to change the duration of Offering Periods
(including the commencement dates thereof) with respect to
future offerings without shareholder approval if such change is
announced at least five days prior to the scheduled beginning of
the first Offering Period to be affected thereafter; provided,
however, that no Offering Period shall expire later than the
date on which this Plan expires or is terminated in accordance
with Section 20 hereof.
5. Participation.
a. Each Eligible Employee may become a Participant with
respect to any Offering Period by completing a subscription
agreement authorizing payroll deductions in a form acceptable to
the Administrator and filing it with the Company (or its
designated third-party share plan administrator) 15 business
days (or a different number of days as may be determined by the
Administrator, in its sole discretion) prior to the first day of
such Offering Period. A Participants completion of a
subscription agreement with respect to any Offering Period will
enroll such Participant in the Plan for each subsequent Offering
Period on the terms contained therein until the Participant
either submits a new subscription agreement, withdraws from
participation under the Plan as provided in Section 10
hereof, or otherwise becomes ineligible to participate in the
Plan.
b. Payroll deductions for a Participant shall commence on
the first payday following the Enrollment Date and shall end on
the last payday in the Offering Period with respect to which
such authorization is applicable, unless sooner terminated by
the Participant as provided in Section 10 hereof.
c. During a Participants leave of absence approved by
his Employer and meeting the requirements of Treasury
Regulation Section 1.421-7(h)(2),
such Participant may continue to participate in the Plan by
making cash payments to the Company on each payday equal to the
amount of the Participants payroll deductions under the
Plan for the payday immediately preceding the first day of such
Participants leave of absence. If a leave of absence is
unapproved or fails to meet the requirements of Treasury
Regulation Section 1.421-7(h)(2),
the Participant will automatically cease to participate in the
Plan and may not make any further contributions to the Plan
hereunder. In such event, the Company will automatically cease
to deduct the Participants payroll under the Plan. The
Company will pay to the Participant his total payroll deductions
for the Offering Period, in cash in one lump sum (without
interest), as soon as practicable after the Participant ceases
to participate in the Plan.
d. The subscription agreement(s) used in connection with
the Plan shall be in a form prescribed by the Administrator, and
the Administrator may, in its sole discretion, determine whether
such agreement shall be submitted in written or electronic form.
6. Payroll Deductions.
a. At the time a Participant files his subscription
agreement, he shall elect to have payroll deductions made on
each payday (such amount to be deducted after any applicable
deduction for tax and other withholding) during the Offering
Period in an amount from 1% to 10% of the Compensation which he
receives on each pay day during the Offering Period.
b. All payroll deductions made for a Participant shall be
credited to his account under the Plan and shall be withheld in
whole percentages only. Except as described in Section 5(c)
hereof, a Participant may not make any additional payments into
such account.
c. A Participant may discontinue his participation in the
Plan as provided in Section 10 hereof, or may increase or
decrease the rate of his payroll deductions during the Offering
Period by completing or filing with the Company (or its
designated third-party share plan administrator) a new
subscription agreement authorizing a change in payroll deduction
rate. The Administrator may, in its discretion, limit the number
of participation rate changes per Participant during any
Offering Period. The change in rate shall be effective with the
first full payroll period following five business days (or a
different number of days as may be determined by the
Administrator, in its sole discretion) after the Companys
(or its designated third-party share plan administrators)
receipt of the new subscription agreement.
d. Notwithstanding the foregoing, to the extent necessary
to comply with Section 423(b)(8) of the Code and
Section 3(b) hereof, a Participants payroll
deductions may be decreased to 0% at any time during an Offering
Period.
C-3
e. At the time an option is exercised, in whole or in part,
or at the time some or all of the Common Shares issued under the
Plan are disposed of, the Participant must make adequate
provision for any federal, state or other tax obligations, if
any, which arise upon the exercise of the option or the
disposition of the Common Shares. At any time, the Company may,
but shall not be obligated to, withhold from all of the
Participants compensation the amount necessary for the
Company to meet applicable withholding obligations, including
any withholding required to make available to the Company any
tax deductions or benefits attributable to the sale or early
disposition of Common Shares by the Employee.
7. Grant of Option. On the
Enrollment Date of each Offering Period, each Participant in
such Offering Period shall be granted an option to purchase on
the Exercise Date with respect to such Offering Period (at the
applicable Purchase Price) up to a number of the Common Shares
determined by dividing such Participants payroll
deductions accumulated prior to such Exercise Date and retained
in the Participants account as of the Exercise Date by the
applicable Purchase Price; provided, however, that such
purchase shall be subject to the limitations set forth in
Sections 3 and 13 hereof. Exercise of the option shall
occur as provided in Section 8 hereof, unless the
Participant has withdrawn from participation pursuant to
Section 10 hereof or otherwise becomes ineligible to
participate in the Plan. The option shall expire on the last day
of the Offering Period.
8. Exercise of Option.
a. Unless a Participant withdraws from the Plan as provided
in Section 10 hereof or otherwise becomes ineligible to
participate in the Plan, such Participants option for the
purchase of Common Shares shall be exercised automatically on
the Exercise Date, and the maximum number of full Common Shares
subject to the option shall be purchased for such Participant at
the applicable Purchase Price with the accumulated payroll
deductions in his account. No fractional Common Shares shall be
purchased, and any payroll deductions accumulated in a
Participants account which are not sufficient to purchase
a full Common Share shall be retained in such Participants
account for the subsequent Offering Period. During a
Participants lifetime, a Participants option to
purchase Common Shares hereunder is exercisable only by him.
b. If the Administrator determines that, on a given
Exercise Date, the number of Common Shares with respect to which
options are to be exercised may exceed either (i) the
number of Common Shares that were available for sale under the
Plan on the Enrollment Date of the applicable Offering Period
(notwithstanding any authorization of additional Common Shares
for issuance under the Plan by the Companys shareholders
subsequent to such Enrollment Date); or (ii) the number of
Common Shares available for sale under the Plan on such Exercise
Date, the Administrator shall provide that the Company (or its
designated third-party share plan administrator) shall make a
pro rata allocation of the Common Shares available for purchase
on such Enrollment Date or Exercise Date, as applicable, in as
uniform a manner as shall be practicable and as it shall
determine in its sole discretion to be equitable among all
Participants exercising options to purchase Common Shares on
such Exercise Date, and shall decide, in its sole discretion, to
either (x) continue all Offering Periods then in effect or
(y) terminate any or all Offering Periods then in effect
pursuant to Section 20 hereof. In the event of such a pro
rata allocation of Common Shares pursuant to this
Section 8(b), the balance of the amount credited to the
account of each Participant that has not been applied to the
purchase of Common Shares shall be paid to each such Participant
in one lump sum in cash as soon as reasonably practicable after
the Exercise Date, without any interest thereon.
9. Deposit of Common
Shares. As promptly as practicable after each
Exercise Date on which a purchase of Common Shares occurs, the
Company may arrange for the deposit, into each
Participants account with any broker designated by the
Company to administer this Plan, of the number of Common Shares
purchased upon exercise of each such Participants option.
10. Withdrawal.
a. At any time prior to the Exercise Date, a Participant,
by giving written notice to the Company (or its designated
third-party share plan administrator) in a form acceptable to
the Administrator, may withdraw all but not less than all of the
payroll deductions credited to his account and not yet used to
exercise an option under the Plan. All of the Participants
payroll deductions credited to his account during the Offering
Period, plus any balance retained in his account from a prior
Offering Period, if any, shall be paid to such Participant as
soon as reasonably practicable after receipt of notice of
withdrawal, and such Participants option for the Offering
Period shall be
C-4
automatically terminated, and no further payroll deductions for
the purchase of Common Shares shall be made for such Offering
Period. If a Participant withdraws from an Offering Period,
payroll deductions shall not resume at the beginning of any
subsequent Offering Period unless the Participant delivers to
the Company (or its designated third-party share plan
administrator) a new subscription agreement in accordance with
the terms of Section 5(a) hereof.
b. A Participants withdrawal from an Offering Period
shall not have any effect upon his eligibility to participate in
any similar plan which may hereafter be adopted by the Company
or in Offering Periods which commence after the termination of
the Offering Period from which the Participant withdraws.
11. Termination of
Employment. Upon a Participants ceasing
to be an Eligible Employee, for any reason, such Participant
shall be deemed to have elected to withdraw from the Plan, and
the payroll deductions credited to such Participants
account during the Offering Period, plus any balance retained in
his account from a prior Offering Period, if any, shall be paid
to him, or in the case of his death, to the person or persons
entitled thereto under Section 15 hereof, as soon as
reasonably practicable, and such Participants option for
the Offering Period shall be automatically terminated.
12. Interest. No interest
shall accrue on the payroll deductions or lump sum contributions
of a Participant in the Plan.
13. Shares Subject to Plan.
a. Subject to adjustment upon changes in capitalization of
the Company as provided in Section 19 hereof, a maximum of
1,000,000 Common Shares shall be made available for sale under
the Plan. If any option granted under the Plan shall for any
reason terminate without having been exercised, the Common
Shares not purchased under such option shall again become
available for issuance under the Plan. The shares subject to the
Plan may be unissued shares or reacquired shares bought on the
market or otherwise.
b. Except as otherwise provided herein, with respect to
Common Shares subject to an option granted under the Plan, a
Participant shall not be deemed to be a shareholder of the
Company, and the Participant shall not have any of the rights or
privileges of a shareholder, until such Common Shares have been
issued to the Participant or his nominee following exercise of
the Participants option. No adjustments shall be made for
dividends (ordinary or extraordinary, whether in cash
securities, or other property) or distributions or other rights
for which the record date occurs prior to the date of such
issuance, except as otherwise expressly provided herein.
14. Administration.
a. It shall be the duty of the Administrator to conduct the
general administration of the Plan in accordance with the
provisions of the Plan. The Administrator shall have the power
to interpret the Plan and the terms of the options and to adopt
such rules for the administration, interpretation and
application of the Plan as are consistent therewith and to
interpret, amend or revoke any such rules. The Administrator may
adopt such procedures and sub-plans as are necessary or
appropriate to permit participation in the Plan by employees who
are foreign nationals or employed outside the United States. The
Administrator at its option may utilize the services of an agent
to assist in the administration of the Plan, including
establishing and maintaining an individual securities account
under the Plan for each Participant. In its absolute discretion,
the Board may at any time and from time to time exercise any and
all rights and duties of the Administrator under the Plan.
b. The Administrator may delegate to officers or employees
of the Company or any of its affiliates, or committees thereof,
the authority, subject to such terms as the Administrator shall
determine, to perform such functions, including, but not limited
to, administrative functions, as the Administrator may determine
appropriate. The Administrator may appoint agents to assist it
in administering the Plan.
c. The Administrator may employ attorneys, consultants,
accountants, appraisers, brokers or other persons in connection
with its administration of the Plan. All expenses and
liabilities incurred by the Administrator in connection with the
administration of the Plan shall be borne by the Company. The
Administrator, the Company, and its officers and directors shall
be entitled to rely upon the advice, opinions and valuations of
any such persons. All actions taken and all interpretations and
determinations made by the Administrator in good faith shall be
final and binding upon all Participants, the Company and all
other interested persons. No member of the Administrator or
person to whom the powers of administration have been delegated
hereunder, shall be personally liable for any
C-5
action, determination or interpretation made in good faith with
respect to the Plan or the options, and all members of the
Administrator, and all persons to whom the powers of
administration have been delegated, shall be fully protected by
the Company in respect of any such action, determination or
interpretation.
15. Designation of Beneficiary.
a. A Participant may file a written designation of a
beneficiary who is to receive any Common Shares and cash, if
any, from such Participants account under the Plan in the
event of such Participants death subsequent to an Exercise
Date on which the option is exercised but prior to delivery to
such Participant of such Common Shares and cash. In addition, a
Participant may file a written designation of a beneficiary who
is to receive any cash from the Participants account under
the Plan in the event of such Participants death prior to
exercise of the option. To the extent required under applicable
law, spousal consent shall be required for such designation to
be effective if the Participant is married and the designated
beneficiary is not the Participants spouse.
b. Such beneficiary designation may be changed by the
Participant at any time by written notice to the Company. In the
event of the death of a Participant and in the absence of a
beneficiary validly designated under the Plan who is living at
the time of such Participants death, the Company shall
deliver such Common Shares
and/or cash
to the executor or administrator of the estate of the
Participant, or if no such executor or administrator has been
appointed (to the knowledge of the Company), the Company, in its
discretion, may deliver such Common Shares
and/or cash
to the spouse or to any one or more dependents or relatives of
the Participant, or if no spouse, dependent or relative is known
to the Company, then to such other person as the Company may
designate.
16. Transferability. Neither
payroll deductions credited to a Participants account nor
any rights with regard to the exercise of an option or to
receive Common Shares under the Plan may be assigned,
transferred, pledged or otherwise disposed of in any way by the
Participant (other than by will, the laws of descent and
distribution, or as provided in Section 15 hereof). Any
such attempt at assignment, transfer, pledge or other
disposition shall be without effect, except that the Company may
treat such act as an election to withdraw funds from an Offering
Period in accordance with Section 10 hereof.
17. Use of Funds. All
payroll deductions received or held by the Company under the
Plan may be used by the Company for any corporate purpose, and
the Company shall not be obligated to segregate such payroll
deductions.
18. Reports. Individual
accounts shall be maintained for each Participant in the Plan.
Statements of account shall be given to Participants following
each Offering Period, which statements shall set forth the
amounts of payroll deductions, the Purchase Price, the number of
Common Shares purchased, and the remaining cash balance, if any.
19. Adjustments Upon Changes in Capitalization,
Merger, Amalgamation, Asset Sale, Dissolution or
Liquidation.
a. Changes in Capitalization. The
number of Common Shares which have been authorized for issuance
under the Plan but not yet placed under option, the maximum
number of Common Shares each Participant may purchase in each
Offering Period (pursuant to Section 7 hereof), as well as
the price per Common Share and the number of Common Shares
covered by each option under the Plan which has not yet been
exercised shall be proportionately adjusted for any increase or
decrease in the number of issued Common Shares resulting from a
stock split, reverse stock split, stock dividend, combination or
reclassification of the Common Shares, or any other increase or
decrease in the number of Common Shares effected without receipt
of consideration by the Company; provided, however, that
conversion of any convertible securities of the Company shall
not be deemed to have been effected without receipt of
consideration. Such adjustment shall be made by the
Administrator, whose determination in that respect shall be
final, binding and conclusive on all Participants and the
Company. Except as expressly provided herein, no issuance by the
Company of shares of any class, or securities convertible into
shares of any class, shall affect, and no adjustment by reason
thereof shall be made with respect to, the number or price of
Common Shares subject to an option.
b. Merger, Amalgamation, Asset Sale, Dissolution or
Liquidation. In the event of a proposed
merger or amalgamation of the Company with or into another
corporation or a proposed sale of all or substantially all of
the
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assets of the Company, each outstanding option shall be assumed
or an equivalent option substituted by the successor corporation
or a parent or subsidiary of the successor corporation. In the
event that the successor corporation or a parent or subsidiary
of the successor corporation refuses to assume or substitute for
the option, or in the event of the proposed dissolution or
liquidation of the Company, the Offering Period then in progress
shall be shortened by the Administrator by setting a new
Exercise Date (the New Exercise Date), which
shall occur no later than immediately prior to the effective
date of such proposed merger, amalgamation, sale, dissolution or
liquidation, as applicable. The Company shall notify each
Participant in writing, at least ten business days prior to the
New Exercise Date, that the Exercise Date for the
Participants option has been changed to the New Exercise
Date and that the Participants option shall be exercised
automatically on the New Exercise Date, unless prior to such New
Exercise Date the Participant has withdrawn from the Offering
Period as provided in Section 10 hereof.
20. Amendment or Termination.
a. The Board may at any time and for any reason terminate
or amend the Plan. Except as provided in Section 19 hereof,
no such termination shall affect options previously granted,
provided that an Offering Period may be terminated by the Board
if the Board determines that the termination of the Offering
Period or the Plan is in the best interests of the Company and
its shareholders. Except as provided in Section 19 hereof
and this Section 20, no amendment may make any change in
any option theretofore granted which adversely affects the
rights of any Participant without the consent of such
Participant. To the extent necessary to comply with
Section 423 of the Code (or any successor rule or provision
or any other applicable law, regulation or stock exchange rule),
the Company shall obtain shareholder approval of any amendment
in such a manner and to such a degree as required.
b. Without shareholder consent and without regard to
whether any Participants rights may be considered to have
been adversely affected, the Administrator shall be
entitled to change the Offering Periods, limit the frequency
and/or
number of changes in the amount withheld during an Offering
Period, establish the exchange ratio applicable to amounts
withheld in a currency other than U.S. dollars, permit
payroll withholding in excess of the amount designated by a
Participant in order to adjust for delays or mistakes in the
Companys processing of properly completed withholding
elections, establish reasonable waiting and adjustment periods
and/or
accounting and crediting procedures to ensure that amounts
applied toward the purchase of Common Shares for each
Participant properly correspond with amounts withheld from the
Participants Compensation, and establish such other
limitations or procedures as the Administrator determines in its
sole discretion advisable which are consistent with the Plan.
c. In the event the Board determines that the ongoing
operation of the Plan may result in unfavorable financial
accounting consequences, the Board may, in its discretion and,
to the extent necessary or desirable, modify or amend the Plan
to reduce or eliminate such financial accounting consequences,
including, but not limited to:
(i) altering the Purchase Price for any Offering Period
including an Offering Period underway at the time of the change
in Purchase Price;
(ii) shortening any Offering Period so that the Offering
Period ends on a new Exercise Date, including an Offering Period
underway at the time of the Administrator action; and
(iii) allocating shares.
Such modifications or amendments shall not require shareholder
approval or the consent of any Participants.
21. Notices. All notices or
other communications by a Participant to the Company under or in
connection with the Plan shall be deemed to have been duly given
when received in the form specified by the Company at the
location, or by the person, designated by the Company for the
receipt thereof.
22. Conditions to Issuance of Shares.
a. The Company shall not be required to issue or deliver to
a Participant any certificate or certificates for shares
purchased upon the exercise of options prior to fulfillment of
all the following conditions:
(i) The admission of such shares to listing on all stock
exchanges, if any, on which the Common Shares are then listed;
C-7
(ii) The obtaining of any approval or other clearance from
any state or federal governmental agency which the Administrator
shall, in its absolute discretion, determine to be necessary or
advisable;
(iii) Such Participants payment to the Company of all
amounts which it is required to withhold under federal, state or
local law upon exercise of the option; and
(iv) The lapse of such reasonable period of time following
the exercise of the option as the Administrator may from time to
time establish for reasons of administrative convenience.
b. The obligation of the Company to make a payment of
Common Shares or otherwise shall be subject to all applicable
laws, rules and regulations, and to such approvals by
governmental agencies as may be required. Notwithstanding any
terms or conditions of any option to the contrary, the Company
shall be under no obligation to offer to sell or to sell and
shall be prohibited from offering to sell or selling any Common
Shares pursuant to an option unless such Common Shares have been
properly registered for sale with the Securities and Exchange
Commission pursuant to the Securities Act of 1933 or unless the
Company has received an opinion of counsel, satisfactory to the
Company, that such Common Shares may be offered or sold without
such registration pursuant to an available exemption therefrom
and the terms and conditions of such exemption have been fully
complied with. The Company shall be under no obligation to
register for sale or resale under the Securities Act of 1933 any
of the Common Shares to be offered or sold under the Plan or any
Common Shares issued upon exercise or settlement of options. If
the Common Shares offered for sale or sold under the Plan are
offered or sold pursuant to an exemption from registration under
the Securities Act of 1933, the Company may restrict the
transfer of such Common Shares and may legend the share
certificates representing such Common Shares in such manner as
it deems advisable to ensure the availability of any such
exemption.
23. Term of Plan. The Plan
shall become effective as of the Effective Date. The Plan shall
be deemed to be approved by the Companys shareholders if
it receives the affirmative vote of the Companys
shareholders in accordance with the Bye-laws of the Company.
Subject to approval by the shareholders of the Company in
accordance with this Section 23, the Plan shall be in
effect until the 10th anniversary of the date of the
initial adoption of the Plan by the Board, unless sooner
terminated under Section 20 hereof. In the event the
Companys shareholders do not approve this Plan pursuant to
this Section 23, neither this Plan nor any elections made
hereunder shall be of any force or effect, any outstanding
option shall be cancelled for no consideration, and all amounts
deducted from each Participants paycheck shall be repaid
to such Participant as soon as practicable without interest.
24. Equal Rights and
Privileges. All Eligible Employees of the
Company (or of any Subsidiary) will have equal rights and
privileges under this Plan so that this Plan qualifies as an
employee stock purchase plan within the meaning of
Section 423 of the Code. Any provision of this Plan that is
inconsistent with this requirement to provide equal rights and
privileges will, without further act or amendment by the
Company, the Board or the Administrator, be reformed to comply
with the equal rights and privileges requirement of
Section 423 of the Code.
25. Section 409A. The
options to purchase Common Shares under the Plan are not
intended to constitute nonqualified deferred
compensation within the meaning of Section 409A of
the Code. However, if at any time the Administrator determines
that the options may be subject to Section 409A of the
Code, the Administrator shall have the right, in its sole
discretion, to amend the Plan and any outstanding options as it
may determine is necessary or desirable either to exempt the
options from the application of Section 409A of the Code or
to cause the options to comply with the requirements of
Section 409A of the Code.
26. No Employment
Rights. Nothing in the Plan shall be
construed to give any person (including any Eligible Employee or
Participant) the right to remain in the employ of the Company, a
Parent or a Subsidiary, or to affect the right of the Company,
any Parent or any Subsidiary to terminate the employment of any
person (including any Eligible Employee or Participant) at any
time, with or without cause.
27. Notice of Disposition of Shares; Transfer
Restrictions. If required by the Company,
each Participant shall give prompt notice to the Company (at its
local Human Resources office), or cause a designated third-party
share administrator to give prompt notice to the Company, of any
disposition or other transfer of any Common Shares purchased
upon exercise of an option hereunder if such disposition or
transfer is made either (a) within two years from the
Enrollment Date of the Offering Period in which the Common
Shares were purchased or (b) within
C-8
one year after the Exercise Date on which such Common Shares
were purchased. Such notice shall specify the date of such
disposition or other transfer and the amount realized, in cash,
other property, assumption of indebtedness, or other
consideration, by the Participant in such disposition or other
transfer. Notwithstanding anything herein to the contrary, no
Participant shall be permitted to dispose of or transfer any
Common Shares purchased pursuant to an option hereunder prior to
the date that is 12 months following the date upon which
such Common Shares were so purchased. The Administrator may
provide, in its sole discretion, that the Common Shares
purchased pursuant to an option hereunder shall be held in book
entry form, rather than delivered to the Participant, through
the expiration of such
12-month
period. If certificates representing the Common Shares are
registered in the name of the Participant, the Administrator may
require that such certificates bear an appropriate legend
referring to the terms, conditions and restrictions applicable
to such Common Shares and that the Company retain physical
possession of the certificates.
28. Governing Law. Subject
to any applicable provisions of United States federal law
(including, without limitation, Section 423(b) of the
Code), the validity and enforceability of this Plan shall be
governed by and construed in accordance with the laws of the
State of New York, without regard to otherwise governing
principles of conflicts of law.
C-9
APPENDIX
D
Second
Amended and Restated
BYE-LAWS
of
ALLIED WORLD ASSURANCE COMPANY HOLDINGS, LTD
(Effective as of
[ ],
2008)
Table
of Contents
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Bye-Law
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Page
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1.
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Interpretation
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D-1
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2.
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Board of Directors
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D-4
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3.
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Management of the Company
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D-4
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4.
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Power to appoint managing director or chief executive officer
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D-5
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5.
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Power to appoint manager
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D-5
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6.
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Power to authorise specific actions
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D-5
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7.
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Power to appoint attorney
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D-5
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8.
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Power to delegate to a committee
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D-5
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9.
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Power in respect of employees
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D-5
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10.
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Power to borrow and charge property
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D-5
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11.
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Exercise of power to purchase shares of or discontinue the
Company
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D-5
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12.
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Election of Directors
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D-6
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13.
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Defects in appointment of Directors
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D-6
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14.
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Alternate Directors
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D-7
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15.
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Removal of Directors
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D-7
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16.
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Vacancies on the Board
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D-7
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17.
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Notice of meetings of the Board
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D-7
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18.
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Quorum at meetings of the Board
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D-8
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19.
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Meetings of the Board
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D-8
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20.
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Chairman of meetings
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D-8
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21.
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Unanimous written resolutions
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D-8
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22.
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Contracts and disclosure of Directors interests
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D-8
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23.
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Remuneration of Directors
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D-8
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24.
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Officers of the Company
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D-9
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25.
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Appointment of Officers
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D-9
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26.
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Remuneration of Officers
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D-9
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27.
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Duties of Officers
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D-9
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28.
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Register of Directors and Officers
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D-9
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29.
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Obligations of Board to keep minutes
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D-9
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30.
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Indemnification of Directors and Officers of the Company
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D-9
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31.
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Waiver of claim by Member
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D-10
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32.
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Notice of annual general meeting
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D-10
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33.
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Notice of special general meeting
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D-10
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34.
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Advance notice of Member nominees for Director and other Member
proposals
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D-10
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35.
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Accidental omission of notice of general meeting
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D-12
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36.
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Meeting called on requisition of Members
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D-12
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37.
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Short notice
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D-12
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38.
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Postponement of meetings
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D-12
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39.
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Quorum for general meeting
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D-12
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40.
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Adjournment of meetings
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D-12
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41.
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Attendance at meetings
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D-12
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42.
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Attendance of Directors
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D-12
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43.
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Voting at meetings
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D-13
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i
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Bye-Law
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Page
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44.
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Voting on show of hands
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D-13
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45.
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Decision of chairman
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D-13
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46.
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Demand for a poll
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D-13
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47.
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Seniority of joint holders voting
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D-14
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48.
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Instrument of proxy
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D-14
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49.
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Representation of corporations at meetings
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D-14
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50.
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Rights of shares
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D-14
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51.
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Limitation on voting rights of Controlled Shares
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D-16
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52.
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Power to issue shares
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D-17
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53.
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Variation of rights, alteration of share capital and purchase of
shares of the Company
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D-18
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54.
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Conversion and transfer of Non-Voting Shares
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D-18
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55.
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Registered holder of shares
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D-19
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56.
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Death of a joint holder
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D-19
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57.
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Share certificates
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D-19
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58.
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Calls on shares
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D-19
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59.
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Forfeiture of shares
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D-20
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60.
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Contents of Register of Members
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D-20
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61.
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Inspection of Register of Members
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D-20
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62.
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Determination of record dates
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D-20
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63.
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Instrument of transfer
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D-20
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64.
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Restriction on transfer
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D-21
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65.
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Transfers by joint holders
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D-23
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66.
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Representative of deceased Member
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D-23
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67.
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Registration on death or bankruptcy
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D-23
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68.
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Declaration of dividends by the Board
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36D-23
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69
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Other distributions
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D-23
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70.
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Reserve fund
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D-23
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71.
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Deduction of amounts due to the Company
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D-23
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72.
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Unclaimed dividends
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D-23
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73.
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Interest on dividends
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D-24
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74.
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Issue of bonus shares
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D-24
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75.
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Records of account
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D-24
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76.
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Financial year end
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D-24
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77.
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Financial statements
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D-24
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78.
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Appointment of Auditor
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D-24
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79.
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Remuneration of Auditor
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38D-24
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80.
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Vacation of office of Auditor
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D-25
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81.
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Access to books of the Company
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D-25
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82.
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Report of the Auditor
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D-25
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83.
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Notices to Members of the Company
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D-25
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84.
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Notices to joint Members
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39D-25
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85.
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Service and delivery of notice
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D-25
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86.
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The seal
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D-25
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87.
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Manner in which seal is to be affixed
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D-25
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ii
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Bye-Law
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Page
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88.
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Winding-up/distribution
by liquidator
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D-26
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89.
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Alteration of Bye-laws
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D-26
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90.
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Directors of Bermuda Insurance
SubsidiarySubsidiaries
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D-26
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91.
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Directors of certain
Non-U.S.,
Non-Bermuda
Insurance Subsidiaries
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D-26
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92.
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Bye-laws or articles of association of certain
insurance subsidiaries
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42D-27
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93. Directors of subsidiaries of Bermuda
Insurance Subsidiary
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27
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Schedule Form A (Bye-law 59)
Schedule Form B (Bye-law 63)
Schedule Form C (Bye-law 67)
iii
INTERPRETATION
1. Interpretation
(1) In these Bye-laws the following words and expressions
shall, where not inconsistent with the context, have the
following meanings respectively:
(a) Act means the Companies Act 1981 of
Bermuda, as amended from time to time;
(b) Affiliate means, with respect to any
Person, any other Person that directly or indirectly through one
or more intermediaries, controls, or is controlled by, or is
under common control with, such Person. For the purposes of this
definition, the term control means the power to
direct the management of an entity, directly or indirectly,
whether through the ownership of voting securities, by contract
or otherwise, and the terms controlled and
controlling have meanings correlative to the
foregoing;
(c) Auditor includes any individual or
partnership appointed as auditor of the Company in accordance
with Bye-law 78;
(d)
Bermuda Insurance Subsidiary means
Allied World Assurance Company, Ltd
, and any successor
thereto
and
any other insurance company incorporated and organized under the
laws of Bermuda that is a subsidiary of the Company;
(e) Board means the Board of Directors
appointed or elected pursuant to these Bye-laws and acting by
resolution in accordance with the Act and these Bye-laws or the
Directors present at a meeting of Directors at which there is a
quorum;
(f) Business Day means any day, other
than a Saturday, a Sunday or any day on which banks in Hamilton,
Bermuda or The City of New York, United States are authorized or
obligated by law or executive order to close;
(g) Cause shall be deemed to exist only
if (i) the Director whose removal is proposed has been
charged with or convicted of an indictable offence or a felony
by a court of competent jurisdiction or has been adjudged by a
court of competent jurisdiction to be liable for fraud or
dishonesty in the performance of such Directors duty to
the Company or (ii) the Director whose removal is proposed
suffers from any physical or mental disability that
substantially impairs the ability of such Director to function
in that capacity;
(h) Code means the United States
Internal Revenue Code of 1986, as amended from time to time, or
any federal statute from time to time in effect that has
replaced such statute, and any reference in these Bye-laws to a
provision of the Code or a rule or regulation promulgated
thereunder means such provision, rule or regulation, as amended
from time to time, or any provision of a federal law, or any
federal rule or regulation, from time to time in effect that has
replaced such provision, rule or regulation;
(i) Common Shares means the common
shares, par value U.S.$0.03 per share, of the Company and
includes a fraction of a Common Share;
(j) Company means the company for which
these Bye-laws are approved and confirmed;
(k) Controlled Shares of any Person
means all shares of the Company, of all classes entitled to vote
or to elect, appoint or replace Directors, owned by such Person,
whether:
(i) directly,
(ii) with respect to Persons who are U.S. Persons, by
application of the attribution and constructive ownership rules
of Sections 958(a) and 958(b) of the Code or
(iii) beneficially owned directly or indirectly within the
meaning of Section 13(d)(3) of the Exchange Act and the
rules and regulations thereunder other than Excluded Controlled
Shares;
(l) debenture means debenture stock,
mortgages, bonds and any other such debt securities of the
Company whether constituting a charge on the assets of the
Company or not;
(m) Director means a director of the
Company;
D-1
(n) Eligible Subsidiary Director has the
meaning ascribed thereto in Bye-law 91(1);
(o) Exchange Act means the United States
Securities Exchange Act of 1934, as amended from time to time,
or any federal statute from time to time in effect that has
replaced such statute, and any reference in these Bye-laws to a
provision of the Exchange Act or a rule or regulation
promulgated thereunder means such provision, rule or regulation,
as amended from time to time, or any provision of a federal law,
or any federal rule or regulation, from time to time in effect
that has replaced such provision, rule or regulation;
(p) Excluded Controlled Shares in
reference to any Person means Controlled Shares of such Person
that would not be Controlled Shares of such Person but for
clause (iii) of the definition of Controlled Shares,
provided that (i) such Person is registered under
the United States federal securities laws as a broker, dealer or
investment adviser; (ii) such Person is the beneficial
owner of such shares solely because it has discretionary
authority to vote or dispose of such shares in a fiduciary
capacity on behalf of its client who is also a beneficial owner
of such shares; (iii) the voting rights carried by such
shares are not being exercised (and the client is informed that
they are not being exercised) by such broker, dealer or adviser
and are being exercised (if they are exercised at all) by such
client; and (iv) the Person would meet the eligibility test
for the filing of Schedule 13G contained in
Rule 13d-1(b)(1)
under the Exchange Act with respect to the entirety of its
common share ownership (without regard to whether such Person
actually has any filing obligations under Section 13(d) of
the Exchange Act), and provided, further, that the
Company shall have received such assurances as it may request
confirming that such shares are Excluded Controlled Shares. The
Company may assume that the Controlled Shares of each Member do
not include any Excluded Controlled Shares unless such Member
otherwise notifies the Company and provides such assurance;
(q) Fair Market Value means, with
respect to a repurchase of any shares of the Company in
accordance with these Bye-laws, (i) if such shares are
listed on a securities exchange (or quoted in a securities
quotation system), the average closing sale price of such shares
on such exchange (or in such quotation system), or, if such
shares are listed on (or quoted in) more than one exchange (or
quotation system), the average closing sale price of the shares
on the principal securities exchange (or quotation system) on
which such shares are then traded, or, if such shares are not
then listed on a securities exchange (or quotation system) but
are traded in the over-the-counter market, the average of the
latest bid and asked quotations for such shares in such market,
in each case for the last five trading days immediately
preceding the day on which the Repurchase Notice of such shares
is sent pursuant to these Bye-laws; or (ii) if no such
closing sales prices or quotations are available because such
shares are not publicly traded or otherwise, the fair value of
such shares as determined by one independent nationally
recognized investment banking firm chosen by the Company and
reasonably satisfactory to the Member whose shares are to be so
repurchased by the Company, provided that the calculation
of the Fair Market Value of the shares made by such appointed
investment banking firm (i) shall not include any discount
relating to the absence of a public trading market for, or any
transfer restrictions on, such shares, and (ii) such
calculation shall be final and the fees and expenses stemming
from such calculation shall be borne by the Company or its
assignee, as the case may be;
(r) Formula has the meaning ascribed
thereto in Bye-law 51(1);
(s) Founder means any of the Industry
Founders or GS Capital Partners 2000, L.P., GS Capital Partners
2000 Offshore, L.P., GS Capital Partners 2000 GmbH &
Co. Beteiligungs KG, GS Capital Partners 2000 Employee Fund,
L.P., Stone Street Fund 2000, L.P. and Bridge Street
Special Opportunities Fund 2000, L.P.;
(t) Founder Back-Attribution Convention
has the meaning ascribed thereto in Bye-law 64(7);
(u) Indemnitees has the meaning ascribed
thereto in Bye-law 30;
(v) Industry Founders means American
International Group, Inc. and The Chubb Corporation;
(w) Member means the Person registered
in the Register of Members as the holder of shares in the
Company and, when two or more Persons are so registered as joint
holders of shares, means the Person whose name stands first in
the Register of Members as one of such joint holders or all of
such Persons as the context so requires;
(x) Member Notice has the meaning
ascribed thereto in Bye-law 34(2);
D-2
(y)
Non-U.S.,
Direct Subsidiary has the meaning ascribed thereto
in Bye-law 91(1);,
Non-Bermuda
Insurance
Subsidiary
means any insurance company incorporated and organized under the
laws of any
non-U.S. jurisdiction
other than Bermuda that is a subsidiary of the
Company;
(z) Non-U.S. Indirect Subsidiary has
the meaning ascribed thereto in Bye-law 91(1);
(z) (aa)Non-Voting
Shares has the meaning ascribed thereto in Bye-law
50(1);
(aa) (bb)notice means
written notice as further defined in these Bye-laws unless
otherwise specifically stated;
(bb) (cc)Offending
Member has the meaning ascribed thereto in Bye-law
64(9);
(cc) (dd)Officer means
any individual appointed by the Board to hold an office in the
Company;
(dd) (ee)Other Meeting
Date has the meaning ascribed thereto in Bye-law 34(2);
(ee) (ff)Ownership
Limits has the meaning ascribed thereto in Bye-law
64(8);
(ff) (gg)percentage of the total
combined voting power of all classes of shares entitled to
vote has the meaning ascribed thereto in
Section 951(b) of the Code and Treasury Regulations
Section 1.951-1(g)(2);
(gg) (hh)Person means
any individual, company, corporation, firm, partnership, limited
liability company, trust or any other business, entity or
person, whether or not recognized as constituting a separate
legal entity;
(hh) (ii)Preference
Shares has the meaning ascribed thereto in Bye-law
50(1);
(ii) (jj)Register of Directors
and Officers means the Register of Directors and
Officers referred to in Bye-law 28;
(jj) (kk)Register of
Members means the Register of Members referred to in
Bye-law 60;
(kk) (ll)Repurchase
Notice has the meaning ascribed thereto in Bye-law
11(3);
(ll) (mm)Repurchase
Price has the meaning ascribed thereto in Bye-law
11(3);
(mm) (nn)Secretary
means the individual appointed to perform any or all the duties
of secretary of the Company and includes any deputy or assistant
secretary;
(nn) (oo)Securities Act
means the United States Securities Act of 1933, as amended from
time to time, or any federal statute from time to time in effect
which has replaced such statute, and any reference in these
Bye-laws to a provision of the Securities Act or a rule or
regulation promulgated thereunder means such provision, rule or
regulation, as amended from time to time, or any provision of a
federal law, or any federal rule or regulation, from time to
time in effect that has replaced such provision, rule or
regulation;
(oo) (pp)share means a
share of any class of shares in the capital of the Company and
includes a fraction of a share;
(pp) (qq)subsidiary,
with respect to any Person, means a company more than fifty
percent (50%) (or, in the case of a wholly-owned subsidiary, one
hundred percent (100%)) of the outstanding voting shares of
which are owned, directly or indirectly, by such Person, or by
one or more other subsidiaries of any such Person, and one or
more other subsidiaries;
(qq) (rr)10%
Shareholder means a Person who owns, in the aggregate,
(i) directly,
(ii) with respect to Persons who are U.S. Persons, by
application of the attribution and constructive ownership rules
of Sections 958(a) and 958(b) of the Code or
(iii) beneficially, directly or indirectly within the
meaning of Section 13(d)(3) of the Exchange Act,
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issued or issuable shares of the Company representing ten
percent (10%) or more of the total combined voting power of all
classes of shares entitled to vote of the Company other than,
with respect to clause (iii), Excluded Controlled Shares;
(rr) (ss) United States
means the United States of America and dependent territories or
any part thereof;
(ss)
(tt) U.S. Person
means (i) an individual who is a citizen or resident of the
United States; (ii) a corporation, limited liability
company or partnership that is, as to the United States, a
domestic corporation, limited liability company or partnership;
(iii) an estate that is subject to United States federal
income tax on its income regardless of its source; and
(iv) a trust if a United States court can exercise primary
supervision over the trusts administration and one or more
United States Persons are authorized to control all substantial
decisions of the trust;
(tt) (uu) Voting Shares
has the meaning ascribed thereto in Bye-law 50(1).
(2) In these Bye-laws, where not inconsistent with the
context:
(a) words denoting the plural number include the singular
number and vice versa;
(b) words denoting the masculine gender, feminine gender or
neuter shall include the masculine gender, feminine gender or
neuter as the case may be;
(c) the word:
(i) may shall be construed as permissive;
(ii) shall shall be construed as imperative;
(d)
the
word insurance shall include
reinsurance;
and
(e) (d) unless otherwise provided herein,
words or expressions defined in the Act shall bear the same
meaning in these Bye-laws.
(3) Expressions referring to writing or written shall,
unless the contrary intention appears, include facsimile,
printing, lithography, photography, electronic mail and other
modes of representing words in a visible form.
(4) Headings used in these Bye-laws are for convenience
only and are not to be used or relied upon in the construction
hereof.
BOARD
OF DIRECTORS
2. Board of Directors
The business of the Company shall be managed and conducted by
the Board.
3. Management of the Company
(1) In managing the business of the Company, the Board may
exercise all such powers of the Company as are not, by statute
or by these Bye-laws, required to be exercised by the Company in
general meeting subject, nevertheless, to these Bye-laws, the
provisions of any statute and to such regulations as may be
prescribed by the Company in general meeting.
(2) No regulation or alteration to these Bye-laws made by
the Company in general meeting shall invalidate any prior act of
the Board which would have been valid if that regulation or
alteration had not been made.
(3) The Board may procure that the Company pays all
expenses incurred in promoting and incorporating the Company.
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4. Power to appoint managing director or chief
executive officer
The Board may from time to time appoint an individual (including
a Director) to act as managing director or chief executive
officer of the Company, and who shall, subject to the control of
the Board, supervise and administer all of the general business
and affairs of the Company.
5. Power to appoint manager
The Board may appoint a Person to act as manager of the
Companys day to day business and may entrust to and confer
upon such manager such powers and duties as it deems appropriate
for the transaction or conduct of such business.
6. Power to authorise specific actions
The Board may from time to time and at any time authorise any
Person to act on behalf of the Company for any specific purpose
and in connection therewith to execute any agreement, document
or instrument on behalf of the Company.
7. Power to appoint attorney
The Board may from time to time and at any time by power of
attorney appoint any Person, whether nominated directly or
indirectly by the Board, to be an attorney of the Company for
such purposes and with such powers, authorities and discretions
(not exceeding those vested in or exercisable by the Board) and
for such period and subject to such conditions as it may think
fit and any such power of attorney may contain such provisions
for the protection and convenience of persons dealing with any
such attorney as the Board may think fit and may also authorise
any such attorney to sub-delegate all or any of the powers,
authorities and discretions so vested in the attorney. Such
attorney may, if so authorised under the seal of the Company,
execute any deed or instrument under such attorneys
personal seal with the same effect as the affixation of the seal
of the Company.
8. Power to delegate to a committee
The Board may appoint one or more Board committees and may
delegate any of its powers (including the power to sub-delegate)
to any such committee. Such committees may consist partly or
entirely of
non-Directors.
All Board committees shall conform to such directions as the
Board shall impose on them. It is further provided that each
member of a Board committee shall have one (1) vote, and
each committee shall have the right as it deems appropriate to
retain outside experts. Each committee may adopt rules for the
conduct of its affairs, including rules governing the adoption
of resolutions by unanimous written consent, and the place,
time, and notice of meetings, as such committee shall consider
advisable and as shall not be inconsistent with these Bye-laws
or with any applicable resolution adopted by the Board. Failing
the adoption of such rules, the meetings and proceedings of any
such committee shall be governed by the provisions of these
Bye-laws regulating the meetings and proceedings of the Board so
far as the same are applicable and are not superseded by
directions of the Board. Each committee shall cause minutes to
be made of all meetings of such committee and of the attendance
thereat and shall cause such minutes and copies of resolutions
adopted by unanimous consent to be promptly inscribed or
incorporated by the Secretary in the Companys minute book.
9. Power in respect of employees
The Board may appoint, suspend or remove any managing director,
manager, officer, secretary, clerk, agent or employee of the
Company and may fix their remuneration and determine their
duties.
10. Power to borrow and charge property
The Board may exercise all the powers of the Company to borrow
money and to mortgage or charge its undertaking, property and
uncalled capital, or any part thereof, and may issue debentures
and other securities whether outright or as security for any
debt, liability or obligation of the Company or any third party.
11. Exercise of power to purchase shares of or
discontinue the Company
(1) The Board may exercise all the powers of the Company to
purchase all or any part of its own shares pursuant to
Section 42A of the Act.
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(2) The Board may exercise all the powers of the Company to
discontinue the Company to a named country or jurisdiction
outside Bermuda pursuant to Section 132G of the Act.
(3) Unilateral Repurchase Right If the Board in
its absolute and unfettered discretion, on behalf of the
Company, determines that share ownership by any Member may
(i) result in adverse regulatory or legal consequences or
(ii) result in, or materially increase the risk of,
material adverse tax consequences, to the Company, any of its
subsidiaries or any of the Members, the Company will have the
option, but not the obligation, to repurchase, in accordance
with Section 42A of the Act, all or part of the shares held
by such Member (to the extent the Board, in the reasonable
exercise of its discretion, determines it is necessary to avoid
or cure such adverse consequences) for immediately available
funds in an amount equal to the Fair Market Value of such shares
on the date the Company sends the Repurchase Notice referred to
below (the Repurchase Price); provided that
the Board will use its best efforts to exercise this option
equally among similarly situated Members (to the extent possible
under the circumstances). In that event, the Company will also
be entitled to assign its right to purchase to a third party or
parties including the other Members. Each Member shall be bound
by the determination by the Company to repurchase or assign its
right to purchase such Members shares and, if so required
by the Company, shall sell the number of shares that the Company
requires it to sell.
In the event that the Company or its assignee(s) determines to
repurchase any such shares in accordance with this Bye-law
11(3), the Company shall provide each Member concerned with
written notice of such determination (a Repurchase
Notice) at least seven (7) calendar days prior to
such repurchase or such shorter period as each such Member may
authorize, specifying the date on which any such shares are to
be repurchased and the Repurchase Price. The Company may revoke
the Repurchase Notice at any time before it (or its assignee(s))
pays for the shares. The Member shall retain the ability,
subject to these Bye-laws, to transfer its shares to a third
party or parties that is not an Affiliate, prior to the closing
of the repurchase. Neither the Company nor its assignee(s) shall
be obliged to give general notice to the Members of any
intention to purchase or the conclusion of any purchase of
shares. Payment of the Repurchase Price by the Company or its
assignee(s) shall be by wire transfer and made at a closing to
be held on the first Business Day that is no less than seven
(7) calendar days after receipt of the Repurchase Notice by
the Member.
(4) Restrictions on repurchases If the Company
repurchases shares, or assigns its repurchase right, pursuant to
this Bye-law 11, it shall do so only in a manner
it
the
Board, in its sole and absolute discretion
, believes would
not result
, upon consummation of such purchase, in a
violation of the Ownership Limits as described in Bye-law
64.in,
or materially increase the risk of, a material adverse
regulatory or tax treatment of the Company, any subsidiary
thereof, or any Member in any jurisdiction.
12. Election of Directors
The Board shall consist of not less than seven
(7) Directors or such number in excess thereof as the Board
may from time to time determine up to a maximum of thirteen
(13) Directors, each having one vote, who shall be elected,
except in the case of vacancy, by the Members holding a
plurality of the votes cast for a resolution approving such
director, at a general meeting in accordance with and subject to
the limitations in these Bye-laws, including, but not limited
to, Bye-law 51. The Directors shall be divided into three
(3) classes as nearly equal as possible (Class I,
Class II and Class III). The initial Class I
Directors shall serve for a term expiring at the annual general
meeting of Members to be held in 2008; the initial Class II
Directors shall serve for a term expiring at the annual general
meeting of Members to be held in 2007; and the initial
Class III Directors shall serve for a term expiring at the
annual general meeting of Members to be held in 2006. At each
annual general meeting of Members, the successor or successors
of the class of Directors shall hold office for a term expiring
at the annual general meeting of Members held in the third year
following the year of their election. The Directors elected to
each class shall hold office until their successors are duly
elected and qualified or until their earlier death,
disqualification, resignation or removal.
13. Defects in appointment of Directors
All acts done bona fide by any meeting of the Board or by a
committee of the Board or by any person acting as a Director
shall, notwithstanding that it be afterwards discovered that
there was some defect in the appointment of any Director or
person acting as aforesaid, or that they or any of them were
disqualified, be as valid as if every person had been duly
appointed and was qualified to be a Director.
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14. Alternate Directors
No Director shall have the right to appoint another person to
act as his alternate director.
15. Removal of Directors
(1) Subject to any provision to the contrary in these
Bye-laws, the Members may, at any special general meeting
convened and held in accordance with these Bye-laws, remove a
Director, but only for Cause, provided that the notice of
any such meeting convened for the purpose of removing a Director
shall contain a statement of the intention so to do and be
served on such Director not less than 14 days before the
meeting and at such meeting such Director shall be entitled to
be heard on the motion for such Directors removal.
(2) A vacancy on the Board created by the removal of a
Director under the provisions of subparagraph (1) of this
Bye-law may be filled by the Members at the meeting at which
such Director is removed and, in the absence of such election or
appointment, the Board may fill any such vacancy in accordance
with Bye-law 16. A Director so appointed shall hold office for
the remainder of the removed Directors term or until such
Directors successor is elected or appointed or such
Directors office is otherwise vacated.
16. Vacancies on the Board
(1) The Board shall have the power from time to time and at
any time to appoint any person as a Director to fill a vacancy
on the Board occurring as the result of the death, disability,
disqualification or resignation of any Director or from an
increase in the size of the Board pursuant to Bye-law 12 or if
such Directors office is otherwise vacated. The Board
shall also have the power from time to time to fill any vacancy
left unfilled at a general meeting. A Director so appointed by
the Board shall hold office for the remainder of the removed
Directors term or until such Directors successor is
elected or appointed or such Directors office is otherwise
vacated.
(2) The Board may act notwithstanding any vacancy in its
number but, if and so long as its number is reduced below the
number fixed by these Bye-laws as the quorum necessary for the
transaction of business at meetings of the Board, the continuing
Directors or Director may act only for the purpose of
(a) summoning a general meeting of the Company or
(b) preserving the assets of the Company.
(3) The office of Director shall be vacated if:
(a) a Director is removed from office pursuant to these
Bye-laws or is prohibited from being a Director by law;
(b) a Director is or becomes bankrupt or makes any
arrangement or composition with his creditors generally;
(c) a Director is or becomes of unsound mind or
dies; or
(d) a Director resigns his or her office by notice in
writing to the Company.
17. Notice of meetings of the Board
(1) The chairman, deputy chairman or any two
(2) Directors may, and the Secretary on the requisition of
the chairman, deputy chairman or any two (2) Directors
shall, at any time summon a meeting of the Board by at least
three (3) Business Days notice to each Director, unless
such Director consents to shorter notice. Attendance at a
meeting of the Board shall constitute consent to short notice.
(2) Notice of a meeting of the Board shall be deemed to be
duly given to a Director if it is given to such Director
verbally in person or by telephone or otherwise communicated or
sent to such Director by registered mail, electronic mail,
courier service, facsimile or other mode of representing words
in a legible and non-transitory form at such Directors
last known address or any other address given by such Director
to the Company for this purpose. If such notice is sent by
electronic mail,
next-day
courier or facsimile, it shall be deemed to have been given the
Business Day following the sending thereof and, if by registered
mail, five (5) Business Days following the sending thereof.
(3) Meetings of the Directors shall be held within Bermuda,
or such other countries as the Board may determine, excluding
the United States.
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18. Quorum at meetings of the Board
The quorum necessary for the transaction of business at a
meeting of the Board shall be a majority of the Directors then
in office, present in person or represented by a duly authorized
representative appointed in accordance with the Act, provided
that at least two Directors are present in person.
19. Meetings of the Board
(1) The Board shall appoint a Chairman and a Deputy
Chairman who shall be Directors. The Board may meet for the
transaction of business, adjourn and otherwise regulate its
meetings as it sees fit.
(2) Subject to Bye-law 17(3), Directors may participate in
any meeting of the Board by means of such telephone, electronic
or other communication facilities as permit all persons
participating in the meeting to communicate with each other
simultaneously and instantaneously, and participation in such a
meeting shall constitute presence in person at such meeting.
(3) Upon any vote of the Directors at a meeting of the
Board, each Director shall have one vote.
(4) A resolution put to a vote at a duly constituted
meeting of the Board at which a quorum is present and acting
throughout shall be carried by the affirmative votes of a
majority of the votes cast and in the case of an equality of
votes, the resolution shall fail.
20. Chairman of meetings
The Chairman shall have the right to act as chairman at all
meetings of the Members and of the Board at which the Chairman
is present or, in the case of meetings of Members, such other
person as the Chairman may designate to act as chairman of the
meeting. In his absence, the Deputy Chairman, if present, shall
have the right to act, or to designate another person to act, as
chairman and in the absence of all of them a chairman shall be
appointed or elected by those present at the meeting and
entitled to vote.
21. Unanimous written resolutions
A resolution in writing signed by all the Directors which may be
in counterparts, shall be as valid as if it had been passed at a
meeting of the Board duly called and constituted, such
resolution to be effective on the date on which and at the place
at which, the last Director signs the resolution.
22. Contracts and disclosure of Directors
interests
(1) Any Director, or any Directors firm, partner or
any company with whom any Director is associated, may act in a
professional capacity for the Company and such Director or such
Directors firm, partner or such company shall be entitled
to remuneration for professional services as if such Director
were not a Director, provided that nothing herein
contained shall authorise a Director or Directors firm,
partner or such company to act as Auditor of the Company.
(2) A Director who is directly or indirectly interested in
a contract or proposed contract or arrangement with the Company
shall declare the nature of such interest as required by the Act.
(3) Following a declaration being made pursuant to this
Bye-law, and unless disqualified by a majority of the Board
present at the relevant Board meeting, a Director may vote in
respect of any contract or proposed contract or arrangement in
which such Director is interested and may be counted in the
quorum at such meeting.
23. Remuneration of Directors
(1) The remuneration (if any) of the Directors shall be
determined by the Board and shall be deemed to accrue from day
to day. The Directors may also be paid all travel, hotel and
other expenses reasonably and properly incurred by them in
attending and returning from meetings of the Board, any
committee appointed by the Board, general meetings of the
Company or in connection with the business of the Company or
their duties as Directors generally.
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(2) A Director may hold any other office or place of profit
under the Company (other than the office of Auditor) in
conjunction with his office of Director for such period and on
such terms as to remuneration and otherwise as the Board may
determine.
OFFICERS
24. Officers of the Company
The Officers of the Company shall include a Secretary, a chief
executive officer and such additional Officers as the Board may
from time to time determine all of whom shall be deemed to be
Officers for the purposes of these Bye-laws.
25. Appointment of Officers
The Secretary, the chief executive officer and additional
Officers, if any, shall be appointed by the Board from time to
time.
26. Remuneration of Officers
The Officers shall receive such remuneration as the Board may
from time to time determine.
27. Duties of Officers
The Officers shall have such powers and perform such duties in
the management, business and affairs of the Company as may be
delegated to them by the Board from time to time.
28. Register of Directors and Officers
The Board shall cause to be kept in one or more books at the
registered office of the Company a Register of Directors and
Officers and shall enter therein the particulars required by the
Act.
MINUTES
29. Obligations of Board to keep minutes
(1) The Board shall cause minutes to be duly entered in
books provided for the purpose:
(a) of all elections and appointments of Officers;
(b) of the names of the Directors present at each meeting
of the Board and of any committee appointed by the
Board; and
(c) of all resolutions and proceedings of general meetings
of the Members, meetings of the Board, and meetings of
committees appointed by the Board.
(2) Minutes prepared in accordance with the Act and these
Bye-laws shall be kept by the Secretary at the registered office
of the Company.
INDEMNITY
30. Indemnification of Directors and Officers
of the Company
The Directors, Secretary and other Officers (such terms to
include, for the purposes of Bye-laws 30 and 31, any person
appointed to any committee by the Board) for the time being
acting in relation to any of the affairs of the Company and the
liquidator or trustees (if any) for the time being acting in
relation to any of the affairs of the Company and every one of
them, and their heirs, executors and administrators, shall be
indemnified and secured harmless out of the assets of the
Company from and against all actions, costs, charges, losses,
damages and expenses which they or any of them, their heirs,
executors or administrators, (together, the
Indemnitees) shall or may incur or sustain by or by
reason of any act done, concurred in or omitted in or about the
execution of their duty, or supposed duty, or in their
respective offices or trusts, and none of them shall be
answerable for the acts, receipts,
D-9
neglects or defaults of the others of them or for joining in any
receipts for the sake of conformity, or for any bankers or other
persons with whom any moneys or effects belonging to the Company
shall or may be lodged or deposited for safe custody, or for
insufficiency or deficiency of any security upon which any
moneys of or belonging to the Company shall be placed out on or
invested, or for any other loss, misfortune or damage which may
happen in the execution of their respective offices or trusts,
or in relation thereto, and the Company shall advance to each
Indemnitee any legal or other expenses such Indemnitee
reasonably incurs in investigating or defending any such claim
upon receipt of notice from the Indemnitee of such expense
having been levied, incurred or being expected to be incurred
(together with a copy of any order, invoice, bill or other
evidence thereof reasonably acceptable to the Company),
provided that this indemnity shall not extend to any
matter in which any of said persons is found, in a final
judgment or decree not subject to appeal, to have committed
fraud or dishonesty.
31. Waiver of claim by Member
Each Member agrees to waive any claim or right of action such
Member might have, whether individually or by or in the right of
the Company, against any Director or Officer on account of any
action taken by such Director or Officer, or the failure of such
Director or Officer to take any action in the performance of his
duties with or for the Company, provided that such waiver
shall not extend to any matter in respect of any fraud or
dishonesty which may attach to such Director or Officer.
MEETINGS
32. Notice of annual general meeting
An annual general meeting of the Company shall be held in each
year on such date and at such time and place as the Chairman or
the Board shall appoint. At least ten (10) days
notice of such meeting shall be given to each Member stating the
date, place and time at which the meeting is to be held, that
the election of Directors will take place thereat, and as far as
practicable, the other business to be conducted at the meeting.
33. Notice of special general meeting
The Chairman or any two (2) Directors or any Director and
the Secretary or the Board may convene a special general meeting
of the Company whenever in their judgement such a meeting is
necessary, upon not less than ten (10) days notice
which shall state the date, time, place and the general nature
of the business to be considered at the meeting.
34. Advance notice of Member nominees for
Director and other Member proposals
(1) The matters to be considered and brought before any
annual or special general meeting of Members of the Company
shall be limited to only such matters, including the nomination
and election of directors, as shall be brought properly before
such general meeting in compliance with the Act or procedures
set forth in this Bye-law 34.
(2) For any matter to be properly brought before any annual
general meeting of Members, the matter must be
(i) specified in the notice of annual general meeting given
by or at the direction of the Board, (ii) otherwise brought
before the annual general meeting by or at the direction of the
Board or (iii) brought before the annual general meeting in
the manner specified in this Bye-law 34(2) by a Member of
record. In addition to any other requirements under applicable
law, the Memorandum of Association of the Company and these
Bye-laws, persons nominated by Members for election as directors
of the Company and any other proposals by Members shall be
properly brought before the annual general meeting only if
notice in the manner contemplated hereby of any such matter to
be presented by a Member at such annual general meeting of
Members (the Member Notice) is delivered to the
Secretary of the Company at the principal executive office of
the Company not less than 90 nor more than 120 days prior
to the first anniversary date of the annual general meeting for
the preceding year; provided, however, if and only if the annual
general meeting is not scheduled to be held within a period that
commences 30 days before such anniversary date and ends
30 days after such anniversary date (an annual general
meeting date outside such period being referred to herein as an
Other Meeting Date), such Member Notice shall be
given in the manner provided herein by the later of the close of
business on (i) the date 90 days prior to such Other
Meeting Date or (ii) the tenth day following the date such
Other Meeting Date is first publicly announced or disclosed. Any
Member entitled to nominate any person or persons (as the case
may be) for election as a director or directors of the Company
shall
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deliver, as part of such Member Notice, a statement in writing
setting forth the name of the person or persons to be nominated,
the number and class of all shares of the Company owned of
record and beneficially by each such person, as reported to such
Member by such nominee(s), the information regarding each such
person required by paragraphs (a), (e) and (f) of
Item 401 of
Regulation S-K
adopted by the Securities and Exchange Commission (or the
corresponding provisions of any regulation subsequently adopted
by the Securities and Exchange Commission applicable to the
Company), each such persons signed consent to serve as a
director of the Company if elected, such Members name and
address and the number and class of all shares of the Company
owned of record and beneficially by such Member. Any Member who
gives a Member Notice of any matter proposed to be brought
before the annual general meeting (not involving nominees for
director) shall deliver, as part of such Member Notice, the text
of the proposal to be presented (including the text of any
resolutions to be proposed for consideration by shareholders)
and a brief written statement of the reasons why such Member
favors the proposal and setting forth such Members name
and address, the number and class of all shares of the Company
owned of record and beneficially by such Member and, if
applicable, any material interest of such Member in the matter
proposed (other than as a Member). As used herein, shares
beneficially owned shall mean all shares which such
person is deemed to beneficially own pursuant to
Rules 13d-3
and 13d-5
under the Exchange Act. The Company may require any proposed
nominee to furnish such other information as it may reasonably
require to determine whether the nominee would be considered
independent under the various rules and standards
applicable to the Company.
Notwithstanding anything in this Bye-law 34(2) to the contrary,
in the event that the number of directors to be elected to the
Board of the Company is increased and either all of the nominees
for director or the size of the increased Board is not publicly
announced or disclosed by the Company at least 100 days
prior to the first anniversary of the preceding years
annual general meeting, a Member Notice shall also be considered
timely hereunder, but only with respect to nominees for any new
positions created by such increase, if it shall be delivered to
the Secretary of the Company at the principal executive office
of the Company not later than the close of business on the tenth
day following the first date all of such nominees or the size of
the increased Board shall have been publicly announced or
disclosed.
(3) Only such matters shall be properly brought before a
special general meeting of Members as shall have been brought
before the special general meeting pursuant to the
Companys notice of special general meeting. In the event
the Company calls a special general meeting of Members for the
purpose of electing one or more directors to the Board, not at
the request of any Members acting pursuant to Bye-law 36 of
these Bye-laws, any Member may nominate a person or persons (as
the case may be), for election to such position(s) as specified
in the Companys notice of special general meeting, if the
Member Notice required by Bye-law 34(2) hereof shall be
delivered to the Secretary of the Company at the principal
executive office of the Company not later than the close of
business on the tenth day following the day on which the date of
the special general meeting and of the nominees proposed by the
Board to be elected at such special general meeting is publicly
announced or disclosed.
(4) For purposes of this Bye-law 34, a matter shall be
deemed to have been publicly announced or disclosed
if such matter is disclosed in a press release reported by the
Dow Jones News Service, Associated Press or comparable national
news service or in a document publicly filed by the Company with
the Securities and Exchange Commission.
(5) In no event shall the postponement or adjournment of an
annual general meeting for which notice has already been given
or any announcement of such postponement or adjournment,
commence a new period for the giving of notice as provided in
this Bye-law 34. This Bye-law 34 shall not apply to
Members proposals made pursuant to
Rule 14a-8
under the Exchange Act.
(6) The person acting as chairman at any general meeting of
Members, in addition to making any other determinations that may
be appropriate to the conduct of the general meeting, shall have
the power and duty to determine whether notice of nominees and
other matters proposed to be brought before a general meeting
has been duly given in the manner provided in this Bye-law 34
and, if not so given, shall direct and declare at the general
meeting that such nominees and other matters are not properly
before the general meeting and shall not be considered.
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35. Accidental omission of notice of general
meeting
The accidental omission to give notice of a general meeting to,
or the non-receipt of notice of a general meeting by, any Person
entitled to receive notice shall not invalidate the proceedings
at that meeting.
36. Meeting called on requisition of
Members
Notwithstanding anything herein, the Board shall, on the
requisition of Members holding at the date of the deposit of the
requisition not less than one-tenth of such of the
paid-up
share capital of the Company as at the date of the deposit
carries the right to vote at general meetings of the Company,
forthwith proceed to convene a special general meeting of the
Company and the provisions of Section 74 of the Act shall
apply.
37. Short notice
A general meeting of the Company shall, notwithstanding that it
is called by shorter notice than that specified in these
Bye-laws, be deemed to have been properly called if it is so
agreed by (i) all the Members entitled to attend and vote
thereat in the case of an annual general meeting; and
(ii) by a majority in number of the Members having the
right to attend and vote at the meeting, being a majority
together holding not less than ninety-five percent (95%) in
nominal value of the shares giving a right to attend and vote
thereat in the case of a special general meeting.
38. Postponement of meetings
The Secretary may postpone any general meeting called in
accordance with the provisions of these Bye-laws (other than a
meeting requisitioned under Bye-law 36), provided that notice of
postponement is given to each Member before the time for such
meeting. Fresh notice of the date, time and place for the
postponed meeting shall be given to each Member in accordance
with the provisions of these Bye-laws.
39. Quorum for general meeting
At any general meeting of the Company two or more persons
present in person and representing in person or by proxy in
excess of fifty percent (50%) of the total issued and
outstanding Voting Shares throughout the meeting shall form a
quorum for the transaction of business; provided, that if
the Company shall at any time have only one Member, one Member
present in person or by proxy shall constitute a quorum. If
within half an hour from the time appointed for the meeting a
quorum is not present, the meeting shall stand adjourned to the
same day two (2) weeks later, at the same time and place or
to such other day, time or place as the chairman of the meeting
or failing him the Secretary may determine. Unless the meeting
is adjourned to a specific date and time, fresh notice of the
date, time and place for the resumption of the adjourned meeting
shall be given to each Member in accordance with the provisions
of these Bye-laws.
40. Adjournment of meetings
The chairman of a general meeting may, with the consent of the
Members at any general meeting at which a quorum is present (and
shall if so directed), adjourn the meeting. Unless the meeting
is adjourned to a specific date and time, fresh notice of the
date, time and place for the resumption of the adjourned meeting
shall be given to each Member in accordance with the provisions
of these Bye-laws.
41. Attendance at meetings
Members or their duly appointed proxies may participate in any
general meeting solely by means of their physical attendance at
the meetings, and participation by telephone, electronic or
other communications facilities shall not be permitted.
42. Attendance of Directors
The Directors of the Company shall be entitled to receive notice
of and to attend and be heard at any general meeting.
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43. Voting at meetings
(1) Subject to the provisions of the Act and these
Bye-laws, any question proposed for the consideration of the
Members at any general meeting shall be decided by the
affirmative votes of a majority of the votes cast in accordance
with the provisions of these Bye-laws and in the case of an
equality of votes the resolution shall fail.
(2) A resolution put to a vote at any general meeting or
other meeting of Members as may be required by the Act to
amalgamate the Company with any Person in accordance with the
Act shall be decided by the affirmative votes of a majority of
the votes cast at any such meeting in accordance with the
provisions of these Bye-laws and in the case of an equality of
votes such resolution shall fail.
(3) No Member shall be entitled to vote at any general
meeting unless such Member has paid all the calls on all shares
held by such Member.
44. Voting on show of hands
At any general meeting a resolution put to the vote of the
meeting shall, in the first instance, be voted upon by a show of
hands and, subject to any rights or restrictions for the time
being lawfully attached to any class of shares and subject to
the provisions of these Bye-laws, every Member present in person
and every person holding a valid proxy at such meeting shall be
entitled to one vote and shall cast such vote by raising his or
her hand.
45. Decision of chairman
At any general meeting a declaration by the chairman of the
meeting that a question proposed for consideration has, on a
show of hands, been carried, or carried unanimously, or by a
particular majority, or lost, and an entry to that effect in a
book containing the minutes of the proceedings of the Company
shall, subject to the provisions of these Bye-laws, be
conclusive evidence of that fact.
46. Demand for a poll
(1) Notwithstanding the provisions of the immediately
preceding two Bye-laws, at any general meeting of the Company,
in respect of any question proposed for the consideration of the
Members (whether before or on the declaration of the result of a
show of hands as provided for in these Bye-laws), a poll may be
demanded by any of the following persons:
(a) the chairman of such meeting;
(b) at least three (3) Members present in person or
represented by proxy;
(c) any Member or Members present in person or represented
by proxy and holding between them not less than one-tenth of the
total voting rights of all the Members having the right to vote
at such meeting; or
(d) any Member or Members present in person or represented
by proxy holding shares in the Company conferring the right to
vote at such meeting, being shares on which an aggregate sum has
been paid up equal to not less than one-tenth of the total sum
paid up on all such shares conferring such right.
(2) Where, in accordance with the provisions of
subparagraph (1) of this Bye-law, a poll is demanded,
subject to any rights or restrictions for the time being
lawfully attached to any class of shares, including any
limitation on the voting power of any Controlled Shares pursuant
to Bye-law 51, every Person present at such meeting shall have
one vote for each Voting Share (as defined in Bye-law
50) of which such Person is the holder or for which such
person holds a proxy and such vote shall be counted in the
manner set out in subparagraph (4) of this Bye-law and the
result of such poll shall be deemed to be the resolution of the
meeting at which the poll was demanded and shall replace any
previous resolution upon the same matter which has been the
subject of a show of hands.
(3) A poll demanded in accordance with the provisions of
subparagraph (1) of this Bye-law, for the purpose of
electing a chairman of the meeting or on a question of
adjournment, shall be taken forthwith and a poll demanded on any
other question shall be taken in such manner and at such time
and place as the chairman of the meeting may direct and any
business other than that upon which a poll has been demanded may
be proceeded with pending the taking of the poll.
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