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As filed with the U.S. Securities and
Exchange Commission on August 10, 2011
Registration
No. 333-175398
UNITED STATES SECURITIES AND
EXCHANGE COMMISSION
Washington, D.C.
20549
Amendment No. 2
to
Form S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
Allied World Assurance Company
Holdings, AG
(Exact name of registrant as
specified in its charter)
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Switzerland
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6331
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98-0681223
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(State or Other Jurisdiction of
Incorporation or Organization)
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(Primary Standard Industrial
Classification Code Number)
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(I.R.S. Employer
Identification No.)
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Lindenstrasse 8, 6340
Baar
Zug, Switzerland
41-41-768-1080
(Address, including ZIP Code,
and Telephone Number, including Area Code, of Registrants
Principal Executive Offices)
CT Corporation System
111 Eighth Avenue, 13th
Floor
New York, New York
10011
(212) 894-8940
(Name, Address, including ZIP
Code, and Telephone Number, including Area Code, of Agent for
Service)
Copies to:
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Steven A. Seidman, Esq.
Jeffrey S. Hochman, Esq.
Willkie Farr & Gallagher LLP
787 Seventh Avenue
New York, NY 10019
(212) 728-8000
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Wesley D. Dupont, Esq.
Allied World Assurance Company Holdings, AG
Lindenstrasse 8
6340 Baar
Zug, Switzerland
(441) 278-5400
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Gary A. Schwartz, Esq.
Transatlantic Holdings, Inc.
80 Pine Street
New York, NY 10005
(212) 365-2200
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Lois Herzeca, Esq.
Gibson, Dunn & Crutcher LLP
200 Park Avenue
New York, NY 10166
(212) 351-4000
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Approximate date of commencement of proposed sale of the
securities to the public: As soon as practicable
after this Registration Statement becomes effective and upon
completion of the merger described in the enclosed joint proxy
statement/prospectus.
If the securities being registered on this form are being
offered in connection with the formation of a holding company
and there is compliance with General Instruction G, check the
following
box. o
If this Form is filed to register additional securities for an
offering pursuant to Rule 462(b) under the Securities Act, check
the following box and list the Securities Act registration
statement number of the earlier effective registration statement
for the same
offering. o
If this Form is a post-effective amendment filed pursuant to
Rule 462(d) under the Securities Act, check the following
box and list the Securities Act registration statement number of
the earlier effective registration statement for the same
offering. o
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated
filer, or a smaller reporting company. See the definitions of
large accelerated filer, accelerated
filer and smaller reporting company in Rule
12b-2 of the
Exchange Act. (Check one):
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Large
accelerated
filer þ
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Accelerated
filer o
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Non-accelerated
filer o
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Smaller reporting
company o
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(Do not check if a smaller
reporting company)
If applicable, place an X in the box to designate the
appropriate rule provision relied upon in conducting this
transaction:
Exchange Act Rule 13e-4(i) (Cross-Border Issuer Tender
Offer) o
Exchange Act Rule 14d-1(d) (Cross-Border Third-Party Tender
Offer) o
CALCULATION OF REGISTRATION
FEE
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Proposed Maximum
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Proposed Maximum
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Amount of
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Title of Each Class of
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Amount
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Offering
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Aggregate
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Registration
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Securities to be Registered
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to be Registered
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Price per Share
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Offering Price
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Fee
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Common Shares
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57,016,384(1)
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N/A
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$3,172,184,251.20(2)
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$368,290.59(3)(4)
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(1)
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Represents the estimated maximum number of the Registrants
common shares to be issued pursuant to the merger agreement
described herein. The number of common shares is based on the
number of shares of Transatlantic Holdings, Inc.
(Transatlantic) common stock (Transatlantic
common stock) outstanding as of July 5, 2011 and
potentially issuable pursuant to Transatlantic stock options and
stock-based awards prior to closing.
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(2)
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Estimated solely for purposes of calculating the registration
fee required by Section 6(b) of the Securities Act and
calculated pursuant to Rules 457(f)(1) and 457(c) under the
Securities Act. The proposed maximum aggregate offering price of
the Registrants common shares was calculated based upon
the market value of shares of Transatlantic common stock (the
securities to be cancelled in the merger) in accordance with
Rule 457(c) under the Securities Act as follows: the
product of (a) $48.96, the average of the high and low prices
per share of Transatlantic common stock on July 5, 2011, as
quoted on the New York Stock Exchange, multiplied by
(b) 64,791,345, the estimated number of shares of
Transatlantic common stock outstanding as of July 5, 2011
and potentially issuable pursuant to Transatlantic options and
stock-based awards prior to closing.
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(3)
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Determined in accordance with Section 6(b) of the
Securities Act at a rate equal to $116.10 per $1,000,000 of the
proposed maximum aggregate offering price.
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(4)
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Previously paid.
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The Registrant hereby amends this Registration Statement on
such date or dates as may be necessary to delay its effective
date until the Registrant shall file a further amendment which
specifically states that this Registration Statement shall
thereafter become effective in accordance with Section 8(a)
of the Securities Act, or until the Registration Statement shall
become effective on such dates as the Securities and Exchange
Commission, acting pursuant to said Section 8(a), may
determine.
Information
contained herein is subject to completion or amendment. A
registration statement relating to these securities has been
filed with the Securities and Exchange Commission. These
securities may not be sold nor may offers to buy be accepted
prior to the time the registration statement becomes effective.
This joint proxy statement/prospectus shall not constitute an
offer to sell or the solicitation of an offer to buy, nor shall
there be any sale of such securities, in any jurisdiction in
which such offer, solicitation or sale would be unlawful prior
to appropriate registration or qualification under the
securities laws of such jurisdiction.
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PRELIMINARY SUBJECT
TO COMPLETION DATED AUGUST 10, 2011
PROPOSED MERGER YOUR VOTE IS VERY IMPORTANT
Allied World Assurance Company Holdings, AG (Allied
World) and Transatlantic Holdings, Inc.
(Transatlantic) have agreed to a merger of
equals business combination of the two companies pursuant
to the terms of an Agreement and Plan of Merger, dated as of
June 12, 2011 (the merger agreement). Pursuant
to the terms of the merger agreement, GO Sub, LLC, a
wholly-owned subsidiary of Allied World (Merger
Sub), will merge with and into Transatlantic (the
merger), with Transatlantic surviving as a
wholly-owned subsidiary of Allied World. Upon completion of the
merger, Allied World will be the parent company of Transatlantic
and Allied Worlds name will be changed to
TransAllied Group Holdings, AG.
Upon completion of the merger, Transatlantic stockholders will
be entitled to receive 0.88 registered shares
(Namenaktien) of Allied World (Allied World
shares) for each share of Transatlantic common stock, par
value $1.00 per share (Transatlantic common stock),
that they own immediately prior to the effective time of the
merger (the exchange ratio), together with cash in
lieu of Allied World fractional shares. This exchange ratio is
fixed and will not be adjusted to reflect stock price changes
prior to the closing of the merger. Based on the closing price
of Allied World shares on the New York Stock Exchange, Inc. (the
NYSE) on June 10, 2011, the last trading day
before public announcement of the merger, the exchange ratio
represented approximately $51.10 in value for each share of
Transatlantic common stock. Based on the closing price of Allied
World shares on the NYSE
on ,
2011, the latest practicable trading day before the date of this
joint proxy statement/prospectus, the exchange ratio represented
approximately $ in value for each
share of Transatlantic common stock. Allied World shareholders
will continue to own their existing Allied World shares after
the merger. Allied World shares are currently traded on the NYSE
under the symbol AWH, and Transatlantic common stock
is currently traded on the NYSE under the symbol
TRH. We urge you to obtain current market
quotations of Allied World shares and Transatlantic common
stock.
Based on the estimated number of Allied World shares and
Transatlantic common stock that will be outstanding immediately
prior to the closing of the merger, we estimate that, on a fully
diluted basis, upon such closing, former Allied World
shareholders will own approximately 42% of the combined company
and former Transatlantic stockholders will own approximately 58%
of the combined company.
Allied World and Transatlantic will each hold a meeting of their
respective shareholders (the Special Shareholder
Meetings) in connection with the merger. At the
extraordinary general meeting of Allied World shareholders, (the
Allied World Special Shareholder Meeting), Allied
World shareholders will be asked to vote on proposals to
increase the ordinary share capital, conditional share capital
and authorized share capital of Allied World, a proposal to
approve the issuance of Allied World shares to Transatlantic
stockholders, a proposal to amend the Allied World Articles of
Association to change Allied Worlds name to
TransAllied Group Holdings, AG, a proposal to elect
directors to the combined companys board of directors upon
completion of the merger, and certain other related proposals.
At the special meeting of Transatlantic stockholders (the
Transatlantic Special Shareholder Meeting),
Transatlantic stockholders will be asked to vote on the adoption
of the merger agreement and certain other related proposals.
We cannot complete the merger unless the holders of each
companys shares approve the proposals related to the
merger. Your vote is very important, regardless of the number
of shares you own. Whether or not you expect to attend either
Special Shareholder Meeting in person, please submit a proxy to
vote your shares as promptly as possible so that your shares may
be represented and voted at the Allied World or Transatlantic
Special Shareholder Meeting, as applicable.
The Allied World board of directors has unanimously approved
the merger agreement and determined that the merger agreement
and the transactions contemplated thereby are in the best
interests of Allied World. The Allied World board of directors
unanimously recommends that the Allied World shareholders vote
(i) FOR the proposals to increase the ordinary
share capital, (ii) FOR the
proposal to issue shares of Allied World in the merger,
(iii) FOR the proposal to amend Allied
Worlds Articles of Association to change the
companys name, (iv) FOR the proposal to
elect directors to the combined companys board of
directors, (v) FOR the proposal to effect a
capital reduction to allow for the payment of a dividend to the
combined companys shareholders after the completion of the
merger and (vi) FOR the proposal to approve the
fourth amendment and restatement of the Allied World Third
Amended and Restated 2004 Stock Incentive Plan.
The Transatlantic board of directors has unanimously approved
the merger agreement and determined that the merger agreement
and the transactions contemplated thereby are in the best
interests of Transatlantic and its stockholders. The
Transatlantic board of directors unanimously recommends that
Transatlantic stockholders vote (i) FOR the
proposal to adopt the merger agreement,
(ii) FOR the proposal to approve adjournment of
the Transatlantic Special Shareholder Meeting, if necessary or
appropriate, to solicit additional proxies and
(iii) FOR the proposal to approve, on an
advisory (non-binding) basis, the compensation that may be paid
or become payable to Transatlantics named executive
officers in connection with the merger and the agreements and
understandings pursuant to which such compensation may be paid
or become payable.
The obligations of Allied World and Transatlantic to complete
the merger are subject to the satisfaction or waiver of several
conditions. The accompanying joint proxy statement/prospectus
contains detailed information about Allied World, Transatlantic,
the meetings, the merger agreement and the merger. You should
read this joint proxy statement/prospectus carefully and in its
entirety before voting, including the section entitled
Risk Factors beginning on page 22.
We look forward to the successful combination of Allied World
and Transatlantic.
Sincerely,
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Scott A. Carmilani
Chairman, President and Chief Executive Officer
Allied World Assurance Company Holdings, AG
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Richard S. Press
Chairman of the Board of Directors
Transatlantic Holdings, Inc.
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Neither the Securities and Exchange Commission nor any state
securities commission has approved or disapproved of the
securities to be issued under this joint proxy
statement/prospectus or determined if this joint proxy
statement/prospectus is truthful or complete. Any representation
to the contrary is a criminal offense.
This joint proxy statement/prospectus is
dated ,
2011 and is first being mailed to the holders of shares of
Allied World and Transatlantic on or
about ,
2011.
ALLIED WORLD ASSURANCE COMPANY
HOLDINGS, AG
Lindenstrasse 8, 6340 Baar
Zug, Switzerland
NOTICE OF SPECIAL SHAREHOLDER
MEETING
TO BE HELD
ON ,
2011
August , 2011
To the Shareholders of Allied World Assurance Company Holdings,
AG:
We are pleased to invite you to attend the extraordinary general
meeting of shareholders of Allied World Assurance Company
Holdings, AG (Allied World), a Swiss corporation,
which will be held at Allied Worlds corporate
headquarters, Lindenstrasse 8, 6340 Baar, Zug, Switzerland,
on ,
2011, at [2:00] p.m. local time, for the following purposes
(the Allied World Special Shareholder Meeting):
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to consider and vote on the proposal to increase Allied
Worlds ordinary share capital pursuant to
article 3a(a) of the Articles of Association of Allied
World, a copy of which is included as Annex D to the joint
proxy statement/prospectus of which this notice forms a part
(the Allied World Articles), by
CHF (equaling
USD )
to
CHF (equaling
USD )
by the issuance
of
Allied World registered shares (Namenaktien)
(Allied World shares) to Transatlantic Holdings,
Inc. (Transatlantic) stockholders pursuant to, and
only in connection with, the merger as contemplated by the
Agreement and Plan of Merger, dated as of June 12, 2011, as
it may be amended from time to time, by and among Allied World,
Transatlantic and GO Sub, LLC, a Delaware limited liability
company and a wholly-owned subsidiary of Allied World (the
merger agreement), a copy of which is included as
Annex A to the joint proxy statement/prospectus of which
this notice forms a part, including the exclusion of all
preferential subscription rights to which Allied World
shareholders may be entitled; the contributions for the new
registered shares are paid by converting existing reserves
(Kapitalreserven) into share capital;
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to consider and vote on the proposal to increase Allied
Worlds conditional share capital pursuant to
article 5(a) of the Allied World Articles by
CHF (equaling
USD )
to
CHF
(equaling
USD ),
only in connection with the merger;
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to consider and vote on the proposal to increase Allied
Worlds authorized share capital pursuant to
article 6(a) of the Allied World Articles by
CHF (equaling
USD )
to
CHF
(equaling
USD ),
only in connection with the merger;
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to consider and vote on the proposal to issue Allied World
shares to Transatlantic stockholders pursuant to the merger and
as contemplated by the merger agreement as required by New York
Stock Exchange (NYSE) rules;
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to consider and vote on the proposal to amend article 1 of
the Allied World Articles to change Allied Worlds name to
TransAllied Group Holdings, AG
(TransAllied) immediately following, and conditioned
upon, the completion of the merger; and
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to elect (x) three Class II directors to hold office
commencing upon the completion of the merger and ending upon
TransAllieds Annual Shareholder Meeting in 2012,
(y) four Class III directors to hold office commencing
upon the completion of the merger and ending upon
TransAllieds Annual Shareholder Meeting in 2013 and
(z) four Class I directors to hold office commencing
upon the completion of the merger and ending upon
TransAllieds Annual Shareholder Meeting in 2014.
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Completion of the merger is conditioned on, among other things,
approval of each of the proposals described above.
In addition, there are two additional proposals, the approval of
the second proposal is conditioned upon the approval of the
proposals set forth above:
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to consider and vote on the proposal to effect a capital
reduction to allow for the payment of a dividend to the combined
companys shareholders after the completion of the merger;
and
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to consider and vote on the proposal to amend and restate the
Allied World Third Amended and Restated 2004 Stock Incentive
Plan (the Stock Incentive Plan), the form of which
is included as Annex E to the joint proxy
statement/prospectus of which this notice forms a part, to,
among other things, increase the number of shares reserved for
issuance under the Stock Incentive Plan and extend the Stock
Incentive Plans termination date, effective upon the
completion of the merger.
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Allied World will transact no other business at the meeting
except such business as may properly be brought before the
Allied World Special Shareholder Meeting or any adjournment or
postponement thereof. Please refer to the joint proxy
statement/prospectus of which this notice forms a part for
further information with respect to the business to be
transacted at the Allied World Special Shareholder Meeting.
The Allied World board of directors has unanimously approved the
merger agreement and determined that the merger agreement and
the transactions contemplated thereby, including the merger, the
issuance of the Allied World shares to Transatlantic
stockholders pursuant to the merger and the amendment of the
Allied World Articles, are in the best interests of Allied
World. The Allied World board of directors unanimously
recommends that Allied World shareholders vote FOR
each of the proposals set forth above.
The Allied World board of directors has fixed the close of
business on July 22, 2011 as the record date for
determination of Allied World shareholders entitled to receive
notice of, and to vote at, the Allied World Special Shareholder
Meeting or any adjournments or postponements thereof. Only
holders of record of Allied World shares at the close of
business on the record date are entitled to receive notice of,
and to vote at, the Allied World Special Shareholder Meeting.
The approval of each of the proposals to increase the share
capital of Allied World requires the approval of at least
662/3%
of the votes represented at the Allied World Special Shareholder
Meeting and a majority of the nominal value of the Allied World
shares represented at such meeting, where holders of at least
50% of the total outstanding Allied World shares are represented
and voting and who are entitled to vote on such proposal. The
approval of the proposals to issue the Allied World shares
pursuant to the merger and to amend and restate the Stock
Incentive Plan in order to increase the shares reserved for
issuance thereunder requires the affirmative vote of the holders
of a majority of shares entitled to vote on the proposal and
present in person or represented by proxy at the Allied World
Special Shareholder Meeting; provided that the total votes cast
on each such proposal represent over 50% of the outstanding
Allied World shares entitled to vote on such proposal (whereby
abstentions will be treated as votes cast for purposes of such
proposal and will have the effect of votes against
such proposals, and broker
non-votes
will not be treated as votes cast for purposes of such
proposal). The approval of the proposals to amend the Allied
World Articles to change Allied Worlds name to
TransAllied Group Holdings, AG following the
completion of the merger, to elect the directors as described
above and to approve a capital reduction to allow for payment of
a dividend to the combined company shareholders after the
completion of the merger, require a majority of the votes cast
in favor of such proposals at the Allied World Special
Shareholder Meeting (whereby abstentions and broker non-votes
will not be treated as votes cast for purposes of such proposal)
where holders of at least 50% of the total outstanding Allied
World shares are represented and voting and who are entitled to
vote on such proposals.
Your vote is very important. Whether or not you expect to
attend in person, we urge you to submit a proxy to vote your
shares as promptly as possible by signing and returning the
enclosed proxy card in the postage-paid envelope provided, so
that your shares may be represented and voted at the Allied
World Special Shareholder Meeting. If your shares are held in an
Allied World plan or in the name of a bank, brokerage firm or
other nominee, please follow the instructions on the voting
instruction card furnished by the plan trustee or administrator,
or record holder, as appropriate.
The enclosed joint proxy statement/prospectus provides a
detailed description of the merger and the merger agreement. We
urge you to read the joint proxy statement/prospectus of which
this notice forms a part, including any documents incorporated
by reference, and the Annexes carefully and in their entirety.
If you
have any questions concerning the merger or this joint proxy
statement/prospectus, would like additional copies or need help
voting your Allied World shares, please contact Allied
Worlds proxy solicitor:
MacKenzie Partners, Inc.
105 Madison Avenue
New York, NY 10016
(800) 322-2885
or
(212) 929-5500
(collect)
E-mail:
proxy@mackenziepartners.com
By Order of the Board of Directors of
Allied World Assurance Company Holdings, AG,
Wesley D. Dupont
Corporate Secretary
TRANSATLANTIC HOLDINGS, INC.
80 Pine Street
New York, NY 10005
NOTICE OF SPECIAL MEETING OF
STOCKHOLDERS
TO BE HELD
ON ,
2011
August , 2011
To the Stockholders of Transatlantic Holdings, Inc.:
We are pleased to invite you to attend the special meeting of
stockholders of Transatlantic Holdings, Inc.
(Transatlantic), a Delaware corporation, which will
be held
at
on ,
2011 at [8:00] a.m. local time, for the following purposes
(the Transatlantic Special Shareholder Meeting):
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to consider and vote on the proposal to adopt the Agreement and
Plan of Merger, dated as of June 12, 2011, as it may be
amended from time to time (the merger agreement), by
and among Allied World Assurance Company Holdings, AG
(Allied World), Transatlantic and GO Sub, LLC, a
Delaware limited liability company and a wholly-owned subsidiary
of Allied World, a copy of which is included as Annex A to
the joint proxy statement/prospectus of which this notice forms
a part;
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to consider and vote upon the proposal to adjourn the
Transatlantic Special Shareholder Meeting, if necessary or
appropriate, to solicit additional proxies if there are not
sufficient votes to approve the foregoing proposal; and
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to consider and vote on a proposal, on an advisory (non-binding)
basis, to approve the compensation that may be paid or become
payable to Transatlantics named executive officers in
connection with the merger, and the agreements and
understandings pursuant to which such compensation may be paid
or become payable, as described in the section entitled
The Merger Interests of Transatlantics
Directors and Executive Officers in the Merger
Golden Parachute Compensation.
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Completion of the merger is conditioned on, among other things,
approval of the proposal to adopt the merger agreement.
Transatlantic will transact no other business at the
Transatlantic Special Shareholder Meeting except such business
as may properly be brought before the Transatlantic Special
Shareholder Meeting or any adjournment or postponements thereof.
Please refer to the joint proxy statement/prospectus of which
this notice forms a part for further information with respect to
the business to be transacted at the Transatlantic Special
Shareholder Meeting.
The Transatlantic board of directors has unanimously approved
the merger agreement and determined that the merger agreement
and the transactions contemplated thereby, including the merger,
are advisable and in the best interests of Transatlantic and its
stockholders. The Transatlantic board of directors
unanimously recommends that Transatlantic stockholders vote
FOR each of the proposals set forth above.
The Transatlantic board of directors has fixed the close of
business on July 22, 2011 as the record date for
determination of Transatlantic stockholders entitled to receive
notice of, and to vote at, the Transatlantic Special Shareholder
Meeting or any adjournments or postponements thereof. Only
holders of record of Transatlantic common stock
(Transatlantic common stock) at the close of
business on the record date are entitled to receive notice of,
and to vote at, the Transatlantic Special Shareholder Meeting. A
list of the names of Transatlantic stockholders of record will
be available for ten days prior to the Transatlantic Special
Shareholder Meeting for any purpose germane to the Transatlantic
Special Shareholder Meeting between the regular business hours
of 9:00 a.m. and 5:00 p.m., local time, at
Transatlantics headquarters, 80 Pine Street, New York, NY.
The Transatlantic stockholder list will also be available at the
Transatlantic Special
Shareholder Meeting during the whole time thereof for
examination by any stockholder present at such meeting.
Adoption of the merger agreement requires the affirmative vote
of holders of a majority of the outstanding shares of
Transatlantic common stock entitled to vote thereon. Approval of
the proposal to adjourn the Transatlantic Special Shareholder
Meeting, if necessary or appropriate, for the purpose of
soliciting additional proxies requires the affirmative vote of
the holders of a majority of the shares of Transatlantic common
stock entitled to vote and present in person or represented by
proxy, whether or not a quorum is present. Approval, on an
advisory (non-binding) basis, of the compensation that may be
paid or become payable to Transatlantics named executive
officers in connection with the merger, and the agreements and
understandings pursuant to which such compensation may be paid
or become payable, requires the affirmative vote of the holders
of a majority of the shares of Transatlantic common stock
present in person or represented by proxy and entitled to vote
thereon.
Your vote is very important. Whether or not you expect to
attend the Transatlantic Special Shareholder Meeting in person,
we urge you to submit a proxy to vote your shares as promptly as
possible by either: (1) logging onto
http://proxy.georgeson.com and following the instructions on
your proxy card; (2) dialing
1-800-652-VOTE (8683)
and listening for further directions; or (3) signing and
returning the enclosed proxy card in the postage-paid envelope
provided, so that your shares may be represented and voted at
the Transatlantic Special Shareholder Meeting. If your shares
are held in the name of a bank, brokerage firm or other nominee,
please follow the instructions on the voting instruction card
furnished by the record holder, as appropriate.
The enclosed joint proxy statement/prospectus provides a
detailed description of the merger and the merger agreement. We
urge you to read the joint proxy statement/prospectus of which
this notice forms a part, including any documents incorporated
by reference, and the Annexes carefully and in their entirety.
If you have any questions concerning the merger or this joint
proxy statement/prospectus, would like additional copies or need
help voting your shares of Transatlantic common stock, please
contact Transatlantics proxy solicitor:
Georgeson Inc.
199 Water Street
New York, NY 10038
(888) 613-9817
(Banks and brokers please call:
(212) 440-9800)
E-mail:
transatlantic@georgeson.com
By Order of the Board of Directors of
Transatlantic Holdings, Inc.,
Amy M. Cinquegrana
Secretary
ADDITIONAL
INFORMATION
This joint proxy statement/prospectus incorporates important
business and financial information about Allied World and
Transatlantic from other documents that are not included in or
delivered with this joint proxy statement/prospectus. This
information is available to you without charge upon your
request. You can obtain the documents incorporated by reference
into this joint proxy statement/prospectus free of charge by
requesting them in writing or by telephone from the appropriate
company at the following addresses and telephone numbers:
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MacKenzie Partners, Inc.
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Georgeson Inc.
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105 Madison Avenue
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199 Water Street
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New York, NY 10016
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New York, NY 10038
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(800)
322-2885
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(888) 613-9817
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or
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(Banks and brokers please call: (212) 440-9800)
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(212)
929-5500
(collect)
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E-mail: transatlantic@georgeson.com
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E-mail: proxy@mackenziepartners.com
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or
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or
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Allied World Assurance Company Holdings, AG
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Transatlantic Holdings, Inc.
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Lindenstrasse 8, 6340 Baar
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80 Pine Street
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Zug, Switzerland
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New York, NY 10005
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Attn.: Corporate Secretary
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Attn.: Investor Relations
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(441)
278-5400
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(212) 365-2200
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Investors may also consult Allied Worlds or
Transatlantics website for more information concerning the
merger described in this joint proxy statement/prospectus.
Allied Worlds website is
www.awac.com. Transatlantics website is
www.transre.com. Information included on these websites
is not incorporated by reference into this joint proxy
statement/prospectus.
If you would like to request any documents, please do so
by ,
2011 in order to receive them before the meetings.
For a more detailed description of the information incorporated
by reference in this joint proxy statement/prospectus and how
you may obtain it, see Where You Can Find More
Information beginning on page 184.
ABOUT
THIS JOINT PROXY STATEMENT/PROSPECTUS
This joint proxy statement/prospectus, which forms part of a
registration statement on
Form S-4
filed with the U.S. Securities and Exchange Commission (the
SEC) by Allied World, constitutes a prospectus of
Allied World under Section 5 of the Securities Act of 1933,
as amended (the Securities Act), with respect to the
Allied World registered shares (the Allied World
shares) to be issued to the Transatlantic stockholders
pursuant to the merger. This joint proxy statement/prospectus
also constitutes a joint proxy statement for both Allied World
and Transatlantic under Section 14(a) of the Securities
Exchange Act of 1934, as amended (the Exchange Act).
It also constitutes a notice of meeting with respect to the
extraordinary general meeting of Allied World shareholders (the
Allied World Special Shareholder Meeting) and a
notice of meeting with respect to the special meeting of
Transatlantic stockholders (the Transatlantic Special
Shareholder Meeting).
You should rely only on the information contained in or
incorporated by reference into this joint proxy
statement/prospectus. No one has been authorized to provide you
with information that is different from that contained in, or
incorporated by reference into, this joint proxy
statement/prospectus. This joint proxy statement/prospectus is
dated ,
2011. You should not assume that the information contained in
this joint proxy statement/prospectus is accurate as of any date
other than that date. You should not assume that the information
incorporated by reference into this joint proxy
statement/prospectus is accurate as of any date other than the
date of the incorporated document. Neither our mailing of this
joint proxy statement/prospectus to Allied World shareholders or
Transatlantic stockholders nor the issuance by Allied World of
Allied World shares pursuant to the merger will create any
implication to the contrary.
This joint proxy statement/prospectus does not constitute an
offer to sell, or a solicitation of an offer to buy, any
securities, or the solicitation of a proxy, in any jurisdiction
to or from any person to whom it is unlawful to make any such
offer or solicitation. Information contained in this joint proxy
statement/prospectus regarding Allied World has been provided by
Allied World and information contained in this joint proxy
statement/prospectus regarding Transatlantic has been provided
by Transatlantic.
All references in this joint proxy statement/prospectus to
Allied World refer to Allied World Assurance Company
Holdings, AG, a Swiss corporation, and/or its consolidated
subsidiaries, unless the context requires otherwise; all
references in this joint proxy statement/prospectus to
Transatlantic refer to Transatlantic Holdings, Inc.,
a Delaware corporation, and/or its consolidated subsidiaries,
unless the context requires otherwise; all references to
Merger Sub refer to GO Sub, LLC, a Delaware limited
liability company and wholly-owned subsidiary of Allied World
formed for the sole purpose of effecting the merger; unless
otherwise indicated or as the context requires, all references
in this joint proxy statement/prospectus to we,
our and us refer to Allied World and
Transatlantic collectively; and, unless otherwise indicated or
as the context requires, all references to the merger
agreement refer to the Agreement and Plan of Merger, dated
as of June 12, 2011, as it may be amended from time to
time, by and among Allied World, Transatlantic and Merger Sub, a
copy of which is included as Annex A to this joint proxy
statement/prospectus. Allied World, following completion of the
merger, is sometimes referred to in this joint proxy
statement/prospectus as TransAllied or the
combined company. Also, in this joint proxy
statement/prospectus, $ and USD refer to
U.S. dollars and CHF refers to Swiss francs; and
local time means the local time in Switzerland with
respect to the Allied World Special Shareholder Meeting and
related matters, and the local time in New York City with
respect to the Transatlantic Special Shareholder Meeting and
related matters.
TABLE OF
CONTENTS
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A-1
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B-1
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C-1
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II-1
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EX-23.2 |
EX-23.3 |
EX-99.1 |
EX-99.2 |
ii
QUESTIONS
AND ANSWERS
The following are some questions that you, as a shareholder of
Allied World Assurance Company Holdings, AG (an Allied
World shareholder) or a stockholder of Transatlantic
Holdings, Inc. (a Transatlantic stockholder), may
have regarding the merger and the other matters being considered
at the contemplated meetings and the answers to those questions.
Allied World Assurance Company Holdings, AG (Allied
World) and Transatlantic Holdings, Inc.
(Transatlantic) urge you to carefully read the
remainder of this joint proxy statement/prospectus because the
information in this section does not provide all the information
that might be important to you with respect to the merger and
the other matters being considered at the Special Shareholder
Meetings. Additional important information is also contained in
the Annexes to, and the documents incorporated by reference
into, this joint proxy statement/prospectus.
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Q: |
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Why am I receiving this joint proxy statement/prospectus? |
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A: |
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Allied World and Transatlantic have agreed to a strategic
business combination pursuant to the terms of the merger
agreement that is described in this joint proxy
statement/prospectus. A copy of the merger agreement is included
in this joint proxy statement/prospectus as Annex A. |
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In order to complete the merger, among other things: |
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Allied World shareholders must approve the proposal
to increase Allied Worlds ordinary share capital pursuant
to article 3a(a) of the Articles of Association of Allied
World Assurance Company Holdings, AG (the Allied World
Articles), by
CHF (equaling
USD )
to
CHF (equaling
USD )
by the issuance
of
registered shares (Namenaktien) of Allied World Assurance
Company Holdings, AG (Allied World shares) to
Transatlantic stockholders pursuant to, and only in connection
with, the merger as contemplated by the merger agreement,
including the exclusion of all preferential subscription rights
to which Allied World shareholders may be entitled (the
article 3 share capital increase
proposal); the contributions for the new registered shares
are paid by converting existing reserves
(Kapitalreserven) into share capital;
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Allied World shareholders must approve the proposal
to increase Allied Worlds conditional share capital
pursuant to article 5(a) of the Allied World Articles by
CHF (equaling
USD )
to
CHF (equaling
USD ),
only in connection with the completion of the merger (the
article 5 share capital increase proposal);
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Allied World shareholders must approve the proposal
to increase Allied Worlds authorized share capital
pursuant to article 6(a) of the Allied World Articles by
CHF (equaling
USD )
to
CHF (equaling
USD ),
only in connection with the merger (the
article 6 share capital increase proposal
and, together with the article 3 share capital
increase proposal and the article 5 share capital
increase proposal, the share capital increase
proposals);
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Allied World shareholders must approve the proposal
to issue Allied World shares to Transatlantic stockholders
pursuant to the merger and as contemplated by the merger
agreement as required by NYSE rules (the NYSE share
issuance proposal);
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Allied World shareholders must approve the proposal
to amend the Allied World Articles to change Allied Worlds
name to TransAllied Group Holdings, AG (Allied World
and Transatlantic after the merger, TransAllied or
the combined company) immediately following, and
conditioned upon, the completion of the merger (the name
change proposal);
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Allied World shareholders must approve the proposal
to elect (x) three Class II directors to hold office
commencing upon the completion of the merger and ending upon
TransAllieds annual general meeting of shareholders
(Annual Shareholder Meeting) in 2012, (y) four
Class III directors to hold office commencing upon the
completion of the merger and ending upon TransAllieds
Annual Shareholder Meeting in 2013 and (z) four
Class I directors to hold office commencing upon the
completion of the merger and ending upon TransAllieds
Annual Shareholder Meeting in 2014 (the election of
directors proposal); and
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iii
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Transatlantic stockholders must approve the proposal
to adopt the merger agreement (the adoption of the merger
agreement proposal).
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In addition, Allied World is soliciting proxies from its
shareholders with respect to two additional proposals, the
approval of the second proposal is conditioned upon the
completion of the merger; however, completion of the merger is
not conditioned upon receipt of either of these approvals: |
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Allied World shareholders are being asked to
consider and vote upon the proposal to effect a capital
reduction to allow for the payment of a dividend to the combined
companys shareholders after the completion of the merger
(the capital reduction proposal); and
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Allied World shareholders are being asked to
consider and vote on the proposal to amend and restate the
Allied World Third Amended and Restated 2004 Stock Incentive
Plan (the Stock Incentive Plan), the form of which
is included as Annex E to this joint proxy
statement/prospectus, to, among other things, increase the
number of shares reserved for issuance under the Plan and to
extend the Plans termination date, effective upon the
completion of the merger (the Stock Incentive Plan
proposal).
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In addition, Transatlantic is soliciting proxies from its
stockholders with respect to two additional proposals;
completion of the merger is not conditioned upon receipt of
these approvals: |
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Transatlantic stockholders are being asked to
consider and vote upon the proposal to adjourn the special
meeting of Transatlantic stockholders (the Transatlantic
Special Shareholder Meeting), if necessary or appropriate,
to solicit additional proxies if there are not sufficient votes
to approve the adoption of the merger agreement proposal (the
adjournment proposal); and
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Transatlantic stockholders are being asked to
consider and vote on a proposal, on an advisory (non-binding)
basis, to approve the compensation that may be paid or become
payable to Transatlantics named executive officers in
connection with the merger, and the agreements and
understandings pursuant to which such compensation may be paid
or become payable, as described in the section entitled
The Merger Interests of Transatlantics
Directors and Executive Officers in the Merger
Golden Parachute Compensation (the golden parachute
proposal).
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Allied World and Transatlantic will hold separate meetings of
the holders of their shares to obtain these approvals. This
joint proxy statement/prospectus, including its Annexes,
contains and incorporates by reference important information
about Allied World and Transatlantic, the merger and the
meetings of the holders of shares of Allied World and
Transatlantic. You should read all the available information
carefully and in its entirety. |
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Q: |
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What will I receive in the merger? |
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A: |
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Allied World Shareholders: If the merger is
completed, Allied World shareholders will not receive any merger
consideration and will continue to hold the shares of Allied
World which they currently hold. The share capital of Allied
World consists of the outstanding Allied World shares and
non-voting participation certificates (Allied World
non-voting shares). |
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Transatlantic Stockholders: If the merger is
completed, holders of Transatlantic common stock will receive
0.88 Allied World shares for each share of Transatlantic common
stock they hold at the effective time of the merger.
Transatlantic stockholders will not receive any Allied World
fractional shares in the merger. Instead, Allied World will pay
cash in lieu of any Allied World fractional shares that a
Transatlantic stockholder would otherwise have been entitled to
receive. |
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Following the merger, the combined companys common shares
will be traded on the NYSE under the symbol TAG. |
|
Q: |
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What is the value of the merger consideration? |
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A: |
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Because Allied World will issue 0.88 Allied World shares in
exchange for each share of Transatlantic common stock, the value
of the merger consideration that Transatlantic stockholders
receive will depend on the price of Allied World shares at the
effective time of the merger. That price will not be known at
the time of the Special Shareholder Meetings and may be more or
less than the current price or the price at the time of the
meetings. We urge you to obtain current market quotations of
Allied World shares and Transatlantic common stock. |
iv
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Q: |
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When and where will the meetings be held? |
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A: |
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Allied World Shareholders: The extraordinary
general meeting of Allied World shareholders (the Allied
World Special Shareholder Meeting) will be held at Allied
Worlds corporate headquarters, Lindenstrasse 8, 6340 Baar,
Zug, Switzerland,
on ,
2011, at [2:00] p.m. local time. |
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Transatlantic Stockholders: The Transatlantic
Special Shareholder Meeting will be held
at ,
on ,
2011, at [8:00] a.m. local time. |
|
Q: |
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Who is entitled to vote at the meetings? |
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A: |
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Allied World Shareholders: The Allied World
board of directors has set July 22, 2011 (the Allied
World record date) as the record date for the Allied World
Special Shareholder Meeting. Only holders of record of Allied
World shares as of the close of business on the Allied World
record date are entitled to notice of, and to vote at, the
Allied World Special Shareholder Meeting or any adjournment or
postponement of the Allied World Special Shareholder Meeting.
Holders of Allied World non-voting shares will receive this
joint proxy statement/prospectus but are not entitled to
participate in or vote at the Allied World Special Shareholder
Meeting. As of the Allied World record date, there were
38,077,329 Allied World shares and 43,860 Allied World
non-voting shares outstanding. Beneficial owners of Allied World
shares and shareholders registered in the Allied World share
register with Allied World shares at the close of business on
the Allied World record date are entitled to vote at the Allied
World Special Shareholder Meeting, except as provided below. If
you ask to be registered as a shareholder of record with respect
to your Allied World shares in Allied Worlds share
register and become a shareholder of record for those shares (as
opposed to a beneficial holder of shares held in street
name) after the Allied World record date, but on or
before ,
2011, and want to vote those shares at the Allied World Special
Shareholder Meeting, you will need for identification purposes
to obtain a proxy from the registered voting rights record
holder of those shares as of the Allied World record date to
vote your shares in person at the Allied World Special
Shareholder Meeting. Alternatively, you may also obtain the
proxy materials by contacting the Corporate Secretary,
attention: Wesley D. Dupont, at Allied World Assurance Company
Holdings, AG, Lindenstrasse 8, 6340 Baar, Zug, Switzerland, or
via e-mail
at secretary@awac.com. If you are a record holder of Allied
World shares (as opposed to a beneficial holder of shares held
in street name) on the record date but sell your
Allied World shares prior
to ,
2011 you will not be entitled to vote those shares at the Allied
World Special Shareholder Meeting. |
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Transatlantic Stockholders: The Transatlantic
board of directors has set July 22, 2011 (the
Transatlantic record date) as the record date for
the Transatlantic Special Shareholder Meeting. Only holders of
record of outstanding shares of Transatlantic common stock as of
the close of business on the Transatlantic record date are
entitled to notice of, and to vote at, the Transatlantic Special
Shareholder Meeting or any adjournment or postponement of the
Transatlantic Special Shareholder Meeting. As of the
Transatlantic record date, there were 62,488,896 shares of
Transatlantic common stock outstanding. |
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Q: |
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What constitutes a quorum at the meetings? |
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A: |
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Allied World Shareholders: A quorum is
required to transact business at the Allied World Special
Shareholder Meeting. Without giving effect to the limitation on
voting rights described below, the quorum required at the Allied
World Special Shareholder Meeting is that two or more persons
present in person and representing in person or by proxy
throughout the meeting more than 50% of the total issued and
outstanding Allied World shares are present throughout the
meeting. The Allied World board of directors or chairman of the
Allied World board of directors may postpone the meeting with
sufficient factual reason, provided that notice of postponement
is given to the shareholders in the same form as the invitation
before the time for such meeting. A new notice is then required
to hold the postponed meeting. Under Swiss law, a general
meeting of shareholders for which a notice of meeting has been
duly published may not be adjourned without publishing a new
notice of meeting. |
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Abstentions will be included in the calculation of the number of
Allied World shares represented at the Allied World Special
Shareholder Meeting for purposes of determining whether a quorum
has been achieved. Under NYSE rules, if brokers do not have
discretion to vote on any of the proposals at a |
v
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shareholders meeting, broker non-votes will not count
toward the calculation of a quorum. As each of the proposals to
be voted on at the Allied World Special Shareholder Meeting are
considered non-routine under NYSE rules, brokers do
not have discretion to vote on such proposals and, as such,
broker non-votes will not be included in the calculation of the
number of Allied World shares represented at the Allied World
Special Shareholder Meeting for purposes of determining whether
a quorum has been achieved. |
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Transatlantic Stockholders: Stockholders who
hold shares representing at least a majority of the aggregate
voting power of the outstanding capital stock entitled to vote
at the Transatlantic Special Shareholder Meeting must be present
in person or represented by proxy to constitute a quorum for the
transaction of business at the Transatlantic Special Shareholder
Meeting. The Transatlantic stockholders, by a majority vote at
the meeting by the holders of Transatlantic common stock
entitled to vote and present in person or by proxy, whether or
not a quorum is present, may adjourn the meeting to another time
or place without further notice unless the adjournment is for
more than 30 days or, if after the adjournment, a new
record date is fixed for the adjourned meeting, in which case a
notice of the adjourned meeting shall be given to each
stockholder of record entitled to vote at the adjourned meeting. |
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Abstentions will be included in the calculation of the number of
shares of Transatlantic common stock represented at the
Transatlantic Special Shareholder Meeting for purposes of
determining whether a quorum has been achieved. Under NYSE
rules, if brokers do not have discretion to vote on any of the
proposals at a stockholders meeting, broker non-votes will
not count toward the calculation of a quorum. As each of the
proposals to be voted on at the Transatlantic Special
Shareholder Meeting are considered non-routine under
NYSE rules, brokers do not have discretion to vote on such
proposals and, as such, broker non-votes will not be included in
the calculation of the number of shares of Transatlantic common
stock represented at the Transatlantic Special Shareholder
Meeting for purposes of determining whether a quorum has been
achieved. |
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Q: |
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How do I vote? |
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A: |
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Allied World Shareholders. The manner in which
your shares may be voted depends on how your shares are held. If
you are a shareholder of record of Allied World, meaning that
your Allied World shares are represented by certificates or book
entries in your name so that you appear as a shareholder of
record in Allied Worlds share register maintained by its
transfer agent, Continental Stock Transfer &
Trust Company, a proxy card for voting these shares will be
included with this joint proxy statement/prospectus. You may
direct how your shares are to be voted by completing, signing
and returning the proxy card in the enclosed envelope. You may
also vote your Allied World shares in person at the Allied World
Special Shareholder Meeting. |
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If you hold Allied World shares in street name
through a bank or brokerage firm, you may instead receive from
your bank or brokerage firm a voting instruction form with the
joint proxy statement/prospectus that you may use to instruct
them on 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 Allied World shares in person at
the Allied World Special Shareholder Meeting, you must obtain a
proxy from your bank, brokerage firm or other nominee giving you
the right to vote your Allied World shares at the Allied World
Special Shareholder Meeting. |
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Transatlantic Stockholders. If you are a
stockholder of record of Transatlantic as of the close of
business on the Transatlantic record date, you may vote in
person by attending the Transatlantic Special Shareholder
Meeting or, to ensure your shares are represented at the
Transatlantic Special Shareholder Meeting, you may authorize a
proxy to vote by: |
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logging onto http://proxy.georgeson.com/ and
following the instructions on your proxy card to vote via the
internet anytime up
to ,
on ,
2011 and following the instructions provided on that site;
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dialing 1-800-652-VOTE (8683) and listening for
further directions to vote by telephone anytime up
to
on ,
2011 and following the instructions provided in the recorded
message; or
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signing and returning the accompanying proxy card in
the enclosed postage-paid envelope. Transatlantic stockholders
of record may submit their proxies through the mail by
completing their proxy card, and signing, dating and returning
it in the enclosed, pre-addressed, postage-paid envelope. To be
valid, a returned proxy card must be signed and dated.
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If you hold Transatlantic common stock in street
name through a bank, brokerage firm or other nominee,
please follow the voting instructions provided by your bank,
brokerage firm or other nominee to ensure that your shares of
Transatlantic common stock are represented at the Transatlantic
Special Shareholder Meeting. If you want to vote your
Transatlantic common stock in person at the Transatlantic
Special Shareholder Meeting, you must obtain a proxy from your
bank, brokerage firm or other nominee giving you the right to
vote your Transatlantic common stock at the Transatlantic
Special Shareholder Meeting. |
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Q: |
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How many votes do I have? |
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A: |
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Allied World Shareholders: Holders of Allied
World shares are entitled to one vote per Allied World share
owned as of the close of business on the Allied World record
date, unless you own controlled shares that
constitute 10% or more of the issued Allied World shares as of
the close of business on the Allied World record date, in which
case your voting rights with respect to those controlled shares
will be limited, in the aggregate, to a voting power of
approximately 10% pursuant to a formula specified in
article 14 of the Allied World Articles. The Allied World
Articles define controlled shares generally to include all
shares of Allied World directly, indirectly or constructively
owned or beneficially owned by any person or group of persons.
As of the close of business on the Allied World record date,
there were 38,077,329 Allied World shares outstanding and
entitled to vote at the Allied World Special Shareholder Meeting. |
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Transatlantic Stockholders: Holders of
Transatlantic common stock are entitled to one vote for each
share owned as of the close of business on the Transatlantic
record date. However, to satisfy the requirements of New York
State Insurance regulators, on June 1, 2009, Davis Selected
Advisors, L.P. (Davis Advisors) entered into an
agreement with Transatlantic whereby Davis Advisors agreed to
vote the number of shares of Transatlantic common stock owned by
Davis Advisors in excess of 9.9% of Transatlantics
outstanding shares in a manner proportionate to the vote of the
owners of the shares (excluding Davis Advisors, stockholders
beneficially owning more than 10% of Transatlantics
outstanding shares, and directors and officers of Transatlantic)
voting on such matters. As of the close of business on the
Transatlantic record date, there were 62,488,896 shares of
Transatlantic common stock outstanding and entitled to vote at
the Transatlantic Special Shareholder Meeting. |
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Q: |
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What vote is required to approve each proposal? |
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A: |
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Allied World Shareholders: Approval of each of
the following proposals require the affirmative vote of at least
662/3%
of the votes represented at the Allied World Special Shareholder
Meeting and a majority of the nominal value of the Allied World
shares represented at such meeting, where holders of at least
50% of the total outstanding Allied World shares are represented
and voting and who are entitled to vote on such proposal:
(i) the article 3 share capital increase
proposal, (ii) the article 5 share capital
increase proposal and (iii) the article 6 share
capital increase proposal. Abstentions and broker non-votes will
not be considered votes cast and will have no effect on these
proposals, assuming a quorum is present. |
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The approval of the NYSE share issuance proposal and the Stock
Incentive Plan proposal requires the affirmative vote of the
holders of a majority of shares entitled to vote on the proposal
and present in person or represented by proxy at the Allied
World Special Shareholder Meeting, provided that the total votes
cast on this proposal represent over 50% of the outstanding
Allied World shares entitled to vote on such proposal. Votes
for, votes against and abstentions count
as votes cast, while broker non-votes do not count as votes cast
for this purpose. All outstanding Allied World shares count as
shares entitled to vote. Thus, the total sum of votes
for, plus votes against, plus
abstentions, which we refer to as the NYSE votes
cast, must be greater than 50% of the total outstanding
Allied World shares. The number of votes for the
proposal must be greater than 50% of the NYSE votes cast. |
vii
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Approval of each of the following proposals requires a majority
of the votes cast voting in favor of such proposal at the Allied
World Special Shareholder Meeting where holders of at least 50%
of the total outstanding Allied World shares are represented and
voting and who are entitled to vote on such proposal:
(i) the name change proposal, (ii) the election of
directors proposal and (iii) the capital reduction proposal.
Abstentions and broker non-votes will not be considered votes
cast and will have no effect on these proposals, assuming a
quorum is present. |
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Because the proposals to be voted on by the Allied World
shareholders at the Allied World Special Shareholder Meeting are
all non-routine matters, if a bank or brokerage firm
holds your shares you are urged to instruct your bank or
brokerage firm on how to vote your shares to ensure your shares
are voted on each of the proposals to be brought before the
Allied World Special Shareholder Meeting. |
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Transatlantic Stockholders: The adoption of
the merger agreement proposal requires the affirmative vote of
the holders of a majority of the outstanding shares of
Transatlantic common stock entitled to vote thereon. Failures to
vote, votes to abstain and broker non-votes, if any, will have
the effect of a vote AGAINST the adoption of the
merger agreement proposal. |
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Approval of the adjournment proposal requires the affirmative
vote of the holders of a majority of the shares of Transatlantic
common stock entitled to vote and present in person or
represented by proxy, whether or not a quorum is present.
Abstentions will have the same effect as a vote
AGAINST the adjournment proposal. Failures to vote
and broker non-votes, if any, will not be voted, but this will
not have an effect on the adjournment proposal. |
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Approval of the golden parachute proposal requires the
affirmative vote of the holders of a majority of the shares of
Transatlantic common stock present in person or represented by
proxy and entitled to vote thereon, assuming a quorum is
present. Abstentions will have the same effect as a vote
AGAINST the golden parachute proposal. Failures to
vote and broker non-votes, if any, will not be voted, but this
will not have an effect on the golden parachute proposal,
assuming a quorum is present. |
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Q: |
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My shares are held in street name by my bank,
brokerage firm or other nominee. Will my bank, brokerage firm or
other nominee automatically vote my shares for me? |
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A: |
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No. If your shares are held in the name of a bank,
brokerage firm or other nominee, you are considered the
beneficial holder of the shares held for you in what
is known as street name. You are not the
record holder of such shares. If this is the case,
this joint proxy statement/prospectus has been forwarded to you
by your bank, broker or other nominee. As the beneficial holder,
unless your bank, brokerage firm or other nominee has
discretionary authority over your shares, you generally have the
right to direct your bank, brokerage firm or other nominee as to
how to vote your shares. If you do not provide voting
instructions, your shares will not be voted on any proposal on
which your bank, brokerage firm or other nominee does not have
discretionary authority, including certain matters to be
considered at the Special Shareholder Meetings. This is often
called a broker non-vote. You should provide your
bank, broker or other nominee with instructions as to how to
vote your Allied World shares and Transatlantic common stock, as
applicable. |
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Please follow the voting instructions provided by your bank,
broker or other nominee so that it may vote your shares on your
behalf. Please note that you may not vote shares held in street
name by returning a proxy card directly to Allied World or
Transatlantic or by voting in person at your meeting unless you
first obtain a proxy from your bank, brokerage firm or other
nominee. |
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Q: |
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How does the Allied World board of directors recommend that
Allied World shareholders vote? |
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A: |
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The Allied World board of directors has unanimously determined
that the merger agreement and the transactions contemplated by
the merger agreement, including the merger, are advisable and in
the best interests of Allied World. The Allied World board of
directors unanimously recommends that the Allied World
shareholders vote (i) FOR the share capital
increase proposals, (ii) FOR the NYSE share
issuance proposal, (iii) FOR the name change
proposal , (iv) FOR the election of directors
proposal, (v) FOR the capital reduction proposal and
(vi) FOR the Stock Incentive Plan proposal. |
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Q: |
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How does the Transatlantic board of directors recommend that
Transatlantic stockholders vote? |
viii
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A: |
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The Transatlantic board of directors has unanimously determined
that the merger agreement and the transactions contemplated by
the merger agreement, including the merger, are advisable and in
the best interests of Transatlantic and its stockholders. The
Transatlantic board of directors unanimously recommends that
Transatlantic stockholders vote (i) FOR the
adoption of the merger agreement proposal,
(ii) FOR the adjournment proposal and
(iii) FOR the golden parachute proposal. |
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Q: |
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What will happen if I return my proxy card without indicating
how to vote? |
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A: |
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Allied World Shareholders: If you properly
complete and sign your proxy card but do not indicate how your
Allied World shares should be voted on a matter, the Allied
World shares represented by your proxy will be voted as the
Allied World board of directors recommends and, therefore,
FOR the proposals brought before the Allied World
Special Shareholder Meeting. |
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Transatlantic Stockholders: If you properly
complete and sign your proxy card but do not indicate how your
shares of Transatlantic common stock should be voted on a
matter, the shares of Transatlantic common stock represented by
your proxy will be voted as the Transatlantic board of directors
recommends and, therefore, FOR the proposals brought
before the Transatlantic Special Shareholder Meeting. |
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Q: |
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How do I appoint and vote via the independent proxy if I am
an Allied World shareholder of record? |
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A: |
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If you are an Allied World shareholder of record as of the
Allied World record date, under Swiss law you may authorize the
independent proxy, Mr. Paul Buergi, of Buis Buergi AG,
Muehlebachstrasse 7, P.O Box 672, CH-8024, Zurich, Switzerland,
with full rights of substitution, to vote your Allied World
shares on your behalf instead of using the enclosed proxy card.
If you authorize the independent proxy to vote your shares
without giving instructions, your shares will be voted in
accordance with the recommendations of the Allied World board of
directors with regard to the items listed in the notice of
meeting. If new agenda items (other than those in the notice of
meeting) or new proposals or motions with respect to those
agenda items set forth in the notice of meeting are being put
forth before the Allied World Special Shareholder Meeting, the
independent proxy will, in the absence of other specific
instructions, vote in accordance with the recommendations of the
Allied World board of directors. An optional form of proxy card
that may be used by the independent proxy to vote your Allied
World shares is included with this joint proxy
statement/prospectus. Proxy cards authorizing the independent
proxy to vote your shares must be sent directly to the
independent proxy, arriving no later
than ,
local
time, ,
2011. |
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Q: |
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Can I change my vote or revoke my proxy after I have returned
a proxy or voting instruction card? |
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A: |
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Yes. |
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If you are the holder of record of Allied World
shares: If you are the holder of record of Allied
World shares, you can change your vote or revoke your proxy at
any time before your proxy is voted at your meeting. You can do
this in one of the following ways: |
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you can provide the Allied World corporate secretary
with written notice of revocation, by voting in person at the
Allied World Special Shareholder Meeting or by executing a
later-dated proxy card; 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; or
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if you have granted your proxy to the independent
proxy, you can provide Mr. Paul Buergi, of Buis Buergi AG,
Muehlebachstrasse 7, P.O. Box 672, CH-8024, Zurich,
Switzerland, with written notice of revocation, by voting in
person at the Allied World Special Shareholder Meeting or by
executing a later-dated independent proxy card. Revocation of,
or changes to, proxies issued to the independent proxy must be
received by the independent proxy
by ,
local time,
on ,
2011.
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Attendance at the Allied World Special Shareholder Meeting by an
Allied World shareholder who has executed and delivered a proxy
card to Allied World shall not in and of itself constitute a
revocation of such proxy. Only your vote at the Allied World
Special Shareholder Meeting will revoke your proxy. |
ix
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If you hold Allied World shares in street
name: If your Allied World shares are held
in street name, you must obtain a proxy from your bank,
brokerage firm or other nominee giving you the right to vote
your Allied World shares at the Allied World Special Shareholder
Meeting. |
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If you are the holder of record of Transatlantic common
stock: If you are the holder of record of
Transatlantic common stock, you can change your vote or revoke
your proxy at any time before your proxy is voted at your
meeting. You can do this in one of the following ways: |
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you can grant a new, valid proxy bearing a later
date (including by telephone or via the internet);
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you can send a signed notice of revocation; or
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you can attend the Transatlantic Special Shareholder
Meeting and vote in person, which will automatically cancel any
proxy previously given, or you may revoke your proxy in person.
Simply attending the Transatlantic Special Shareholder Meeting
without voting will not revoke any proxy that you have
previously given or change your vote.
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If you choose either of the first two methods, your notice of
revocation or your new proxy must be received by Transatlantic
no later than the beginning of the Transatlantic Special
Shareholder Meeting. If you have submitted a proxy for your
shares by telephone or via the internet, you may revoke your
prior telephone or internet proxy by any manner described above. |
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If you hold shares of Transatlantic common stock in
street name: If your shares of
Transatlantic common stock are held in street name, you must
contact your bank, brokerage firm or other nominee to change
your vote. |
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Q: |
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What are the material U.S. federal income tax consequences of
the merger to U.S. holders of Allied World shares? |
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A: |
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No gain or loss will be recognized by Allied World shareholders
as a consequence of the merger. |
|
Q: |
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What are the material U.S. federal income tax consequences of
the merger to U.S. holders of Transatlantic common stock? |
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A: |
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The receipt of Allied World shares (and cash, if any, received
in lieu of fractional shares) in exchange for shares of
Transatlantic common stock pursuant to the merger agreement will
be a taxable transaction for U.S. federal income tax purposes. |
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Q: |
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When do you expect the merger to be completed? |
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A: |
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Allied World and Transatlantic hope to complete the merger as
soon as reasonably possible and expect the closing of the merger
to occur in the fourth quarter of 2011. However, the merger is
subject to various regulatory clearances and the satisfaction or
waiver of other conditions, and it is possible that factors
outside the control of Allied World and Transatlantic could
result in the merger being completed at an earlier time, a later
time or not at all. There may be a substantial amount of time
between the Special Shareholder Meetings and the completion of
the merger. |
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Q: |
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Do I need to do anything with my shares other than voting for
the proposals at the meeting? |
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A: |
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Allied World Shareholders: If you are an
Allied World shareholder, after the merger is completed, you are
not required to take any action with respect to your Allied
World shares. |
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Transatlantic Stockholders: If you are a
Transatlantic stockholder, after the merger is completed, each
share of Transatlantic common stock you hold will be converted
automatically into the right to receive 0.88 Allied World shares
together with cash in lieu of any fractional Allied World
shares, as applicable. You will receive instructions at that
time regarding exchanging your shares of Transatlantic common
stock for Allied World shares. You do not need to take any
action at this time. Please do not send your Transatlantic
stock certificates with your proxy card. |
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Q: |
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Are holders of shares entitled to appraisal rights? |
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A: |
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No. Neither the Allied World shareholders, under Swiss law,
nor the Transatlantic stockholders, under Delaware law, are
entitled to appraisal rights in connection with the merger. |
x
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Q: |
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What happens if I sell my shares of Transatlantic common
stock before the Transatlantic Special Shareholder Meeting? |
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A: |
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The record date for the Transatlantic Special Shareholder
Meeting is earlier than the date of the Transatlantic Special
Shareholder Meeting and the date that the merger is expected to
be completed. If you transfer your shares of Transatlantic
common stock after the Transatlantic record date but before the
Transatlantic Special Shareholder Meeting, you will retain your
right to vote at the Transatlantic Special Shareholder Meeting,
but will have transferred the right to receive the merger
consideration in the merger. In order to receive the merger
consideration, you must hold your shares through the effective
date of the merger. |
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Q: |
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What if I hold shares in both Allied World and
Transatlantic? |
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A: |
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If you are a holder of shares of both Allied World and
Transatlantic you will receive two separate packages of proxy
materials. A vote cast as an Allied World shareholder will not
count as a vote cast as a Transatlantic stockholder, and a vote
cast as a Transatlantic stockholder will not count as a vote
cast as an Allied World shareholder. Therefore, please
separately submit a proxy for your Allied World shares and your
Transatlantic common stock. |
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Q: |
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Who can help answer my questions? |
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A: |
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Allied World shareholders or Transatlantic stockholders who have
questions about the merger, the other matters to be voted on at
the Special Shareholder Meetings, how to submit a proxy or
desire additional copies of this joint proxy
statement/prospectus or additional proxy cards should contact: |
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If you are an Allied World shareholder:
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If you are a Transatlantic stockholder:
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MacKenzie Partners, Inc.
105 Madison Avenue
New York, NY 10016
(800) 322-2885
or
(212) 929-5500
(collect)
E-mail:
proxy@mackenziepartners.com
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Georgeson Inc.
199 Water Street
New York, NY 10038
(888) 613-9817
(Banks and brokers please call: (212) 440-9800)
E-mail: transatlantic@georgeson.com
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or
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or
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Allied World Assurance Company Holdings, AG
Lindenstrasse 8, 6340 Baar
Zug, Switzerland
Attn.: Corporate Secretary
(441) 278-5400
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Transatlantic Holdings, Inc.
80 Pine Street
New York, NY 10005
Attn.: Investor Relations
(212) 365-2200
|
xi
SUMMARY
This summary highlights information contained elsewhere in
this joint proxy statement/prospectus and may not contain all
the information that is important to you with respect to the
merger and the other matters being considered at the Special
Shareholder Meetings. Allied World and Transatlantic urge you to
read the remainder of this joint proxy statement/prospectus
carefully, including the attached Annexes, and the other
documents to which we have referred you. See also the section
entitled Where You Can Find More Information
beginning on page 184. We have included page references in
this summary to direct you to a more complete description of the
topics presented below.
The
Companies
Allied
World Assurance Company Holdings, AG
Allied World Assurance Company Holdings, AG is a holding company
incorporated in Switzerland. Allied World, through its
wholly-owned subsidiaries, including Allied World Assurance
Company, Ltd, Allied World Assurance Company (Europe) Limited,
Allied World Assurance Company (Reinsurance) Limited, Allied
World Assurance Company (U.S.) Inc., Allied World National
Assurance Company, Darwin National Assurance Company, and Darwin
Select Insurance Company and its branch offices, is a specialty
insurance and reinsurance company that underwrites a diversified
portfolio of property and casualty lines of business through
offices located in Bermuda, Hong Kong, Ireland, Singapore,
Switzerland, the United Kingdom and the United States. Allied
World has nine offices in the United States and has become
licensed in Canada, as well. Since its formation in 2001, Allied
World has focused primarily on the direct insurance markets.
Allied World offers its clients and producers significant
capacity in both direct property and casualty insurance markets
as well as the reinsurance market. Allied World is the ultimate
parent company of Allied World Assurance Company Holdings, Ltd,
the former publicly-traded Bermuda holding company, and its
subsidiaries as a result of a redomestication effected on
December 1, 2010 pursuant to a scheme of arrangement under
Bermuda law.
Allied World shares are traded on the New York Stock Exchange,
Inc. (NYSE) under the symbol AWH.
Following the merger, common shares of the combined company,
TransAllied Group Holdings, AG, will be traded on the NYSE under
the symbol TAG.
The principal executive offices of Allied World are located at
Lindenstrasse 8, 6340 Baar, Zug, Switzerland and its telephone
number is
41-41-768-1080.
Transatlantic
Holdings, Inc.
Transatlantic Holdings, Inc. is a holding company incorporated
in the State of Delaware. Transatlantic, through its
wholly-owned subsidiaries, Transatlantic Reinsurance
Company®
(TRC), Trans Re Zurich Reinsurance Company Ltd.,
acquired by TRC in 1996, and Putnam Reinsurance Company
(Putnam) (contributed by Transatlantic to TRC in
1995), offers reinsurance capacity for a full range of property
and casualty products, directly and through brokers, to
insurance and reinsurance companies, in both the domestic and
international markets on both a treaty and facultative basis.
One or both of TRC and Putnam is licensed, accredited,
authorized or can serve as a reinsurer in 50 states and the
District of Columbia in the United States and in Puerto Rico and
Guam. Through its international locations, Transatlantic has
operations worldwide, including Bermuda, Canada, seven locations
in Europe, three locations in Central and South America, two
locations in Asia (excluding Japan), and one location in each of
Japan, Australia and Africa. TRC is licensed in Bermuda, Canada,
Japan, the United Kingdom, the Dominican Republic, the Hong Kong
Special Administrative Region, the Peoples Republic of
China and Australia. Transatlantic was originally formed in 1986
under the name PREINCO Holdings, Inc. as a holding company for
Putnam. Transatlantics name was changed to Transatlantic
Holdings, Inc. on April 18, 1990 following the acquisition
on April 17, 1990 of all of the common stock of TRC in
exchange for shares of common stock of Transatlantic.
Transatlantics common stock is traded on the NYSE under
the symbol TRH.
1
The principal executive offices of Transatlantic are located at
80 Pine Street, New York, New York 10005 and its telephone
number is
212-365-2200.
GO Sub,
LLC
GO Sub, LLC, a wholly-owned subsidiary of Allied World
(Merger Sub), is a Delaware limited liability
company, which was initially incorporated on June 2, 2011
as a corporation and subsequently converted to a limited
liability company on June 10, 2011, and was formed for the
sole purpose of effecting the merger. In the merger, Merger Sub
will be merged with and into Transatlantic, with Transatlantic
surviving as a
wholly-owned
subsidiary of Allied World.
The
Merger
A copy of the merger agreement is attached as Annex A to
this joint proxy statement/prospectus. Allied World and
Transatlantic encourage you to read the entire merger agreement
carefully because it is the principal document governing the
merger. For more information on the merger agreement, see the
section entitled The Merger Agreement beginning on
page 107.
Effects
of the Merger (see page 42)
Subject to the terms and conditions of the merger agreement, a
copy of which is included as Annex A to this joint proxy
statement/prospectus, at the effective time of the merger,
Merger Sub will be merged with and into Transatlantic, with
Transatlantic surviving the merger as a wholly-owned subsidiary
of Allied World. Upon completion of the merger, Allied World
will be the parent company of Transatlantic, and Allied
Worlds name will be changed to TransAllied Group Holdings,
AG.
Merger
Consideration (see page 107)
Transatlantic stockholders will be entitled to receive 0.88
Allied World shares for each share of Transatlantic common stock
they hold at the effective time of the merger (the
exchange ratio) and cash in lieu of any Allied World
fractional shares. The exchange ratio is fixed and will not be
adjusted for changes in the market value of Transatlantic common
stock or Allied World shares. As a result, the implied value of
the consideration to Transatlantic stockholders will fluctuate
between the date of this joint proxy statement/prospectus and
the effective date of the merger. Based on the closing price of
Allied World shares on the NYSE on June 10, 2011, the last
trading day before public announcement of the merger, the
exchange ratio represented approximately $51.10 in value for
each share of Transatlantic common stock. Based on the closing
price of Allied World shares on the NYSE
on ,
2011, the latest practicable trading day before the date of this
joint proxy statement/prospectus, the exchange ratio represented
approximately $ in value for each
share of Transatlantic common stock.
Material
U.S. Federal Income Tax Consequences of the Merger (see
page 144)
The receipt of Allied World shares in exchange for shares of
Transatlantic common stock pursuant to the merger will be a
taxable transaction for U.S federal income tax purposes. In
general, a U.S. holder that receives Allied World shares in
exchange for shares of Transatlantic common stock pursuant to
the merger will recognize capital gain or loss for U.S federal
income tax purposes in an amount equal to the difference, if
any, between (i) the sum of the fair market value of the
Allied World shares received as of the effective time of the
merger and the amount of cash, if any, received in lieu of
fractional Allied World shares and (ii) the holders
adjusted tax basis in the shares of Transatlantic common stock
exchanged for the Allied World shares pursuant to the merger. No
gain or loss will be recognized by Allied World shareholders.
For further information regarding the U.S. federal income
tax consequences of the merger, see the section entitled
Material U.S. Federal Income Tax Consequences
beginning on page 144.
2
Recommendations
of the Board of Directors of Allied World (see
page 61)
After careful consideration, the Allied World board of directors
unanimously approved the merger agreement and determined that
the merger agreement and the transactions contemplated thereby,
including the merger, the issuance of Allied World shares to
Transatlantic stockholders pursuant to the merger agreement and
the amendment of the Allied World Articles, are in the best
interests of Allied World. For more information regarding the
factors considered by the Allied World board of directors in
reaching its decision to approve the merger agreement and the
transactions thereby contemplated, see the section entitled
The Merger Allied Worlds Reasons for the
Merger; Recommendations of the Allied World board of
directors. The Allied World board of directors
unanimously recommends that the Allied World shareholders vote
(i) FOR the share capital increase proposals,
(ii) FOR the NYSE share issuance proposal,
(iii) FOR the name change proposal,
(iv) FOR the election of directors proposal,
(v) FOR the capital reduction proposal and
(vi) FOR the Stock Incentive Plan proposal.
Recommendations
of the Board of Directors of Transatlantic (see
page 74)
After careful consideration, the Transatlantic board of
directors unanimously approved the merger agreement and
determined that the merger agreement and the transactions
contemplated thereby, including the merger, are advisable and in
the best interests of Transatlantic and its stockholders. For
more information regarding the factors considered by the
Transatlantic board of directors in reaching its decision to
approve the merger agreement and the merger, see the section
entitled The Merger Transatlantics
Reasons for the Merger; Recommendations of the Transatlantic
Board of Directors. The Transatlantic board of
directors unanimously recommends that Transatlantic stockholders
vote (i) FOR the adoption of the merger
agreement proposal, (ii) FOR the adjournment
proposal and (iii) FOR the golden parachute
proposal.
Opinion
of Allied Worlds Financial Advisor (see
page 63)
Allied World engaged Deutsche Bank Securities Inc.
(Deutsche Bank) to act as its financial advisor in
connection with the merger. At the June 12, 2011 meeting of
the Allied World board of directors, Deutsche Bank rendered an
oral and written opinion to the board of directors of Allied
World to the effect that, based upon and subject to the
assumptions, limitations, qualifications and conditions set
forth in the opinion, as of the date of such opinion, the
exchange ratio was fair, from a financial point of view, to
Allied World.
The full text of the written opinion of Deutsche Bank, dated
June 12, 2011, which sets forth, among other things, the
assumptions made, procedures followed, matters considered and
limitations, qualifications and conditions of the review
undertaken by Deutsche Bank in connection with the opinion, is
included in this joint proxy statement/prospectus as
Annex B and is incorporated by reference herein. Allied
World shareholders are urged to read Deutsche Banks
opinion carefully and in its entirety. Deutsche Bank provided
its opinion to Allied Worlds board of directors in
connection with and for the purposes of its evaluation of the
transactions contemplated by the merger agreement. Deutsche
Banks opinion relates only to the fairness, from a
financial point of view, of the exchange ratio to Allied World,
and does not constitute a recommendation to any holder of Allied
World shares as to how any such holder should vote with respect
to the proposals to be considered at the Allied World Special
Shareholder Meeting or any other matter. In addition, Deutsche
Bank was not requested to opine as to, and its opinion does not
in any manner address, the merits of Allied Worlds
underlying business decision to proceed with or effect the
merger or the relative merits of the merger as compared to any
alternative transactions or business strategies. See also
The Merger Opinion of Allied Worlds
Financial Advisor.
Opinion
of Transatlantics Financial Advisor (see
page 78)
Moelis & Company LLC (Moelis) delivered
its oral opinion, which was subsequently confirmed in writing,
that based upon and subject to the conditions and limitations
set forth in its written opinion, as of June 12, 2011, the
exchange ratio set forth in the merger agreement was fair, from
a financial point of view, to the holders of Transatlantic
common stock.
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The full text of the written opinion of Moelis, dated
June 12, 2011, which sets forth the assumptions made,
procedures followed, matters considered and limitations on the
review undertaken in connection with its opinion, is attached to
this joint proxy statement/prospectus as Annex C. The
summary of Moelis opinion contained in this joint proxy
statement/prospectus describes the material analyses underlying
Moelis opinion, but does not purport to be a complete
description of the analyses performed by Moelis in connection
with its opinion, and is qualified in its entirety by reference
to the full text of the opinion. Moelis provided its opinion for
the information and assistance of the Transatlantic board of
directors in connection with its consideration of the merger.
Moelis opinion is limited solely to the fairness, from a
financial point of view, of the exchange ratio set forth in the
merger agreement to the holders of Transatlantic common stock as
of the date of the opinion and does not constitute a
recommendation to any holder of Transatlantic common stock as to
how such Transatlantic stockholder should vote with respect to
the merger or any other matter. In addition, Moelis was not
requested to opine as to, and its opinion does not in any manner
address, Transatlantics underlying business decision to
effect the merger or the relative merits of the merger as
compared to any alternative business strategies or transactions
that might be available to Transatlantic. See also The
Merger Opinion of Transatlantics Financial
Advisor.
Interests
of Allied Worlds Directors and Executive Officers in the
Merger (see page 88)
Executive officers and members of the Allied World board of
directors have interests in the merger that may be different
from, or in addition to, the interests of Allied World
shareholders generally.
These interests include rights of executive officers under
employment agreements with Allied World, rights under a
supplemental executive retirement plan, under new waiver or
retention agreements, as applicable, that are expected to be
entered into prior to the consummation of the merger and rights
to indemnification and directors and officers
liability insurance that will survive completion of the merger.
For more information concerning these interests, please see the
discussion under the captions The
Merger Interests of Allied Worlds Directors and
Executive Officers in the Merger.
The Allied World board of directors was aware of these interests
and considered them, among other matters, in approving the
merger agreement and the transactions contemplated by the merger
agreement and in recommending that you vote to approve the share
capital increase proposals, the NYSE share issuance proposal,
the name change proposal, the election of directors proposal,
the capital reduction proposal and the Stock Incentive Plan
proposal.
Interests
of Transatlantics Directors and Executive Officers in the
Merger (see page 95)
Executive officers and members of the Transatlantic board of
directors have interests in the merger that may be different
from, or in addition to, the interests of Transatlantic
stockholders generally.
Additionally, as detailed below under The
Merger Board of Directors and Management
Following the Merger, certain of Transatlantics
executive officers and members of the Transatlantic board of
directors will continue to serve as officers or directors of the
combined company upon completion of the merger. Specifically,
Mr. Richard S. Press, the current non-executive chairman of
the Transatlantic board of directors, will be the non-executive
chairman of the board of directors of the combined company and
Mr. Michael C. Sapnar, the current Executive Vice President
and Chief Operating Officer of Transatlantic, will be appointed
to serve as President and Chief Executive Officer of Global
Reinsurance of the combined company.
While Transatlantic has various compensation and benefits
arrangements that provide for double trigger
payments (i.e., payments upon certain termination events in
proximity to a change in control), the merger will
not constitute a change in control for purposes of
such arrangements. However, Transatlantic has approved the form
of retention agreements that have been offered to certain
executives, providing for the grant of restricted stock units
(or in the event that there are not enough share reserves,
phantom stock awards) that will vest if the employment of such
executives is maintained through the applicable vesting dates
(or in certain instances of termination prior to such dates).
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In general, outstanding options to acquire Transatlantic common
stock and compensatory stock awards denominated in shares of
Transatlantic common stock will be converted into options to
acquire TransAllied shares and compensatory stock awards
denominated in TransAllied shares. The equity holdings of
Transatlantics directors and executive officers will be
treated in the same manner as the equity holdings of all other
equity holders provided, however, that pursuant to the merger
agreement, any independent Transatlantic or Allied World
director who ceases to be a member of the reconstituted
TransAllied board prior to the end of his or her term shall have
immediate vesting of all of his or her unvested Allied World
stock-based awards. For additional information regarding the
interests of Transatlantic directors and executive officers in
the merger, please see the section entitled The
Merger Interests of Transatlantics Directors
and Executive Officers in the Merger on page 95.
The Transatlantic board of directors was aware of these
interests and considered them, among other matters, in approving
the merger agreement and in recommending that you vote for the
adoption of the merger agreement proposal, the adjournment
proposal and the golden parachute proposal.
Board of
Directors and Management Following the Merger (see
page 98)
Immediately following the effective time of the merger, assuming
the receipt of the resignation letters of all current directors
of Allied World and of shareholder approval of the election of
directors proposal as described herein, the board of directors
of the combined company will consist of 11 members including:
(i) four independent Transatlantic directors: Stephen P.
Bradley, Ian H. Chippendale, John G. Foos and
John L. McCarthy; (ii) Richard S. Press (the
current non-executive chairman of the Transatlantic board of
directors); (iii) Michael C. Sapnar (the current Executive
Vice President and Chief Operating Officer of Transatlantic);
(iv) four of the following current independent Allied World
directors, who will be identified to shareholders at or prior to
the Allied World Special Shareholder Meeting: Barbara T.
Alexander, James F. Duffy, Bart Friedman, Scott Hunter, Mark R.
Patterson, Patrick de Saint-Aignan and
Samuel J. Weinhoff; and (v) Scott A. Carmilani
(the current President and Chief Executive Officer of Allied
World). The 11 members of the board of directors of the combined
company will be divided into three classes of directors as
follows:
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Class II (to hold office commencing upon the completion of
the merger and ending upon TransAllieds Annual Shareholder
Meeting in 2012): Ian H. Chippendale, John L. McCarthy and one
former independent Allied World director;
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Class III (to hold office commencing upon the completion of
the merger and ending upon TransAllieds Annual Shareholder
Meeting in 2013): Stephen P. Bradley, John G. Foos and two
former independent Allied World directors; and
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Class I (to hold office commencing upon the completion of
the merger and ending upon TransAllieds Annual Shareholder
Meeting in 2014): Scott A. Carmilani, Richard S. Press, Michael
C. Sapnar, and one former independent Allied World director.
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Immediately following the effective time of the merger,
Mr. Carmilani will serve as President and Chief Executive
Officer of the combined company. Mr. Press will be elected
as non-executive chairman of the board of directors of the
combined company (the TransAllied board). Effective
on the first anniversary of the closing date of the merger,
Mr. Press will cease to serve as non-executive chairman and
shall remain on the TransAllied board as a director until the
second anniversary of the closing date of the merger, at which
time he has agreed to retire from the TransAllied board (subject
to his earlier resignation or retirement). Mr. Sapnar will
be appointed to serve as President and Chief Executive Officer
of Global Reinsurance of the combined company.
The foregoing director elections and officer appointments are
conditioned upon completion of the merger. In the event that the
merger is not completed, the foregoing director elections and
officer appointments will not take effect.
The appointments of Messrs. Carmilani, Press and Sapnar,
among other matters, will be reflected in the amended and
restated organizational regulations of TransAllied (the
TransAllied organizational regulations), which will
take effect only upon completion of the merger, and, for a
period of one year following the closing
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date, any resolution to revise, modify or delete such provisions
will require a majority of at least eight of the votes cast by
the TransAllied board.
Treatment
of Transatlantic Stock Options and Other Stock-Based Awards and
Programs (see page 103)
Prior to the effective time of the merger, the Allied World
board of directors (or, if appropriate, the committee thereof
administering the Allied World stock plans) will adopt
resolutions or take other actions as may be required to effect
the below actions with respect to the Transatlantic stock
options and stock-based awards.
Stock Options. Upon completion of the merger,
each outstanding option to purchase shares of Transatlantic
common stock will be converted pursuant to the merger agreement
into a stock option to purchase Allied World shares on the same
terms and conditions as were in effect immediately prior to the
completion of the merger based on the exchange ratio.
Stock-Based Awards. Upon completion of the
merger, each outstanding stock-based award of Transatlantic will
be converted into Allied World shares or other compensatory
awards denominated in Allied World shares subject to a risk of
forfeiture to, or the right to repurchase by, Allied World, with
the same terms and conditions as were applicable under such
Transatlantic stock-based awards, and each holder of
Transatlantic stock-based awards shall be entitled to receive a
number of converted Transatlantic stock-based awards equal to
the product of the number of Transatlantic stock-based awards
held by such holder and the exchange ratio.
Each of Allied World and Transatlantic will use the existing
performance goals to determine performance awards through fiscal
year 2011. Thereafter, following the closing of the merger,
TransAllieds Compensation Committee will make a decision
regarding the performance awards for the 2012 fiscal year and
thereafter.
Regulatory
Clearances Required for the Merger (see page 101)
Allied World and Transatlantic have each agreed to take actions
in order to obtain regulatory clearances required to consummate
the merger. Regulatory clearances include expiration or
termination of the required waiting period under the
Hart-Scott-Rodino
Antitrust Improvement Act of 1976, as amended, and the rules and
regulations promulgated thereunder (the HSR Act),
following required notifications and review by the Antitrust
Division of the U.S. Department of Justice (the
Antitrust Division) or the Federal Trade Commission
(the FTC). The parties filed the required
notifications with the Antitrust Division and the FTC on
July 1, 2011 and early termination of the waiting period
was granted effective July 11, 2011.
In addition to those filings required by the HSR Act, certain
insurance regulatory filings will also be required to consummate
the merger. State insurance laws in the United States generally
require that, prior to the acquisition of an insurance company,
the acquiring party must obtain approval from the insurance
commissioner of the insurance companys state of domicile,
and the parties have and will make the required filings in
accordance with such laws. In addition, applications or
notifications have been or will be filed with various insurance
regulatory authorities outside of the United States in
connection with the changes in control that may be deemed to
occur as a result of the transactions contemplated by the merger
agreement.
Allied World and Transatlantic also expect to file notices with
insurance regulators and antitrust and competition authorities
in certain other jurisdictions. While Allied World and
Transatlantic expect to obtain all required regulatory
clearances, we cannot assure you that these regulatory
clearances will be obtained or that the granting of these
regulatory clearances will not involve the imposition of
additional conditions on the completion of the merger, including
the requirement to divest assets, or require changes to the
terms of the merger agreement. These conditions or changes could
result in the conditions to the merger not being satisfied.
Amended
and Restated Articles of Association of Allied World (see
page 126)
The Allied World board of directors proposes to the Allied World
shareholders, subject to completion of the merger, to amend the
Allied World Articles to change Allied Worlds name to
TransAllied Group Holdings, AG. The form of the
Articles of Association of TransAllied (the TransAllied
Articles) is included
6
in this joint proxy statement/prospectus as Annex D. The
adoption of the TransAllied Articles by the Allied World
shareholders is a condition to completion of the merger. In the
event this proposal is approved by Allied World shareholders,
but the merger is not completed, the TransAllied Articles will
not become effective.
Expected
Timing of the Merger
Allied World and Transatlantic currently expect the closing of
the merger to occur in the fourth quarter of 2011. However, the
merger is subject to various regulatory clearances and the
satisfaction or waiver of other conditions as described in the
merger agreement, and it is possible that factors outside the
control of Allied World and Transatlantic could result in the
merger being completed at an earlier time, a later time or not
at all.
Conditions
to Completion of the Merger (see page 118)
The obligations of Allied World and Transatlantic to complete
the merger are subject to the satisfaction of the following
conditions:
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approval by the Allied World shareholders of (i) the share
capital increase proposals, (ii) the NYSE share issuance
proposal and (iii) the name change proposal;
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approval by the Transatlantic stockholders of the adoption of
the merger agreement proposal;
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authorization of the listing of the Allied World shares to be
issued in the merger on the NYSE, subject to official notice of
issuance;
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the waiting period (and any extension thereof) applicable to the
merger under the HSR Act having expired or been earlier
terminated;
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obtaining any necessary approvals of the applicable insurance
regulatory authorities in New York, Bermuda and Switzerland;
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receipt of other requisite regulatory approvals;
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all consents and approvals of, and filings with, governmental
agencies having been made, obtained and in full force, other
than those that would not reasonably be expected to have a
material adverse effect on Allied World and Transatlantic after
giving effect to the merger;
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effectiveness of the registration statement of which this joint
proxy statement/prospectus forms a part and the absence of a
stop order or proceedings threatened or initiated by the SEC for
that purpose;
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absence of any order, injunction, decree, statute, rule or
regulation by a court or other governmental entity that makes
illegal or prohibits the completion of the merger or the other
transactions contemplated by the merger agreement;
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approval by the Allied World shareholders of the election of
directors proposal and execution of a written consent of the
TransAllied board approving certain committee and officer
appointments;
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a ruling from the Swiss Commercial Register having been
obtained; and
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the purchase by Allied World, following receipt of the requisite
Allied World and Transatlantic shareholder approvals, of
45,000 shares of Transatlantic common stock having been
completed.
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In addition, each of Allied Worlds and
Transatlantics obligations to effect the merger is subject
to the satisfaction or waiver of the following additional
conditions:
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the representations and warranties of each party, other than the
representations related to the shares issued and outstanding or
reserved for issuance, the necessary corporate power and
authority to execute and deliver the merger agreement, and the
brokers and finders fees, will be true and correct
(without giving effect to any materiality qualifications
contained in such representations and warranties) as of the date
of the merger agreement and as of the closing date (other than
those representations and warranties that were made only as of a
specified date, which need only be true and correct as of such
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specified date), except where the failure of such
representations and warranties to be so true and correct
(without giving effect to any limitation as to
materiality or to material adverse effect set forth
therein), individually or in the aggregate, has not had, and
would not reasonably be expected to have, a material adverse
effect on such party;
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the representations and warranties of each party relating to the
shares issued and outstanding or reserved for issuance, the
necessary corporate power and authority to execute and deliver
the merger agreement, and the brokers and finders fees,
will be true and correct in all material respects as of the date
of the merger agreement and as of the closing date (except to
the extent such representations or warranties were made as of an
earlier date, in which case, as of such earlier date);
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each party having performed or complied with, in all material
respects, all its obligations under the merger agreement at or
prior to the effective time of the merger; and
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receipt of a certificate executed by each partys chief
executive officer or chief financial officer as to the
satisfaction of the conditions described in the preceding three
bullet points.
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See the section entitled The Merger Agreement
Conditions to Completion of the Merger for a further
discussion of the conditions to closing of the merger.
No
Solicitation of Alternative Proposals (see
page 112)
The merger agreement precludes Allied World and Transatlantic
from soliciting or engaging in discussions or negotiations with
a third party with respect to a proposal for a competing
transaction, including the acquisition of a significant interest
in Allied Worlds or Transatlantics common stock or
assets. However, if Allied World or Transatlantic receives an
unsolicited proposal from a third party for a competing
transaction that Allied Worlds or Transatlantics
board of directors, as applicable, among other things,
determines in good faith (after consultation with its outside
legal advisors and financial advisors) (i) is reasonably
likely to lead to a proposal that is superior to the merger and
(ii) the failure to enter discussions regarding such
proposal would result in a breach of its fiduciary obligations
under applicable law, Allied World or Transatlantic, as
applicable, may, subject to certain conditions, furnish
non-public information to and enter into discussions with, and
only with, that third party regarding such competing transaction.
See the section entitled The Merger Agreement
No Solicitation of Alternative Proposals for a further
discussion of each partys covenant not to solicit
alternative acquisition proposals.
Termination
of the Merger Agreement (see page 119)
Generally, the merger agreement may be terminated and the merger
may be abandoned at any time prior to the completion of the
merger (except as specified below, including after the required
Allied World shareholder approvals or Transatlantic stockholder
approvals are obtained):
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by mutual written consent of Allied World and
Transatlantic; or
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by either party, if:
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a governmental entity issues a final and nonappealable order,
decree or ruling or takes any other action (including the
failure to have taken an action) having the effect of
permanently enjoining or otherwise prohibiting the merger or the
other transactions contemplated by the merger agreement;
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the required approval by the shareholders of Allied World or the
stockholders of Transatlantic has not been obtained at the
respective Special Shareholder Meeting (or at any adjournment or
postponement thereof);
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the merger has not been completed on or before January 31,
2012 (the end date), subject to extension by the
mutual agreement of Allied World and Transatlantic;
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the other party has breached any of its agreements or
representations in the merger agreement, in a way that the
conditions to such non-breaching partys obligation to
complete the merger would not then be satisfied and such breach
is either incurable or not cured by the end date; or
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prior to obtaining the requisite stockholder approval, the board
of directors of the other party changes its recommendation that
its stockholders vote in favor of the merger and the
transactions contemplated by the merger agreement.
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See the section entitled The Merger Agreement
Termination of the Merger Agreement for a further
discussion of the rights of each of Allied World and
Transatlantic to terminate the merger agreement.
Expenses
and Termination Fees; Liability for Breach (see
page 119)
Generally, all fees and expenses incurred in connection with the
merger agreement and the transactions contemplated by the merger
agreement will be paid by the party incurring those expenses,
subject to the specific exceptions discussed in this joint proxy
statement/prospectus whereby Allied World or Transatlantic, as
the case may be, may be required to pay a termination fee of
$115 million or $35 million
and/or the
reimbursement of expenses up to a maximum amount of
$35 million.
See the section entitled The Merger Agreement
Expenses and Termination Fees; Liability for Breach for a
further discussion of the circumstances under which such
termination fees
and/or
expense reimbursement will be required to be paid.
Accounting
Treatment (see page 146)
Allied World and Transatlantic each prepare its financial
statements in accordance with accounting principles generally
accepted in the United States of America (GAAP) and
any statutory accounting principles prescribed or permitted by
the domiciliary state insurance department of the applicable
subsidiary (SAP). The merger will be accounted for
using the acquisition method of accounting. Transatlantic will
be the accounting acquirer.
See the section entitled Accounting Treatment for a
further discussion of the accounting treatment of the
transaction.
No
Appraisal Rights (see page 105)
Neither the holders of Allied World shares, under Swiss law, nor
the holders of shares of Transatlantic common stock, under
Delaware law, are entitled to appraisal rights in connection
with the merger.
See the section entitled The Merger No
Appraisal Rights for a further discussion of the appraisal
rights in connection with the merger.
Comparison
of Stockholder Rights and Corporate Governance Matters (see
page 169)
Transatlantic stockholders, whose rights are currently governed
by the Transatlantic restated certificate of incorporation (the
Transatlantic charter), the Transatlantic amended
and restated by-laws (the Transatlantic bylaws) and
Delaware law, will, upon completion of the merger, become
shareholders of the combined company and their rights will be
governed by the TransAllied Articles, the TransAllied
organizational regulations and Swiss law. As a result,
Transatlantic stockholders will have different rights once they
become shareholders of the combined company due to differences
between the governing documents of Transatlantic and
TransAllied, and differences between Delaware and Swiss law.
These differences are described in detail under the section
entitled Comparison of Rights of TransAllied Shareholders
and Transatlantic Stockholders.
Listing
of Allied World Shares; De-listing and Deregistration of Shares
of Transatlantic Common Stock (see page 104)
It is a condition to the completion of the merger that the
Allied World shares to be issued to Transatlantic stockholders
pursuant to the merger be authorized for listing on the NYSE at
the effective time of the merger.
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Upon completion of the merger, shares of Transatlantic common
stock currently listed on the NYSE will cease to be listed on
the NYSE and will subsequently be deregistered under the
Exchange Act.
See the sections entitled The Merger Listing
of Allied World Shares and The Merger
De-listing and Deregistration of Transatlantic Common
Stock for a further discussion of the listing of Allied
World shares and de-listing of Transatlantic common stock in
connection with the merger.
The
Combined Companys Share Repurchase Program Post-Merger
(see page 106)
Allied World has a share repurchase program that had an
aggregate of $200.8 million of available capacity at
June 30, 2011. Following the completion of the merger, the
combined company intends to reevaluate its share repurchase
program as part of its year-end review and in preparation for
its Annual Shareholder Meeting in 2012. See the section entitled
The Merger The Combined Companys Share
Repurchase Program Post-Merger on page 106.
The
Meetings
The
Allied World Special Shareholder Meeting (see
page 30)
The Allied World Special Shareholder Meeting will be held at
Allied Worlds corporate headquarters, Lindenstrasse 8,
6340 Baar, Zug, Switzerland,
on ,
2011, at [2:00] p.m. local time. The Allied World Special
Shareholder Meeting is being held to consider and vote on:
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the proposal to increase Allied Worlds ordinary share
capital pursuant to article 3a(a) of the Allied World
Articles by CHF (equaling
USD ) to
CHF (equaling
USD ) by the issuance
of
Allied World shares to Transatlantic stockholders pursuant to,
and only in connection with, the merger as contemplated by the
merger agreement, including the exclusion of all preferential
subscription rights to which Allied World shareholders may be
entitled, referred to herein as the
article 3 share capital increase proposal;
the contributions for the new registered shares are paid by
converting existing reserves (Kapitalreserven) into share
capital;
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the proposal to increase Allied Worlds conditional share
capital pursuant to article 5(a) of the Allied World Articles by
CHF (equaling
USD ) to
CHF (equaling
USD ), only in connection with the
merger, referred to herein as the
article 5 share capital increase proposal;
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the proposal to increase Allied Worlds authorized share
capital pursuant to article 6(a) of the Allied World Articles by
CHF (equaling
USD ) to
CHF (equaling
USD ), only in connection with the
merger, referred to herein as the
article 6 share capital increase proposal
and, together with the article 3 share capital
increase proposal and the article 5 share capital
increase proposal, the share capital increase
proposals;
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the proposal to issue Allied World shares to Transatlantic
stockholders pursuant to the merger and as contemplated by the
merger agreement as required by NYSE rules, referred to herein
as the NYSE share issuance proposal;
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the proposal to amend article 1 of the Allied World
Articles to change Allied Worlds name to TransAllied
Group Holdings, AG immediately following, and conditioned
upon, the completion of the merger, referred to herein as the
name change proposal;
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the proposal to elect (x) three Class II directors to
hold office commencing upon the completion of the merger and
ending upon TransAllieds Annual Shareholder Meeting in
2012, (y) four Class III directors to hold office
commencing upon the completion of the merger and ending upon
TransAllieds Annual Shareholder Meeting in 2013 and
(z) four Class I directors to hold office commencing
upon the completion of the merger and ending upon
TransAllieds Annual Shareholder Meeting in 2014, referred
to herein as the election of directors proposal;
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the proposal to effect a capital reduction to allow for the
payment of a dividend to the combined companys
shareholders after the completion of the merger, referred to
herein as the capital reduction proposal; and
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the proposal to amend and restate the Stock Incentive Plan, the
form of which is included as Annex E to the joint proxy
statement/prospectus, as required by NYSE rules, to, among other
things, increase the number of shares reserved for issuance
under the Stock Incentive Plan and to extend the Plans
termination date effective upon the completion of the merger,
referred to herein as the Stock Incentive Plan
proposal.
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Completion of the merger is conditioned on, among other things,
approval of the share capital increase proposals, the NYSE share
issuance proposal, the name change proposal and the election of
directors proposal.
Only holders of record of outstanding Allied World shares as of
the close of business on July 22 , 2011, the Allied World
record date, are entitled to notice of, and to vote at, the
Allied World Special Shareholder Meeting or any adjournments or
postponements thereof. At the close of business on the Allied
World record date, 38,077,329 Allied World shares were issued
and outstanding, approximately 1.9% of which were owned and
entitled to be voted by Allied World directors and executive
officers and their affiliates. We currently expect that Allied
Worlds directors and executive officers will vote their
Allied World shares in favor of each of the proposals to be
considered and voted upon at the Allied World Special
Shareholder Meeting, although none of them has entered into any
agreement obligating him or her to do so.
You may cast one vote for each Allied World share you own.
Approval of each of the following proposals requires the
affirmative vote of at least
662/3%
of the votes represented at the Allied World Special Shareholder
Meeting and a majority of the nominal value of the Allied World
shares represented at such meeting, where holders of at least
50% of the total outstanding Allied World shares are represented
and voting and who are entitled to vote on such proposal:
(i) the article 3 share capital increase
proposal, (ii) the article 5 share capital
increase proposal and (iii) the article 6 share
capital increase proposal. The NYSE share issuance proposal and
the Stock Incentive Plan proposal require the affirmative vote
of the holders of a majority of shares entitled to vote on the
proposal and present in person or represented by proxy at the
Allied World Special Shareholder Meeting; provided that the
total votes cast on each such proposal represent over 50% of the
outstanding shares of Allied World shares entitled to vote on
such proposal. Each of the following approvals requires a
majority of the votes cast voting in favor of such proposal at
the Allied World Special Shareholder Meeting where holders of at
least 50% of the total outstanding Allied World shares are
represented and voting and who are entitled to vote on such
proposal: (i) the name change proposal, (ii) the
election of directors proposal and (iii) the capital reduction
proposal.
The
Transatlantic Special Shareholder Meeting (see
page 36)
The Transatlantic Special Shareholder Meeting is scheduled to be
held
at
on ,
2011 at [8:00 a.m.] local time. The Transatlantic Special
Shareholder Meeting is being held in order to consider and vote
on:
|
|
|
|
|
the proposal to adopt the merger agreement, which is further
described in the sections entitled The Merger and
The Merger Agreement, beginning on pages 42 and
107, respectively, referred to herein as the adoption of
the merger agreement proposal;
|
|
|
|
|
|
the proposal to adjourn the Transatlantic Special Shareholder
Meeting, if necessary or appropriate, to solicit additional
proxies if there are not sufficient votes to approve the
foregoing proposal, referred to herein as the adjournment
proposal; and
|
|
|
|
the proposal, on an advisory (non-binding) basis, to approve the
compensation that may be paid or become payable to
Transatlantics named executive officers in connection with
the merger, and the agreements and understandings pursuant to
which such compensation may be paid or become payable as
described in the section entitled The Merger
Interests of Transatlantics Directors and Executive
Officers in the Merger Golden Parachute
Compensation, referred to herein as the golden
parachute proposal.
|
11
Completion of the merger is conditioned on, among other things,
approval of the adoption of the merger agreement proposal.
Only holders of record of Transatlantic common stock at the
close of business on July 22, 2011, the Transatlantic
record date, are entitled to notice of, and to vote at, the
Transatlantic Special Shareholder Meeting or any adjournments or
postponements thereof. At the close of business on the
Transatlantic record date, 62,488,896 shares of
Transatlantic common stock were issued and outstanding,
approximately 0.35% of which were held by Transatlantics
directors and executive officers. We currently expect that
Transatlantics directors and executive officers will vote
their shares in favor of each of the proposals to be considered
and voted upon at the Transatlantic Special Shareholder Meeting,
although no director or executive officer has entered into any
agreement obligating him or her to do so.
You may cast one vote for each share of Transatlantic common
stock you own. The approval of the adoption of the merger
agreement proposal requires the affirmative vote of the holders
of a majority of the outstanding shares of Transatlantic common
stock entitled to vote thereon. The approval of the adjournment
proposal requires the affirmative vote of the holders of a
majority of the shares of Transatlantic common stock entitled to
vote and present in person or by proxy, whether or not a quorum
is present. The Transatlantic stockholders may so adjourn the
meeting to another time or place without further notice unless
the adjournment is for more than 30 days or if after the
adjournment a new record date is fixed for the adjourned
meeting, in which case a notice of the adjourned meeting shall
be given to each stockholder of record entitled to vote at the
adjourned meeting. The approval of the golden parachute proposal
requires the affirmative vote of the holders of a majority of
the shares of Transatlantic common stock present in person or
represented by proxy and entitled to vote thereon, assuming a
quorum is present.
12
Summary
Historical Consolidated Financial Data
Summary
Historical Consolidated Financial Data of Allied World
The following table sets forth selected historical consolidated
financial data of Allied World. This data is derived from Allied
Worlds Consolidated Financial Statements as of and for the
years ended December 31, 2010, 2009, 2008, 2007 and 2006,
respectively, and the unaudited quarterly financial statements
as of and for the six months ended June 30, 2011 and 2010,
which in the opinion of management include all adjustments
necessary for a fair statement of the results for the unaudited
interim periods. This selected financial data should be read in
conjunction with Allied Worlds Consolidated Financial
Statements and related Notes included elsewhere in Allied
Worlds Annual Report on
Form 10-K
for the fiscal year ended December 31, 2010 and Allied
Worlds quarterly report on
Form 10-Q
for the quarter ended June 30, 2011, each of which is
incorporated by reference in this joint proxy
statement/prospectus. See Where You Can Find More
Information beginning on page 184.
Statement
of Operations Data of Allied World
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended
|
|
|
|
|
|
|
June 30,
|
|
|
Year Ended December 31,
|
|
|
|
2011
|
|
|
2010
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
|
($ in millions, except per share amounts and ratios)
|
|
|
Summary Statement of Operations Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross premiums written
|
|
$
|
1,080.3
|
|
|
$
|
998.0
|
|
|
$
|
1,758.4
|
|
|
$
|
1,696.3
|
|
|
$
|
1,445.6
|
|
|
$
|
1,505.5
|
|
|
$
|
1,659.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net premiums written
|
|
$
|
876.7
|
|
|
$
|
803.1
|
|
|
$
|
1,392.4
|
|
|
$
|
1,321.1
|
|
|
$
|
1,107.2
|
|
|
$
|
1,153.1
|
|
|
$
|
1,306.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net premiums earned
|
|
$
|
690.2
|
|
|
$
|
677.2
|
|
|
$
|
1,359.5
|
|
|
$
|
1,316.9
|
|
|
$
|
1,117.0
|
|
|
$
|
1,159.9
|
|
|
$
|
1,252.0
|
|
Net investment income
|
|
|
102.6
|
|
|
|
134.5
|
|
|
|
244.1
|
|
|
|
300.7
|
|
|
|
308.8
|
|
|
|
297.9
|
|
|
|
244.4
|
|
Net realized investment gains (losses)
|
|
|
109.3
|
|
|
|
172.4
|
|
|
|
285.6
|
|
|
|
126.4
|
|
|
|
(60.0
|
)
|
|
|
37.0
|
|
|
|
(4.8
|
)
|
Net impairment charges recognized in earnings
|
|
|
|
|
|
|
(0.2
|
)
|
|
|
(0.2
|
)
|
|
|
(49.6
|
)
|
|
|
(212.9
|
)
|
|
|
(44.6
|
)
|
|
|
(23.9
|
)
|
Other income
|
|
|
|
|
|
|
0.9
|
|
|
|
0.9
|
|
|
|
1.5
|
|
|
|
0.7
|
|
|
|
|
|
|
|
|
|
Net losses and loss expenses
|
|
|
540.3
|
|
|
|
420.9
|
|
|
|
707.9
|
|
|
|
604.1
|
|
|
|
641.1
|
|
|
|
682.3
|
|
|
|
739.1
|
|
Acquisition costs
|
|
|
81.1
|
|
|
|
78.7
|
|
|
|
159.5
|
|
|
|
148.9
|
|
|
|
112.6
|
|
|
|
119.0
|
|
|
|
141.5
|
|
General and administrative expenses
|
|
|
135.2
|
|
|
|
131.5
|
|
|
|
286.5
|
|
|
|
248.6
|
|
|
|
185.9
|
|
|
|
141.6
|
|
|
|
106.1
|
|
Amortization and impairment of intangible assets
|
|
|
1.5
|
|
|
|
1.8
|
|
|
|
3.5
|
|
|
|
11.1
|
|
|
|
0.7
|
|
|
|
|
|
|
|
|
|
Interest expense
|
|
|
27.5
|
|
|
|
19.0
|
|
|
|
40.2
|
|
|
|
39.0
|
|
|
|
38.7
|
|
|
|
37.8
|
|
|
|
32.6
|
|
Foreign exchange (gain) loss
|
|
|
0.7
|
|
|
|
1.6
|
|
|
|
0.4
|
|
|
|
0.7
|
|
|
|
(1.4
|
)
|
|
|
(0.8
|
)
|
|
|
0.6
|
|
Income tax expense (benefit)
|
|
|
13.4
|
|
|
|
13.6
|
|
|
|
26.9
|
|
|
|
36.6
|
|
|
|
(7.6
|
)
|
|
|
1.1
|
|
|
|
5.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
102.4
|
|
|
$
|
317.7
|
|
|
$
|
665.0
|
|
|
$
|
606.9
|
|
|
$
|
183.6
|
|
|
$
|
469.2
|
|
|
$
|
442.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Per Share Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
2.69
|
|
|
$
|
6.34
|
|
|
$
|
14.30
|
|
|
$
|
12.26
|
|
|
$
|
3.75
|
|
|
$
|
7.84
|
|
|
$
|
8.09
|
|
Diluted
|
|
|
2.57
|
|
|
|
5.98
|
|
|
|
13.32
|
|
|
|
11.67
|
|
|
|
3.59
|
|
|
|
7.53
|
|
|
|
7.75
|
|
Weighted average number of common shares outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
38,061,724
|
|
|
|
50,123,945
|
|
|
|
46,491,279
|
|
|
|
49,503,438
|
|
|
|
48,936,912
|
|
|
|
59,846,987
|
|
|
|
54,746,613
|
|
Diluted
|
|
|
39,873,418
|
|
|
|
53,086,708
|
|
|
|
49,913,317
|
|
|
|
51,992,674
|
|
|
|
51,147,215
|
|
|
|
62,331,165
|
|
|
|
57,115,172
|
|
Dividends declared per share
|
|
$
|
|
*
|
|
$
|
0.40
|
|
|
$
|
1.05
|
|
|
$
|
0.74
|
|
|
$
|
0.72
|
|
|
$
|
0.63
|
|
|
$
|
0.15
|
|
|
|
|
* |
|
On August 5, 2011 Allied World distributed the first of its
quarterly dividends, as approved by the shareholders at its 2011
annual general shareholder meeting on May 5, 2011. |
13
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended
|
|
|
|
|
|
|
June 30,
|
|
|
Year Ended December 31,
|
|
|
|
2011
|
|
|
2010
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
Selected Ratios:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss and loss expense ratio(1)
|
|
|
78.3
|
%
|
|
|
62.1
|
%
|
|
|
52.1
|
%
|
|
|
45.9
|
%
|
|
|
57.4
|
%
|
|
|
58.8
|
%
|
|
|
59.0
|
%
|
Acquisition cost ratio(2)
|
|
|
11.7
|
|
|
|
11.6
|
|
|
|
11.7
|
|
|
|
11.3
|
|
|
|
10.1
|
|
|
|
10.3
|
|
|
|
11.3
|
|
General and administrative expense ratio(3)
|
|
|
19.6
|
|
|
|
19.4
|
|
|
|
21.1
|
|
|
|
18.9
|
|
|
|
16.6
|
|
|
|
12.2
|
|
|
|
8.5
|
|
Expense ratio(4)
|
|
|
31.3
|
|
|
|
31.0
|
|
|
|
32.8
|
|
|
|
30.2
|
|
|
|
26.7
|
|
|
|
22.5
|
|
|
|
19.8
|
|
Combined ratio(5)
|
|
|
109.6
|
|
|
|
93.1
|
|
|
|
84.9
|
|
|
|
76.1
|
|
|
|
84.1
|
|
|
|
81.3
|
|
|
|
78.8
|
|
Balance
Sheet Data of Allied World
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of June 30,
|
|
|
As of December 31,
|
|
|
|
2011
|
|
|
2010
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
|
($ in millions, except per share amounts)
|
|
|
Summary Balance Sheet Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
740.8
|
|
|
$
|
442.7
|
|
|
$
|
757.0
|
|
|
$
|
292.2
|
|
|
$
|
655.8
|
|
|
$
|
202.6
|
|
|
$
|
366.8
|
|
Investments at fair value
|
|
|
7,502.8
|
|
|
|
7,420.6
|
|
|
|
7,183.6
|
|
|
|
7,156.3
|
|
|
|
6,157.1
|
|
|
|
6,029.3
|
|
|
|
5,440.3
|
|
Reinsurance recoverable
|
|
|
1,014.0
|
|
|
|
932.4
|
|
|
|
927.6
|
|
|
|
920.0
|
|
|
|
888.3
|
|
|
|
682.8
|
|
|
|
689.1
|
|
Total assets
|
|
|
10,857.1
|
|
|
|
10,214.4
|
|
|
|
10,427.6
|
|
|
|
9,653.2
|
|
|
|
9,022.5
|
|
|
|
7,899.1
|
|
|
|
7,620.6
|
|
Reserve for losses and loss expenses
|
|
|
5,251.3
|
|
|
|
4,920.4
|
|
|
|
4,879.2
|
|
|
|
4,761.8
|
|
|
|
4,576.8
|
|
|
|
3,919.8
|
|
|
|
3,637.0
|
|
Unearned premiums
|
|
|
1,184.7
|
|
|
|
1,070.0
|
|
|
|
962.2
|
|
|
|
928.6
|
|
|
|
930.4
|
|
|
|
811.1
|
|
|
|
813.8
|
|
Total debt
|
|
|
797.8
|
|
|
|
499.0
|
|
|
|
797.7
|
|
|
|
498.9
|
|
|
|
742.5
|
|
|
|
498.7
|
|
|
|
498.6
|
|
Total shareholders equity
|
|
|
3,044.4
|
|
|
|
3,468.5
|
|
|
|
3,075.8
|
|
|
|
3,213.3
|
|
|
|
2,416.9
|
|
|
|
2,239.8
|
|
|
|
2,220.1
|
|
Book value per common share(6)
|
|
$
|
80.23
|
|
|
$
|
70.20
|
|
|
$
|
80.75
|
|
|
$
|
64.61
|
|
|
$
|
49.29
|
|
|
$
|
45.95
|
|
|
$
|
36.82
|
|
|
|
|
(1) |
|
Calculated by dividing net losses and loss expenses by net
premiums earned. |
|
(2) |
|
Calculated by dividing acquisition costs by net premiums earned. |
|
(3) |
|
Calculated by dividing general and administrative expenses by
net premiums earned. |
|
(4) |
|
Calculated by combining the acquisition cost ratio and the
general and administrative expense ratio. |
|
(5) |
|
Calculated by combining the loss ratio, acquisition cost ratio
and general and administrative expense ratio. |
|
(6) |
|
Book value per common share is total shareholders equity
divided by common shares outstanding. |
14
Summary
Historical Consolidated Financial Data of
Transatlantic
The following table sets forth selected historical consolidated
financial data of Transatlantic. This data is derived from
Transatlantics Consolidated Financial Statements as of and
for the years ended December 31, 2010, 2009, 2008, 2007 and
2006, respectively, and the unaudited quarterly financial
statements as of and for the six months ended June 30, 2011
and 2010, which in the opinion of management include all
adjustments necessary for a fair statement of the results for
the unaudited interim periods. This selected financial data
should be read in conjunction with Transatlantics
Consolidated Financial Statements and related Notes included
elsewhere in Transatlantics Annual Report on
Form 10-K
for the fiscal year ended December 31, 2010 and
Transatlantics quarterly report on
Form 10-Q
for the quarter ended June 30, 2011, each of which is
incorporated by reference in this joint proxy
statement/prospectus. See Where You Can Find More
Information beginning on page 184.
Statement
of Operations Data of Transatlantic
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended
|
|
|
|
|
|
|
June 30,
|
|
|
Years Ended December 31,
|
|
|
|
2011
|
|
|
2010
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
|
(in thousands, except per share amounts and ratios)
|
|
|
Net premiums written
|
|
$
|
2,040,472
|
|
|
$
|
1,973,888
|
|
|
$
|
3,881,693
|
|
|
$
|
3,986,101
|
|
|
$
|
4,108,092
|
|
|
$
|
3,952,899
|
|
|
$
|
3,633,440
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net premiums earned
|
|
$
|
1,911,758
|
|
|
$
|
1,966,347
|
|
|
$
|
3,858,620
|
|
|
$
|
4,039,082
|
|
|
$
|
4,067,389
|
|
|
$
|
3,902,669
|
|
|
$
|
3,604,094
|
|
Net losses and loss adjustment expenses incurred
|
|
|
(1,850,178
|
)
|
|
|
(1,437,867
|
)
|
|
|
(2,681,774
|
)
|
|
|
(2,679,171
|
)
|
|
|
(2,907,227
|
)
|
|
|
(2,638,033
|
)
|
|
|
(2,462,666
|
)
|
Net commissions
|
|
|
(481,202
|
)
|
|
|
(473,341
|
)
|
|
|
(932,820
|
)
|
|
|
(927,918
|
)
|
|
|
(980,626
|
)
|
|
|
(980,121
|
)
|
|
|
(903,666
|
)
|
Increase (decrease) in deferred policy acquisition costs
|
|
|
43,420
|
|
|
|
(2,615
|
)
|
|
|
2,898
|
|
|
|
(12,406
|
)
|
|
|
6,956
|
|
|
|
16,901
|
|
|
|
13,471
|
|
Other underwriting expenses
|
|
|
(77,326
|
)
|
|
|
(88,828
|
)
|
|
|
(177,624
|
)
|
|
|
(158,181
|
)
|
|
|
(131,555
|
)
|
|
|
(115,760
|
)
|
|
|
(102,339
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Underwriting (loss) profit(1)
|
|
|
(453,528
|
)
|
|
|
(36,304
|
)
|
|
|
69,300
|
|
|
|
261,406
|
|
|
|
54,937
|
|
|
|
185,656
|
|
|
|
148,894
|
|
Net investment income
|
|
|
226,348
|
|
|
|
228,384
|
|
|
|
473,547
|
|
|
|
467,402
|
|
|
|
440,451
|
|
|
|
469,772
|
|
|
|
434,540
|
|
Realized net capital gains (losses)(2)
|
|
|
54,646
|
|
|
|
6,388
|
|
|
|
30,101
|
|
|
|
(70,641
|
)
|
|
|
(435,541
|
)
|
|
|
9,389
|
|
|
|
10,862
|
|
(Loss) gain on early extinguishment of debt
|
|
|
(1,179
|
)
|
|
|
|
|
|
|
(115
|
)
|
|
|
9,869
|
|
|
|
10,250
|
|
|
|
|
|
|
|
|
|
Interest on senior notes
|
|
|
(33,587
|
)
|
|
|
(34,142
|
)
|
|
|
(68,272
|
)
|
|
|
(43,454
|
)
|
|
|
(43,359
|
)
|
|
|
(43,421
|
)
|
|
|
(43,405
|
)
|
Other expenses, net
|
|
|
(18,725
|
)
|
|
|
(14,651
|
)
|
|
|
(31,773
|
)
|
|
|
(28,549
|
)
|
|
|
(23,515
|
)
|
|
|
(25,644
|
)
|
|
|
(10,983
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) income before income taxes
|
|
|
(226,025
|
)
|
|
|
149,675
|
|
|
|
472,788
|
|
|
|
596,033
|
|
|
|
3,223
|
|
|
|
595,752
|
|
|
|
539,908
|
|
Income (taxes) benefits
|
|
|
116,755
|
|
|
|
(23,290
|
)
|
|
|
(70,587
|
)
|
|
|
(118,371
|
)
|
|
|
99,031
|
|
|
|
(108,611
|
)
|
|
|
(111,756
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income
|
|
$
|
(109,270
|
)
|
|
$
|
126,385
|
|
|
$
|
402,201
|
|
|
$
|
477,662
|
|
|
$
|
102,254
|
|
|
$
|
487,141
|
|
|
$
|
428,152
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Per Common Share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
(1.75
|
)
|
|
$
|
1.94
|
|
|
$
|
6.28
|
|
|
$
|
7.20
|
|
|
$
|
1.54
|
|
|
$
|
7.37
|
|
|
$
|
6.49
|
|
Diluted
|
|
|
(1.75
|
)
|
|
|
1.92
|
|
|
|
6.19
|
|
|
|
7.15
|
|
|
|
1.53
|
|
|
|
7.31
|
|
|
|
6.46
|
|
Cash dividends declared
|
|
|
0.43
|
|
|
|
0.41
|
|
|
|
0.83
|
|
|
|
0.79
|
|
|
|
0.73
|
|
|
|
0.62
|
|
|
|
0.53
|
|
Share Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
62,430
|
|
|
|
65,085
|
|
|
|
64,092
|
|
|
|
66,381
|
|
|
|
66,270
|
|
|
|
66,124
|
|
|
|
65,955
|
|
Diluted
|
|
|
62,430
|
|
|
|
65,785
|
|
|
|
64,930
|
|
|
|
66,802
|
|
|
|
66,722
|
|
|
|
66,654
|
|
|
|
66,266
|
|
Ratios:(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss ratio
|
|
|
96.8
|
%
|
|
|
73.1
|
%
|
|
|
69.5
|
%
|
|
|
66.3
|
%
|
|
|
71.5
|
%
|
|
|
67.6
|
%
|
|
|
68.3
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commission ratio
|
|
|
22.9
|
|
|
|
24.2
|
|
|
|
24.1
|
|
|
|
23.3
|
|
|
|
23.9
|
|
|
|
24.7
|
|
|
|
24.7
|
|
Other underwriting expense ratio
|
|
|
4.0
|
|
|
|
4.5
|
|
|
|
4.6
|
|
|
|
3.9
|
|
|
|
3.2
|
|
|
|
2.9
|
|
|
|
2.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Underwriting expense ratio
|
|
|
26.9
|
|
|
|
28.7
|
|
|
|
28.7
|
|
|
|
27.2
|
|
|
|
27.1
|
|
|
|
27.6
|
|
|
|
27.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Combined ratio
|
|
|
123.7
|
%
|
|
|
101.8
|
%
|
|
|
98.2
|
%
|
|
|
93.5
|
%
|
|
|
98.6
|
%
|
|
|
95.2
|
%
|
|
|
95.9
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15
Balance
Sheet Data of Transatlantic
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of June 30,
|
|
|
As of December 31,
|
|
|
|
2011
|
|
|
2010
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
|
($ in thousands, except per share amounts)
|
|
|
Total investments
|
|
$
|
13,510,673
|
|
|
$
|
12,301,043
|
|
|
$
|
12,972,739
|
|
|
$
|
12,315,395
|
|
|
$
|
10,229,557
|
|
|
$
|
12,500,540
|
|
|
$
|
11,130,832
|
|
Cash and cash equivalents
|
|
|
341,673
|
|
|
|
327,530
|
|
|
|
284,491
|
|
|
|
195,723
|
|
|
|
288,920
|
|
|
|
255,432
|
|
|
|
205,264
|
|
Total assets
|
|
|
16,706,353
|
|
|
|
15,249,845
|
|
|
|
15,705,354
|
|
|
|
14,943,659
|
|
|
|
13,376,938
|
|
|
|
15,484,327
|
|
|
|
14,268,464
|
|
Unpaid losses and loss adjustment expenses
|
|
|
9,950,709
|
|
|
|
8,789,300
|
|
|
|
9,020,610
|
|
|
|
8,609,105
|
|
|
|
8,124,482
|
|
|
|
7,926,261
|
|
|
|
7,467,949
|
|
Unearned premiums
|
|
|
1,349,101
|
|
|
|
1,183,155
|
|
|
|
1,212,535
|
|
|
|
1,187,526
|
|
|
|
1,220,133
|
|
|
|
1,226,647
|
|
|
|
1,144,022
|
|
Senior notes
|
|
|
1,005,785
|
|
|
|
1,033,298
|
|
|
|
1,030,511
|
|
|
|
1,033,087
|
|
|
|
722,243
|
|
|
|
746,930
|
|
|
|
746,633
|
|
Total stockholders equity
|
|
|
4,233,932
|
|
|
|
4,049,606
|
|
|
|
4,284,459
|
|
|
|
4,034,380
|
|
|
|
3,198,220
|
|
|
|
3,349,042
|
|
|
|
2,958,270
|
|
Book value per common share(4)
|
|
$
|
67.76
|
|
|
$
|
63.53
|
|
|
$
|
68.83
|
|
|
$
|
60.77
|
|
|
$
|
48.19
|
|
|
$
|
50.56
|
|
|
$
|
44.80
|
|
|
|
|
(1) |
|
Includes pre-tax net catastrophe (costs) of ($612) million
in the first six months of 2011, ($157) million in the
first six months of 2010, ($202) million in the full year
2010, $6 million in the full year 2009, ($170) million
in the full year 2008, ($55) million in the full year 2007
and ($29) million in the full year 2006. |
|
|
|
(2) |
|
Includes
other-than-temporary
impairment write-downs charged to earnings of ($3) million
in the first six months of 2011, ($6) million in the first
six months of 2010, ($8) million in the full year 2010,
($83) million in the full year 2009, ($318) million in
the full year 2008, ($27) million in the full year 2007 and
($1) million in the full year 2006. |
|
|
|
(3) |
|
The loss ratio represents the absolute value of net losses and
loss adjustment expenses incurred expressed as a percentage of
net premiums earned. The underwriting expense ratio represents
the sum of the commission ratio and the other underwriting
expense ratio. The commission ratio represents the absolute
value of the sum of net commission and the (decrease) increase
in deferred policy acquisition costs expressed as a percentage
of net premiums earned. The other underwriting expense ratio
represents the absolute value of other underwriting expenses
expressed as a percentage of net premiums earned. The combined
ratio represents the sum of the loss ratio and the underwriting
expense ratio. |
|
(4) |
|
Book value per common share is stockholders equity divided
by common shares outstanding. |
16
Summary
Unaudited Pro Forma Condensed Consolidated
Financial Information of Allied World and
Transatlantic
The following table presents selected unaudited pro forma
condensed consolidated financial information about the combined
companys consolidated balance sheet and statements of
operations, after giving effect to the merger. The information
under Selected Pro Forma Condensed Consolidated Statements
of Operations Data in the table below gives effect to the
merger as if it had been consummated on January 1, 2010,
the beginning of the earliest period presented. The information
under Selected Pro Forma Condensed Consolidated Balance
Sheet Data in the table below assumes the merger had been
consummated on June 30, 2011. This unaudited pro forma
condensed consolidated financial information was prepared using
the acquisition method of accounting, with Transatlantic
considered the accounting acquirer of Allied World. See
Accounting Treatment on page 146.
In addition, the selected unaudited pro forma condensed
consolidated financial information includes adjustments that are
preliminary and may be revised. There can be no assurance that
such revisions will not result in material changes. The selected
unaudited pro forma condensed consolidated financial information
is presented for illustrative purposes only and is not
necessarily indicative of results that actually would have
occurred or that may occur in the future had the merger been
completed on the dates indicated, nor is it necessarily
indicative of the future operating results or financial position
of the combined company.
The information presented below should be read in conjunction
with the historical consolidated financial statements of Allied
World and Transatlantic including the related notes, filed by
each of them with the SEC, and with the pro forma condensed
consolidated financial information of Allied World and
Transatlantic, including the related notes, appearing elsewhere
in this document. See Where You Can Find More
Information beginning on page 184 and Unaudited
Pro Forma Condensed Consolidated Financial Information
beginning on page 147.
17
Selected
Pro Forma Condensed Consolidated Balance Sheet Data
As of June 30, 2011
|
|
|
|
|
|
|
As of
|
|
|
|
June 30, 2011
|
|
|
|
(Unaudited)
|
|
|
|
(in thousands of U.S. dollars)
|
|
|
ASSETS
|
Total investments
|
|
$
|
21,013,438
|
|
Cash and cash equivalents and restricted cash
|
|
|
1,130,588
|
|
Insurance and reinsurance assets
|
|
|
3,898,627
|
|
Goodwill
|
|
|
|
|
Intangible assets
|
|
|
276,711
|
|
All other assets
|
|
|
896,645
|
|
|
|
|
|
|
Total assets
|
|
$
|
27,216,009
|
|
|
|
|
|
|
|
LIABILITIES AND SHAREHOLDERS EQUITY
|
Unpaid losses and loss adjustment expenses
|
|
$
|
15,140,076
|
|
Unearned premiums
|
|
|
2,524,851
|
|
Senior notes
|
|
|
1,883,870
|
|
All other liabilities
|
|
|
675,205
|
|
|
|
|
|
|
Total liabilities
|
|
|
20,224,002
|
|
Total shareholders equity
|
|
|
6,992,007
|
|
|
|
|
|
|
Total liabilities and shareholders equity
|
|
$
|
27,216,009
|
|
|
|
|
|
|
18
Selected
Pro Forma Condensed Consolidated Statements of Operations
Data
For the Six Months Ended June 30, 2011 and Year Ended
December 31, 2010
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended
|
|
|
Year Ended
|
|
|
|
June 30, 2011
|
|
|
December 31, 2010
|
|
|
|
(Unaudited)
|
|
|
|
(in thousands, except shares outstanding and per share
data)
|
|
|
Revenues:
|
|
|
|
|
|
|
|
|
Net premiums written
|
|
$
|
2,917,146
|
|
|
$
|
5,274,148
|
|
Increase in net unearned premiums
|
|
|
(315,205
|
)
|
|
|
(55,980
|
)
|
|
|
|
|
|
|
|
|
|
Net premiums earned
|
|
|
2,601,941
|
|
|
|
5,218,168
|
|
Net investment income
|
|
|
326,538
|
|
|
|
712,918
|
|
Realized net capital gains
|
|
|
163,158
|
|
|
|
315,101
|
|
Loss on early extinguishment of debt
|
|
|
(1,179
|
)
|
|
|
(115
|
)
|
|
|
|
|
|
|
|
|
|
Total revenues
|
|
|
3,090,458
|
|
|
|
6,246,072
|
|
|
|
|
|
|
|
|
|
|
Expenses:
|
|
|
|
|
|
|
|
|
Net losses and loss adjustment expenses
|
|
|
2,390,443
|
|
|
|
3,389,657
|
|
Acquisition costs
|
|
|
518,835
|
|
|
|
1,089,411
|
|
Other underwriting expenses
|
|
|
210,084
|
|
|
|
464,018
|
|
Interest on senior notes
|
|
|
53,805
|
|
|
|
94,407
|
|
Other expenses, net
|
|
|
21,663
|
|
|
|
147,239
|
|
|
|
|
|
|
|
|
|
|
Total expenses
|
|
|
3,194,830
|
|
|
|
5,184,732
|
|
|
|
|
|
|
|
|
|
|
(Loss) income before income taxes
|
|
|
(104,372
|
)
|
|
|
1,061,340
|
|
Income taxes (benefits)
|
|
|
(103,399
|
)
|
|
|
97,532
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income
|
|
$
|
(973
|
)
|
|
$
|
963,808
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income per common share:
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
(0.01
|
)
|
|
$
|
9.35
|
|
Diluted
|
|
|
(0.01
|
)
|
|
|
9.00
|
|
Dividends per common share
|
|
|
|
|
|
|
1.05
|
|
Weighted average common shares outstanding:
|
|
|
|
|
|
|
|
|
Basic
|
|
|
93,158,177
|
|
|
|
103,049,946
|
|
Diluted
|
|
|
93,158,177
|
|
|
|
107,063,364
|
|
19
Unaudited
Comparative Per Share Data
Presented below are Allied Worlds and Transatlantics
historical per share data for the six months ended June 30,
2011 and the year ended December 31, 2010 and unaudited pro
forma consolidated per share data for the six months ended
June 30, 2011 and the year ended December 31, 2010.
This information should be read together with the consolidated
financial statements and related notes of Allied World and
Transatlantic that are incorporated by reference in this joint
proxy statement/prospectus and with the unaudited pro forma
condensed consolidated financial data included under
Unaudited Pro Forma Condensed Consolidated Financial
Information beginning on page 147. The pro forma
information is presented for illustrative purposes only and is
not necessarily indicative of the operating results or financial
position that would have occurred if the merger had been
completed as of the beginning of the periods presented, nor is
it necessarily indicative of the future operating results or
financial position of the combined company. The historical book
value per share is computed by dividing total stockholders
equity by the number of shares of common stock outstanding at
the end of the period. The pro forma net income (loss) per share
of the combined company is computed by dividing the pro forma
net income (loss) by the pro forma weighted average number of
shares outstanding. The pro forma book value per share of the
combined company is computed by dividing total pro forma
stockholders equity by the pro forma number of shares of
common stock outstanding at the end of the period. The
Transatlantic unaudited pro forma equivalent per share financial
information is computed by multiplying the Allied World
unaudited pro forma consolidated per share amounts by the
exchange ratio (0.88 Allied World shares for each share of
Transatlantic common stock).
|
|
|
|
|
|
|
|
|
|
|
Six Months
|
|
|
Year Ended
|
|
|
|
Ended
|
|
|
December 31,
|
|
Allied World Historical
|
|
June 30, 2011
|
|
|
2010
|
|
|
Net income per share:
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
2.69
|
|
|
$
|
14.30
|
|
Diluted
|
|
$
|
2.57
|
|
|
$
|
13.32
|
|
Book value per share of common stock
|
|
$
|
80.23
|
|
|
$
|
80.75
|
|
Transatlantic Historical
|
|
|
|
|
|
|
|
Net (loss) income per share:
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
(1.75
|
)
|
|
$
|
6.28
|
|
Diluted
|
|
$
|
(1.75
|
)
|
|
$
|
6.19
|
|
Book value per share of common stock
|
|
$
|
67.76
|
|
|
$
|
68.83
|
|
Allied World Unaudited Pro Forma Consolidated Amounts
|
|
|
|
|
|
|
|
Net (loss) income per share:
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
(0.01
|
)
|
|
$
|
9.35
|
|
Diluted
|
|
$
|
(0.01
|
)
|
|
$
|
9.00
|
|
Pro forma book value per share of common stock
|
|
$
|
75.11
|
|
|
|
(1
|
)
|
Transatlantic Unaudited Pro Forma Equivalent Per Share
Data
|
|
|
|
|
|
|
|
Net (loss) income per share:
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
(0.01
|
)
|
|
$
|
8.23
|
|
Diluted
|
|
$
|
(0.01
|
)
|
|
$
|
7.92
|
|
Pro forma book value per share of common stock
|
|
$
|
66.10
|
|
|
|
(1
|
)
|
20
SPECIAL
NOTE REGARDING FORWARD-LOOKING STATEMENTS
This joint proxy statement/prospectus and the documents
incorporated by reference into this joint proxy
statement/prospectus contain forward-looking statements within
the meaning of the safe harbor provisions of the Private
Securities Litigation Reform Act of 1995 that are not limited to
historical facts, but reflect Allied Worlds and
Transatlantics current beliefs, expectations or intentions
regarding future events. These statements include in general
forward-looking statements both with respect to Allied World and
Transatlantic and the insurance and reinsurance industry.
Statements that are not historical facts, including statements
that use terms such as anticipates,
believes, expects, intends,
plans, projects, seeks and
will and that relate to our plans and objectives for
future operations, are forward-looking statements. In light of
the risks and uncertainties inherent in all forward-looking
statements, the inclusion of such statements in this joint proxy
statement/prospectus should not be considered as a
representation by us or any other person that our objectives or
plans will be achieved. These forward-looking statements
include, without limitation, Allied Worlds and
Transatlantics expectations with respect to the synergies,
costs and other anticipated financial impacts of the proposed
transaction; future financial and operating results of the
combined company; the combined companys plans, objectives,
expectations and intentions with respect to future operations
and services; approval of the proposed transaction by
stockholders and by governmental regulatory authorities; the
satisfaction of the closing conditions to the proposed
transaction; and the timing of the completion of the proposed
transaction.
All forward-looking statements involve significant risks and
uncertainties that could cause actual results to differ
materially from those in the forward-looking statements, many of
which are generally outside the control of Allied World and
Transatlantic and are difficult to predict. These risks and
uncertainties also include those set forth under Risk
Factors, beginning on page 22, as well as, among
others, risks and uncertainties relating to: any event, change
or other circumstance that could give rise to the termination of
the merger agreement; the inability to obtain
Transatlantics or Allied Worlds shareholder approval
or the failure to satisfy other conditions to completion of the
merger, including receipt of regulatory approvals; risks that
the proposed transaction disrupts each companys current
plans and operations; the ability to retain key personnel; the
ability to realize the benefits of the merger; the amount of the
costs, fees, expenses and charges related to the merger; pricing
and policy term trends; increased competition; the impact of
acts of terrorism and acts of war; greater frequency or severity
of unpredictable catastrophic events; negative rating agency
actions; the adequacy of each partys loss reserves; Allied
World or its
non-U.S. subsidiaries
becoming subject to significant income taxes in the United
States or elsewhere; changes in regulations or tax laws; changes
in the availability, cost or quality of reinsurance or
retrocessional coverage; adverse general economic conditions;
and judicial, legislative, political and other governmental
developments, as well as managements response to these
factors, and other factors identified in each companys
filings with the SEC. Allied World and Transatlantic caution
that the foregoing list of factors is not exclusive.
Additional information concerning these and other risk factors
is contained in Allied Worlds and Transatlantics
most recently filed Annual Reports on
Form 10-K,
subsequent Quarterly Reports on
Form 10-Q,
Current Reports on
Form 8-K,
and other SEC filings. All subsequent written and oral
forward-looking statements concerning Allied World,
Transatlantic, the proposed transaction or other matters and
attributable to Allied World or Transatlantic or any person
acting on their behalf are expressly qualified in their entirety
by the cautionary statements above. You are cautioned not to
place undue reliance on these forward-looking statements, which
speak only to the date they are made. Allied World and
Transatlantic are under no obligation (and expressly disclaim
any such obligation) to update or revise any forward-looking
statement that may be made from time to time, whether as a
result of new information, future developments or otherwise.
21
RISK
FACTORS
In addition to the other information included and
incorporated by reference in this joint proxy
statement/prospectus,
including the matters addressed in the section entitled
Special Note Regarding Forward-Looking Statements,
you should carefully consider the following risks before
deciding whether to vote for the adoption of the merger
agreement proposal, the adjournment proposal and the golden
parachute proposal, in the case of Transatlantic stockholders,
or for the share capital increase proposals, the NYSE share
issuance proposal, the name change proposal, the election of
directors proposal, the capital reduction proposal and the Stock
Incentive Plan proposal, in the case of Allied World
shareholders. In addition, you should read and consider the
risks associated with each of the businesses of Allied World and
Transatlantic because these risks will also affect the combined
company. These risks can be found in the Annual Reports on
Form 10-K
for the fiscal year ended December 31, 2010 for each of
Allied World and Transatlantic, as such risks may be updated or
supplemented in each companys subsequently filed Quarterly
Reports on
Form 10-Q
or Current Reports on
Form 8-K,
which are incorporated by reference into this joint proxy
statement/prospectus. You should also read and consider the
other information in this joint proxy
statement/prospectus
and the other documents incorporated by reference in this joint
proxy statement/prospectus. See the section entitled Where
You Can Find More Information beginning on
page 184.
Risk
Factors Relating to the Merger
The
exchange ratio is fixed and will not be adjusted in the event of
any change in either Allied Worlds or Transatlantics
stock price.
Upon closing of the merger, each share of Transatlantic common
stock will be converted into the right to receive 0.88 Allied
World shares. This exchange ratio is fixed in the merger
agreement and will not be adjusted for changes in the market
price of either Allied World shares or Transatlantic common
stock between the date of signing the merger agreement and
completion of the merger. Changes in the price of Allied World
shares prior to the completion of the merger will affect the
market value of Allied World shares that Transatlantic
stockholders will receive on the effective date of the merger.
Stock price changes may result from a variety of factors (many
of which are beyond Allied Worlds or Transatlantics
control), including the following factors:
|
|
|
|
|
changes in Allied Worlds and Transatlantics
respective businesses, operations and prospects, or the market
assessments thereof;
|
|
|
|
market assessments of the likelihood that the merger will be
completed, including related considerations regarding regulatory
approvals of the merger; and
|
|
|
|
general market and economic conditions and other factors
generally affecting the price of Allied World shares and
Transatlantic common stock.
|
The price of Allied World shares at the closing of the merger
may vary from the price on the date the merger agreement was
executed, on the date of this joint proxy statement/prospectus
and on the date of the Special Shareholder Meetings of Allied
World and Transatlantic. As a result, the market value
represented by the exchange ratio will also vary. For example,
based on the range of closing prices of Allied World shares
during the period from June 10, 2011, the last trading date
before public announcement of the merger,
through ,
2011, the last practicable trading date before the date of this
joint proxy statement/prospectus, the exchange ratio represented
a market value ranging from a low of
$ to a high of
$ for each share of Transatlantic
common stock.
Because
the merger will be completed after the Special Shareholder
Meetings, at the time of your Special Shareholder Meeting, you
will not know the exact market value of the Allied World shares
that Transatlantic stockholders will receive upon completion of
the merger.
If the price of Allied World shares decreases between the time
of the meetings and the effective time of the merger,
Transatlantic stockholders will receive Allied World shares that
have a market value that is less than the market value of such
shares at the time of the meetings. Therefore, because the
exchange ratio is fixed, stockholders cannot be sure at the time
of the meetings of the market value of the consideration that
will be paid to Transatlantic stockholders upon completion of
the merger.
22
Actions
by Validus may negatively impact Transatlantics ability to
consummate the merger and may cause disruption to
Transatlantics ongoing business.
On July 12, 2011, Validus Holdings, Ltd.
(Validus) delivered an unsolicited offer to
Transatlantic to combine Transatlantic and Validus, with Validus
acquiring all the outstanding common shares of Transatlantic
(the Validus Proposal). On July 19, 2011, after
consultation with its independent financial and legal advisors,
the Transatlantic board of directors concluded that the Validus
Proposal did not constitute a Superior Proposal
under the merger agreement between Allied World and
Transatlantic and the Transatlantic board of directors
reaffirmed its recommendation of, and its declaration of
advisability with respect to, the merger agreement between
Allied World and Transatlantic. However, the Board also
determined on that date that the Validus Proposal is reasonably
likely to lead to a Superior Proposal and that the
failure to enter into discussions regarding the Validus Proposal
would result in a breach of its fiduciary duties under
applicable law. As a result, the Transatlantic board of
directors offered to engage in discussions and exchange
information with Validus, subject to, and in accordance with the
merger agreement between Allied World and Transatlantic,
providing Allied World with three business days notice and
obtaining from Validus a confidentiality agreement with terms
substantially similar and not less favorable to Transatlantic,
in the aggregate, than those contained in the confidentiality
agreement with Allied World. Validus refused to enter into the
confidentiality agreement provided by Transatlantic, and
instead, on July 25, 2011, Validus commenced the Validus
exchange offer. It is unclear what additional actions Validus
may take to further its proposal and prevent the merger from
occurring. Even if ultimately unsuccessful, actions taken by
Validus could cause disruption in Transatlantics business
and could negatively impact the expected timing of the
consummation of the merger. In addition, there is a risk that
Transatlantics stockholders may vote against proposals
relating to the merger as a result of Validuss actions and
that, consequently, the required stockholder vote may not be
obtained. In that case, it is possible that Transatlantic may
decide not to enter into a transaction with Validus or any other
party.
The
merger is subject to a number of conditions, including certain
governmental and regulatory conditions that may not be
satisfied, or may not be completed on a timely basis, or at all.
Failure to complete the transactions could have material and
adverse effects on Allied World and Transatlantic.
Completion of the merger is conditioned upon, among other
matters, the receipt of certain governmental authorizations,
consents, orders or other approvals, including the approval of
antitrust authorities in the United Kingdom and Germany,
and the approval of insurance regulators in Bermuda, Switzerland
and New York. In deciding whether to grant antitrust,
insurance or other regulatory clearances, the relevant
governmental entities will consider the effect of the merger
within their relevant jurisdictions. The governmental agencies
from which Allied World and Transatlantic will seek the
approvals have broad discretion in administering the governing
regulations. The terms and conditions of the approvals that are
granted may impose requirements, limitations or costs or place
restrictions on the conduct of the combined companys
business. There can be no assurance that regulators will not
impose conditions, terms, obligations or restrictions and that
such conditions, terms, obligations or restrictions will not
have the effect of delaying completion of the merger or imposing
additional material costs on, or materially limiting the
revenues of, the combined company following the merger. In
addition, neither Allied World nor Transatlantic can provide
assurances that any such conditions, terms, obligations or
restrictions will not result in the delay or abandonment of the
merger. For a more detailed description of the regulatory review
process, see the section entitled The Merger
Regulatory Clearances Required for the Merger beginning on
page 101.
If the merger is not completed on a timely basis, or at all,
Allied Worlds and Transatlantics respective ongoing
businesses may be adversely affected. Additionally, in the event
the merger is not completed, Allied World and Transatlantic will
be subject to a number of risks without realizing any of the
benefits of having completed the merger, including (i) the
payment of certain fees and costs relating to the merger, such
as legal, accounting, financial advisor and printing fees,
(ii) the potential decline in the market price of Allied
Worlds and Transatlantics shares, (iii) the
risk that the parties may not find a party willing to enter into
a merger agreement on terms equivalent to or more attractive
than the terms set forth in the merger agreement and
(iv) the loss of time and resources.
23
Uncertainties
associated with the merger, the Validus exchange offer and the
Berkshire Proposal may cause a loss of management personnel and
other key employees which could adversely affect the future
business, operations and financial results of the combined
company.
Whether or not the merger is completed, the announcement and
pendency of the merger, the Validus exchange offer and the
Berkshire Proposal (as discussed in the section entitled
The Merger Background of the Merger)
could disrupt the businesses of Allied World and Transatlantic.
Allied World and Transatlantic are dependent on the experience
and industry knowledge of their senior management and other key
employees to execute their business plans. The combined
companys success after the merger will depend in part upon
the ability of Allied World and Transatlantic to retain key
management personnel and other key employees. Current and
prospective employees of Allied World and Transatlantic may
experience uncertainty about their roles within the combined
company following the merger, which may have an adverse effect
on the ability of each of Allied World and Transatlantic to
attract or retain key management and other key personnel.
Accordingly, no assurance can be given that the combined company
will be able to attract or retain key management personnel and
other key employees of Allied World and Transatlantic to the
same extent that such companies have previously been able to
attract or retain employees. In addition, the combined company
might not be able to locate suitable replacements for any such
key employees who leave the combined company or offer employment
to potential replacements on reasonable terms.
Several
lawsuits have been filed against Allied World and Transatlantic
challenging the merger, and an adverse ruling may prevent the
merger from being completed.
Allied World and Transatlantic, as well as the members of the
Transatlantic board of directors, have been named as defendants
in several lawsuits brought by purported shareholders of
Transatlantic challenging the merger and seeking, among other
things, injunctive relief to enjoin the defendants from
completing the merger on the
agreed-upon
terms. See The Merger Litigation Related to
the Merger beginning on page 105 for more information
about the lawsuits that have been filed related to the merger.
One of the conditions to the closing of the merger is that no
order, injunction, decree or other legal restraint or
prohibition shall be in effect that prevents completion of the
merger. Consequently, if a settlement or other resolution is not
reached in the lawsuits referenced above and the plaintiffs
secure injunctive or other relief prohibiting, delaying or
otherwise adversely affecting Allied World and
Transatlantics ability to complete the merger, then such
injunctive or other relief may prevent the merger from becoming
effective within the expected timeframe or at all.
The
merger agreement contains provisions that could discourage a
potential competing acquiror of either Allied World or
Transatlantic.
The merger agreement contains no shop provisions
that, subject to limited exceptions, restrict each of Allied
Worlds and Transatlantics ability to solicit,
initiate, or knowingly encourage and facilitate competing
third-party proposals for the acquisition of its companys
shares or assets. Further, even if the Allied World board of
directors or the Transatlantic board of directors, respectively,
withdraws or qualifies its recommendation with respect to the
merger, Allied World or Transatlantic, as the case may be, will
still be required to submit each of their merger-related
proposals to a vote at their shareholder meeting. In addition,
the other party generally has an opportunity to offer to modify
the terms of the merger in response to any competing acquisition
proposals before the board of directors of the company that has
received a third-party proposal may withdraw or qualify its
recommendation with respect to the merger. In some
circumstances, upon termination of the merger agreement, one of
the parties will be required to pay a termination fee of
$115 million or $35 million to the other party,
and/or an
expense reimbursement up to a maximum of $35 million. See
The Merger Agreement No Solicitation of
Alternative Proposals beginning on page 112,
The Merger Agreement Termination of the Merger
Agreement beginning on page 119 and The Merger
Agreement Expenses and Termination Fees; Liability
for Breach beginning on page 119.
These provisions could discourage a potential third-party
acquiror that might have an interest in acquiring all or a
significant portion of Allied World or Transatlantic from
considering or proposing that acquisition, at a higher per share
cash or market value than the market value proposed to be
received or realized in the merger or might result in a
potential third-party acquiror proposing to pay a lower price to
the shareholders than it
24
might otherwise have proposed to pay because of the added
expense of the termination fee
and/or
expense reimbursement that may become payable in certain
circumstances.
The
fairness opinions delivered by Deutsche Bank and Moelis will not
reflect changes in circumstances between signing the merger
agreement and the completion of the merger.
Neither the Allied World board of directors nor the
Transatlantic board of directors has obtained an updated
fairness opinion as of the date of this joint proxy
statement/prospectus from Deutsche Bank, Allied Worlds
financial advisor, or Moelis, Transatlantics financial
advisor.
Changes in the operations and prospects of Allied World or
Transatlantic, general market and economic conditions and other
factors that may be beyond their control, and on which the
fairness opinions were based, may alter the value of Allied
World or Transatlantic or the prices of Allied World shares or
Transatlantic common stock by the time the merger is completed.
The opinions do not speak as of the time the merger will be
completed or as of any date other than the dates of such
opinions. Because neither company anticipates asking its
financial advisor to update its opinion, these opinions only
address the fairness of the exchange ratio or merger
consideration, from a financial point of view, at the time the
merger agreement was executed. The opinions are included as
Annexes B and C to this joint proxy statement/prospectus.
For a description of the opinions and a summary of the material
financial analyses in connection with rendering such opinions,
please refer to The Merger Opinion of Allied
Worlds Financial Advisors beginning on page 63
and The Merger Opinion of Transatlantics
Financial Advisor beginning on page 78.
The
merger will be taxable to Transatlantic
stockholders.
The receipt of Allied World shares (and cash, if any, received
in lieu of Allied World fractional shares) by U.S. holders
in exchange for shares of Transatlantic common stock pursuant to
the merger will be a taxable transaction for U.S. federal
income tax purposes. For a description of the tax consequences
of the merger, please refer to Material U.S. Federal
Income Tax Consequences beginning on page 144.
Risk
Factors Relating to the Combined Company Following the
Merger
Although
Allied World and Transatlantic expect to realize certain
benefits as a result of the merger, there is the possibility
that the combined company may be unable to integrate
successfully the businesses of Allied World and Transatlantic in
order to realize the anticipated benefits of the
merger.
The merger involves the combination of two companies that
currently operate as independent public companies. The combined
company will be required to devote significant management
attention and resources to integrating the business practices
and operations of Allied World and Transatlantic. Due to legal
restrictions, Allied World and Transatlantic have been able to
conduct only limited planning regarding the integration of the
two companies after completion of the merger and have not yet
determined the exact nature of how the businesses and operations
of the two companies will be combined thereafter. Potential
difficulties the combined company may encounter as part of the
integration process include the following:
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the inability to successfully combine the businesses in a manner
that permits the combined company to achieve the full synergies
anticipated to result from the merger;
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complexities associated with managing the combined businesses,
including the challenge of integrating complex systems,
technology, networks and other assets of each company in a
seamless manner that minimizes any adverse impact on customers,
suppliers, brokers, employees and other constituencies;
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the costs of integration and compliance and the possibility that
the full benefits anticipated to result from the merger will not
be realized;
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any delay in the integration of management teams, strategies,
operations, products and services;
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diversion of the attention of each companys management as
a result of the merger;
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differences in business backgrounds, corporate cultures and
management philosophies that may delay successful integration;
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the ability to retain key employees;
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the ability to create and enforce uniform standards, controls,
procedures, policies and information systems;
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potential unknown liabilities and unforeseen increased expenses
or delays associated with the merger, including one-time cash
costs to integrate the companies beyond current
estimates; and
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the disruption of, or the loss of momentum in, each
companys ongoing businesses or inconsistencies in
standards, controls, procedures and policies,
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any of which could adversely affect each companys ability
to maintain relationships with customers, suppliers, brokers,
employees and other constituencies or Allied Worlds and
Transatlantics ability to achieve the anticipated benefits
of the merger or could reduce each companys earnings or
otherwise adversely affect the business and financial results of
the combined company.
Current
Allied World shareholders and Transatlantic stockholders will
have a reduced ownership and voting interest after the merger
and will exercise less influence over management.
Current Allied World shareholders have the right to vote in the
election of the Allied World board of directors and on other
matters affecting Allied World. Current Transatlantic
stockholders have the right to vote in the election of the
Transatlantic board of directors and on other matters affecting
Transatlantic. Immediately after the merger is completed, it is
expected that, on a fully diluted basis, current Allied World
shareholders will own approximately 42% of the combined company
and current Transatlantic stockholders will own approximately
58% of the combined company. As a result of the merger, current
Allied World shareholders and current Transatlantic stockholders
will have less influence on the management and policies of the
combined company than they now have on the management and
policies of Allied World and Transatlantic, respectively.
Additionally, the Allied World Articles impose voting
restrictions on holders of 10% or more of the total combined
voting power of Allied World issued shares such that these
shareholders voting power is reduced to less than 10% of
the total voting power.
The
future results of the combined company will suffer if the
combined company does not effectively manage its expanded
operations following the merger.
Following the merger, the size of the business of the combined
company will increase significantly beyond the current size of
either Allied Worlds or Transatlantics business. The
combined companys future success depends, in part, upon
its ability to manage this expanded business, which will pose
substantial challenges for management, including challenges
related to the management and monitoring of new global
operations and associated increased costs and complexity. There
can be no assurances that the combined company will be
successful or that it will realize the expected operating
efficiencies, cost savings, revenue enhancements and other
benefits currently anticipated from the merger.
The
financial analyses and forecasts considered by Allied World and
Transatlantic and their respective financial advisors may not be
realized, which may adversely affect the market price of Allied
World shares following the merger.
In performing their financial analyses and rendering their
opinions regarding the fairness, from a financial point of view,
of the exchange ratio set forth in the merger agreement, each of
the respective financial advisors to Allied World and
Transatlantic independently reviewed and relied on, among other
things, internal stand-alone and pro forma financial analyses
and forecasts as separately provided to each respective
financial advisor by Allied World or Transatlantic. See the
sections entitled The Merger Certain Allied
World Prospective Financial Information and The
Merger Certain Transatlantic Prospective Financial
Information. The financial advisor of Transatlantic,
Moelis, assumed, at the direction of the board of directors of
Transatlantic, that such financial information was reasonably
prepared on a basis reflecting the best currently available
estimates and judgments of the management of Allied World and
Transatlantic as to the future performance of their respective
companies and that such future financial results will be
achieved at the times and in the amounts projected by management
of Allied World and Transatlantic. These analyses and forecasts
were prepared by, or as directed by, the managements of Allied
World and Transatlantic and were also considered by the Allied
World board of directors and the Transatlantic board of
directors. None of these analyses or forecasts were prepared
with a view towards public disclosure or compliance with the
published guidelines of
26
the SEC, GAAP, SAP, international financial reporting standards
(IFRS) or the guidelines established by the American
Institute of Certified Public Accountants for preparation and
presentation of financial forecasts. These projections are
inherently based on various estimates and assumptions that are
subject to the judgment of those preparing them. These
projections are also subject to significant economic,
competitive, industry and other uncertainties and contingencies,
all of which are difficult or impossible to predict and many of
which are beyond the control of Allied World and Transatlantic.
Accordingly, there can be no assurance that Allied Worlds
or Transatlantics financial condition or results of
operations will be consistent with those set forth in such
analyses and forecasts. Significantly worse financial results
could have a material adverse effect on the market price of
TransAllied shares following the merger.
The
combined company is expected to incur substantial expenses
related to the merger and the integration of the
companies.
The combined company is expected to incur substantial expenses
in connection with the merger and the integration of Allied
World and Transatlantic. There are a large number of processes,
policies, procedures, operations, technologies and systems that
must be integrated. While Allied World and Transatlantic have
assumed that a certain level of expenses would be incurred,
there are many factors beyond their control that could affect
the total amount or the timing of the integration expenses.
Moreover, many of the expenses that will be incurred are, by
their nature, difficult to estimate accurately. These expenses
could, particularly in the near term, exceed the savings that
the combined company expects to achieve from the elimination of
duplicative expenses and the realization of economies of scale
and cost savings. These integration expenses likely will result
in the combined company taking significant charges against
earnings following the completion of the merger, and the amount
and timing of such charges are uncertain at present.
There
can be no assurance that the merger will not result in a ratings
downgrade of Allied Worlds or Transatlantics
insurance or reinsurance operating companies, which may result
in an adverse effect on the business, financial condition and
operating results.
Ratings with respect to claims paying ability and financial
strength are important factors in establishing the competitive
position of insurance and reinsurance companies and will also
impact the cost and availability of capital to an insurance and
reinsurance holding company. The combined operations of Allied
World and Transatlantic will compete with other insurance and
reinsurance companies, financial intermediaries and financial
institutions on the basis of a number of factors, including the
ratings assigned by internationally-recognized rating
organizations. Ratings will represent an important consideration
in maintaining customer confidence in the combined company and
in its ability to market insurance and reinsurance products.
Rating organizations regularly analyze the financial performance
and condition of insurers. Any ratings downgrade, or the
potential for a ratings downgrade, of Allied World,
Transatlantic, the combined company or any of their insurance or
reinsurance subsidiaries could adversely affect their ability to
market and distribute products and services, which could have an
adverse effect on Allied Worlds, Transatlantics or
the combined companys, as applicable, business, financial
condition and operating results. There is a risk that Allied
World and/or
Transatlantic is subject to being downgraded, and there can be
no assurance that the ratings of the combined companys
insurance and reinsurance operating companies will not be
downgraded, following the merger.
Ratings are not in any way a measure of protection afforded to
investors and should not be relied upon in making an investment
or voting decision.
The
occurrence of severe catastrophic events may cause the combined
companys financial results to be volatile and may affect
the financial results of the combined company differently than
such an event would have affected the financial results of
either Allied World or Transatlantic on a stand-alone
basis.
Because the combined company will, among other things,
underwrite property catastrophe insurance and reinsurance and
have large aggregate exposures to natural and man-made
disasters, management expects that the combined companys
loss experience generally will include infrequent events of
great severity. Consequently, the occurrence of losses from
catastrophic events is likely to cause substantial volatility in
the combined companys financial results. In addition,
because catastrophes are an inherent risk of the combined
companys business, a major event or series of events can
be expected to occur from time to time and to have a material
adverse effect on the combined companys financial
condition and results of operations, possibly to
27
the extent of eliminating the combined companys
shareholders equity. Upon completion of the merger, the
combined companys exposure to natural and man-made
disasters will be different from the exposure of either Allied
World or Transatlantic prior to the completion of the merger.
Accordingly, the merger may exacerbate the exposure described
above.
Some
of the executive officers and directors of Allied World and
Transatlantic have interests in seeing the merger completed that
are different from, or in addition to, those of the other Allied
World and Transatlantic stockholders. Therefore, some of the
executive officers and directors of Allied World may have a
conflict of interest in recommending the proposals being voted
on at the Allied World Special Shareholder Meeting and some of
the executive officers and directors of Transatlantic may have a
conflict of interest in recommending the proposals being voted
on at the Transatlantic Special Shareholder
Meeting.
Certain of the executive officers of Allied World and
Transatlantic have arrangements that provide them with interests
in the merger that are different from, or in addition to, those
of stockholders of Allied World and Transatlantic generally.
These interests include, among others, ownership interests in
the combined company, continued service as an executive officer
of the combined company, payments and equity grants, and the
accelerated vesting of certain equity awards
and/or
certain severance benefits, in connection with the merger. These
interests may influence the executive officers of Allied World
to support or approve the proposals to be presented at the
Allied World Special Shareholder Meeting
and/or the
executive officers of Transatlantic to support or approve the
proposals to be presented at the Transatlantic Special
Shareholder Meeting.
In addition, certain directors of Allied World and Transatlantic
may have interests in the merger that are different from, or in
addition to, those of stockholders of Allied World and
Transatlantic generally, including ownership interests and
equity grants in the combined company and continued service as a
director of the combined company. These interests may influence
the directors of Allied World and Transatlantic to support or
approve the proposals to be presented at the Allied World
Special Shareholder Meeting
and/or the
Transatlantic Special Shareholder Meeting.
See The Merger Interests of Allied
Worlds Directors and Executive Officers in the
Merger beginning on page 88 and The
Merger Interests of Transatlantics Directors
and Executive Officers in the Merger beginning on
page 95 for a more detailed description of these interests.
The
Allied World shares to be received by Transatlantic stockholders
as a result of the merger will have different rights from the
shares of Transatlantic common stock.
Upon completion of the merger, Transatlantic stockholders will
become shareholders of TransAllied, and their rights as
shareholders will be governed by the TransAllied Articles, the
TransAllied organizational resolutions and Swiss law. The rights
associated with Transatlantic common stock are different from
the rights associated with Allied World shares. See
Comparison of Rights of TransAllied Shareholders and
Transatlantic Stockholders beginning on page 169.
Other
Risk Factors of Allied World and Transatlantic
Allied Worlds and Transatlantics businesses are and
will be subject to the risks described above. In addition,
Allied World and Transatlantic are, and will continue to be,
subject to the risks described in Allied Worlds and
Transatlantics Annual Reports on
Form 10-K
for the fiscal year ended December 31, 2010, as updated by
subsequent Quarterly Reports on
Form 10-Q
and Current Reports on
Form 8-K,
all of which are filed with the SEC and incorporated by
reference into this joint proxy statement/prospectus. See
Where You Can Find More Information beginning on
page 184 for the location of information incorporated by
reference in this joint proxy statement/prospectus.
28
THE
COMPANIES
Allied
World Assurance Company Holdings, AG
Allied World Assurance Company Holdings, AG is a holding company
incorporated in Switzerland. Allied World, through its
wholly-owned subsidiaries, including Allied World Assurance
Company, Ltd, Allied World Assurance Company (Europe) Limited,
Allied World Assurance Company (Reinsurance) Limited, Allied
World Assurance Company (U.S.) Inc., Allied World National
Assurance Company, Darwin National Assurance Company and Darwin
Select Insurance Company and its branch offices, is a specialty
insurance and reinsurance company that underwrites a diversified
portfolio of property and casualty lines of business through
offices located in Bermuda, Hong Kong, Ireland, Singapore,
Switzerland, the United Kingdom and the United States. Allied
World has nine offices in the United States and has become
licensed in Canada as well. Since its formation in 2001, Allied
World has focused primarily on the direct insurance markets.
Allied World offers its clients and producers significant
capacity in both direct property and casualty insurance markets
as well as the reinsurance market. Allied World is the ultimate
parent company of Allied World Assurance Company Holdings, Ltd,
the former publicly-traded Bermuda holding company, and its
subsidiaries as a result of a redomestication effected on
December 1, 2010, pursuant to a scheme of arrangement under
Bermuda law.
Allied World shares are traded on the NYSE under the symbol
AWH. Following the merger, the combined
companys common shares will be traded on the NYSE under
the symbol TAG.
The principal executive offices of Allied World are located at
Lindenstrasse 8, 6340 Baar, Zug, Switzerland and its telephone
number is
41-41-768-1080.
Additional information about Allied World and its subsidiaries
is included in documents incorporated by reference into this
joint proxy statement/prospectus. See Where You Can Find
More Information on page 184.
Transatlantic
Holdings, Inc.
Transatlantic Holdings, Inc. is a holding company incorporated
in the State of Delaware. Transatlantic, through its
wholly-owned subsidiaries, TRC, Trans Re Zurich Reinsurance
Company Ltd., acquired by TRC in 1996, and Putnam (contributed
by Transatlantic to TRC in 1995), offers reinsurance capacity
for a full range of property and casualty products, directly and
through brokers, to insurance and reinsurance companies, in both
the domestic and international markets on both a treaty and
facultative basis. One or both of TRC and Putnam is licensed,
accredited, authorized or can serve as a reinsurer in
50 states and the District of Columbia in the United States
and in Puerto Rico and Guam. Through its international
locations, Transatlantic has operations worldwide, including
Bermuda, Canada, seven locations in Europe, three locations in
Central and South America, two locations in Asia (excluding
Japan), and one location in each of Japan, Australia and Africa.
TRC is licensed in Bermuda, Canada, Japan, the United Kingdom,
the Dominican Republic, the Hong Kong Special Administrative
Region, the Peoples Republic of China and Australia.
Transatlantic was originally formed in 1986 under the name
PREINCO Holdings, Inc. as a holding company for Putnam.
Transatlantics name was changed to Transatlantic Holdings,
Inc. on April 18, 1990 following the acquisition on
April 17, 1990 of all of the common stock of TRC in
exchange for shares of common stock of Transatlantic.
Transatlantics common stock is traded on the NYSE under
the symbol TRH.
The principal executive offices of Transatlantic are located at
80 Pine Street, New York, New York 10005 and its telephone
number is
(212) 365-2200.
Additional information about Transatlantic and its subsidiaries
is included in documents incorporated by reference into this
joint proxy statement/prospectus. See Where You Can Find
More Information on page 184.
GO Sub,
LLC
GO Sub, LLC, a wholly-owned subsidiary of Allied World and a
Delaware limited liability company, which was initially
incorporated on June 2, 2011 as a corporation, and
subsequently converted to a limited liability company on
June 10, 2011, and was formed for the sole purpose of
effecting the merger. In the merger, Merger Sub will be merged
with and into Transatlantic, with Transatlantic surviving as a
wholly-owned subsidiary of Allied World.
29
THE
ALLIED WORLD SPECIAL SHAREHOLDER MEETING
This joint proxy statement/prospectus is being provided to
the shareholders of Allied World as part of a solicitation of
proxies by the Allied World board of directors for use at the
Allied World Special Shareholder Meeting to be held at the time
and place specified below, and at any properly convened meeting
following an adjournment or postponement thereof. This joint
proxy statement/prospectus provides shareholders of Allied World
with the information they need to know to be able to vote or
instruct their vote to be cast at the Allied World Special
Shareholder Meeting.
Date,
Time and Place
The Allied World Special Shareholder Meeting will be held at
Allied Worlds corporate headquarters, Lindenstrasse 8,
6340 Baar, Zug, Switzerland,
on ,
2011, at [2:00] p.m. local time.
Purpose
of the Allied World Special Shareholder Meeting
At the Allied World Special Shareholder Meeting, Allied World
shareholders will be asked to consider and vote on:
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the proposal to increase Allied Worlds ordinary share
capital pursuant to article 3a(a) of the Allied World
Articles by CHF (equaling
USD ) to
CHF (equaling
USD ) by the issuance
of
Allied World shares to Transatlantic stockholders pursuant to,
and only in connection with, the merger as contemplated by the
merger agreement, including the exclusion of all preferential
subscription rights to which Allied World shareholders may be
entitled; the contributions for the new registered shares are
paid by converting existing reserves (Kapitalreserven)
into share capital;
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the proposal to increase Allied Worlds conditional share
capital pursuant to article 5(a) of the Allied World Articles by
CHF (equaling
USD ) to
CHF (equaling
USD ), only in connection with the
merger;
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the proposal to increase Allied Worlds authorized share
capital pursuant to article 6(a) of the Allied World Articles by
CHF (equaling
USD ) to
CHF (equaling
USD ), only in connection with the
merger;
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the proposal to issue Allied World shares to Transatlantic
stockholders pursuant to the merger and as contemplated by the
merger agreement as required by NYSE rules;
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the proposal to amend article 1 of the Allied World
Articles to change Allied Worlds name to TransAllied
Group Holdings, AG immediately following, and conditioned
upon, the completion of the merger;
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the proposal to elect (x) three Class II directors to
hold office commencing upon the completion of the merger and
ending upon TransAllieds Annual Shareholder Meeting in
2012, (y) four Class III directors to hold office
commencing upon the completion of the merger and ending upon
TransAllieds Annual Shareholder Meeting in 2013 and
(z) four Class I directors to hold office commencing
upon the completion of the merger and ending upon
TransAllieds Annual Shareholder Meeting in 2014;
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the proposal to effect a capital reduction to allow for the
payment of a dividend to the combined companys
shareholders after the completion of the merger; and
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the proposal to amend and restate the Stock Incentive Plan, as
required by NYSE rules, to, among other things, increase the
number of shares reserved for issuance under the Stock Incentive
Plan and to extend the Stock Incentive Plans termination
date effective upon the completion of the merger.
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Completion of the merger is conditioned on, among other things,
approval of the share capital increase proposals, the NYSE share
issuance proposal, the name change proposal, and the election of
directors proposal.
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Recommendations
of the Board of Directors of Allied World
The Allied World board of directors unanimously approved the
merger agreement and the amendment to the Allied World Articles
and determined that the merger agreement and the transactions
contemplated thereby, including the merger, the issuance of the
Allied World shares to Transatlantic stockholders pursuant to
the merger and the adoption of the amendment to the Allied World
Articles, are in the best interests of Allied World.
The Allied World board of directors unanimously recommends
that the Allied World shareholders vote FOR each of
the proposals set forth above. See the section entitled
The Merger Allied Worlds Reasons for the
Merger; Recommendations of the Allied World Board of
Directors beginning on page 61 for a more detailed
discussion of the Allied World board of directors
recommendation.
Allied
World Record Date; Shareholders Entitled to Vote
Only Allied World shareholders of record at the close of
business on July 22, 2011, the Allied World record date,
are entitled to notice of, and to vote at, the Allied World
Special Shareholder Meeting.
At the close of business on the Allied World record date, there
were 38,077,329 Allied World shares issued and outstanding and
entitled to vote at the Allied World Special Shareholder
Meeting. Holders of Allied World shares will have one vote for
each Allied World share they owned on the Allied World record
date, in person or by a properly executed and delivered proxy
with respect to the Allied World Special Shareholder Meeting,
unless such shareholders own controlled shares that
constitute 10% or more of the issued Allied World shares, in
which case the voting rights with respect to those
controlled shares will be limited, in the aggregate,
to a voting power of approximately 10% pursuant to a formula
specified in article 14 of the Allied World Articles. The
Allied World Articles define controlled shares
generally to include all shares of Allied World directly,
indirectly or constructively owned or beneficially owned by any
person or group of persons. The share capital of Allied World
consists of the outstanding Allied World shares and Allied World
non-voting shares.
Voting by
Allied Worlds Directors and Executive Officers
At the close of business on the Allied World record date,
directors and executive officers of Allied World and their
affiliates were entitled to vote 713,214 Allied World
shares, or approximately 1.9% of the Allied World shares
outstanding on that date. We currently expect that Allied
Worlds directors and executive officers will vote their
shares in favor of each of the proposals to be considered and
voted upon at the Special Shareholder Meeting, although none of
them has entered into any agreement obligating them to do so.
Quorum
In order to transact business at the Allied World Special
Shareholder Meeting, a quorum is required. Two or more persons
present in person and representing in person or by proxy
throughout the meeting more than 50% of the total issued and
outstanding Allied World shares registered in Allied
Worlds share register constitute a quorum for the
transaction of business at the Allied World Special Shareholder
Meeting. The Allied World board of directors or chairman of the
Allied World board of directors may postpone the meeting with
sufficient factual reason, provided that notice of postponement
is given to the shareholders in the same form as the invitation
before the time for such meeting. A new notice is then required
to hold the postponed meeting. Under Swiss law, a general
meeting of shareholders for which a notice of meeting has been
duly published may not be adjourned without publishing a new
notice of meeting.
Abstentions (Allied World shares for which proxies have been
received but for which the holders have abstained from voting)
will be counted toward the presence of a quorum at the Allied
World Special Shareholder Meeting. Under NYSE rules, if brokers
do not have discretion to vote on any of the proposals at a
shareholders meeting, broker non-votes will not count
toward the calculation of a quorum. As each of the proposals to
be voted on at the Allied World Special Shareholder Meeting are
considered non-routine under NYSE rules, brokers do
not have discretion to vote on such proposals and, as such
broker non-votes will not
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be included in the calculation of the number of Allied World
shares represented at the Allied World Special Shareholder
Meeting for purposes of determining whether a quorum has been
achieved.
Required
Vote; Failures to Vote, Abstentions, Broker Non-Votes
Approval of each of the following proposals requires the
affirmative vote of at least
662/3
of the votes represented at the Allied World Special Shareholder
Meeting and a majority of the nominal value of the Allied World
shares represented at such meeting, where holders of at least
50% of the total outstanding Allied World shares are represented
and voting and who are entitled to vote on such proposal:
(i) the article 3 share capital increase
proposal, (ii) the article 5 share capital
increase proposal and (iii) the article 6 share
capital increase proposal. Abstentions and broker non-votes will
not be considered votes cast and will have no effect on these
proposals, assuming a quorum is present.
The approval of the NYSE share issuance proposal and the Stock
Incentive Plan proposal requires the affirmative vote of the
holders of a majority of shares entitled to vote on the proposal
and present in person or represented by proxy at the Allied
World Special Shareholder Meeting, provided that the total votes
cast on this proposal represent over 50% of the outstanding
Allied World shares entitled to vote on this proposal; provided
further that the approval of the NYSE share issuance proposal is
conditioned upon the approval of the share capital increase
proposal, as provided above. Votes for, votes
against and abstentions count as votes cast, while
broker non-votes do not count as votes cast for this purpose.
All outstanding Allied World shares count as shares entitled to
vote. Thus, the total sum of votes for, plus votes
against, plus abstentions, which we refer to as the
NYSE votes cast, must be greater than 50% of the
total outstanding Allied World shares. The number of votes
for the proposal must be greater than 50% of the
NYSE votes cast.
Each of the following approvals requires a majority of the votes
cast voting in favor of such proposal at the Allied World
Special Shareholder Meeting where holders of at least 50% of the
total outstanding Allied World shares are represented and voting
and who are entitled to vote on such proposal: (i) the name
change proposal, (ii) the election of directors proposal
and (iii) the capital reduction proposal. Abstentions and broker
non-votes will not be considered votes cast and will have no
effect on these proposals, assuming a quorum is present.
Completion of the merger is conditioned on, among other things,
approval of the share capital increase proposals, the NYSE share
issuance proposal, the name change proposal and the election of
directors proposal.
Voting of
Proxies by Holders of Record
If you are a holder of record of Allied World shares, a proxy
card is enclosed for your use. Allied World requests that you
submit a proxy by signing the accompanying proxy and returning
it promptly in the enclosed postage-paid envelope. When the
accompanying proxy is returned properly executed, the Allied
World shares represented by it will be voted at the Allied World
Special Shareholder Meeting or any adjournment or postponement
thereof in accordance with the instructions contained in the
proxy.
If a proxy is returned without an indication as to how the
Allied World shares represented are to be voted with regard to a
particular proposal, the Allied World shares represented by the
proxy will be voted in accordance with the recommendation of the
Allied World board of directors and, therefore, FOR
each of the proposals to be considered and voted upon at such
meeting. As of the date hereof, management has no knowledge of
any business that will be presented for consideration at the
Allied World Special Shareholder Meeting and that would be
required to be set forth in this joint proxy
statement/prospectus or the related proxy card other than the
matters set forth in Allied Worlds Notice of Special
Shareholder Meeting. If any other matter is properly presented
at the Allied World Special Shareholder Meeting for
consideration, it is intended that the persons named in the
enclosed form of proxy and acting thereunder will vote in
accordance with their best judgment on such matter.
Voting by
Independent Proxy
If you are an Allied World shareholder of record as of the
Allied World record date, under Swiss law you may authorize the
independent proxy, Mr. Paul Buergi, of Buis Buergi AG,
Muehlebachstrasse 7, P.O. Box 672, CH-8024, Zurich, Switzerland,
with full rights of substitution, to vote your Allied World
shares on your behalf
32
instead of using the enclosed proxy card. If you authorize the
independent proxy to vote your shares without giving
instructions, your shares will be voted in accordance with the
recommendations of the Allied World board of directors with
regard to the items listed in the notice of meeting. If new
agenda items (other than those in the notice of meeting) or new
proposals or motions with respect to those agenda items set
forth in the notice of meeting are being put forth before the
Allied World Special Shareholder Meeting, the independent proxy
will, in the absence of other specific instructions, vote in
accordance with the recommendations of the Allied World board of
directors. An optional form of proxy card that may be used by
the independent proxy to vote your Allied World shares is
included with this joint proxy statement/prospectus. Proxy cards
authorizing the independent proxy to vote your shares must be
sent directly to the independent proxy, arriving no later
than ,
local
time, ,
2011.
Your vote is important. Accordingly, please sign, date and
return the enclosed proxy card whether or not you plan to attend
the Allied World Special Shareholder Meeting in person.
Shares Held
in Street Name
If you hold your Allied World shares in a stock brokerage
account or if your shares are held by a bank or other nominee
(that is, in street name), you must provide the record holder of
your shares with instructions on how to vote your shares. Please
follow the voting instructions provided by your bank, brokerage
firm or other nominee. Please note that you may not vote Allied
World shares held in street name by returning a proxy card
directly to Allied World or by voting in person at the Allied
World Special Shareholder Meeting unless you have a legal
proxy, which you must obtain from your bank, brokerage
firm or other nominee. Further, brokers who hold Allied World
shares on behalf of their customers may not give a proxy to
Allied World to vote those Allied World shares without specific
instructions from their customers.
If you are an Allied World shareholder and you do not instruct
your bank, brokerage firm or other nominee on how to vote your
shares your bank, brokerage firm or other nominee, as
applicable, may not vote your Allied World shares on any of the
proposals to be considered and voted upon at the Allied World
Special Shareholder Meeting as all such matters are deemed
non-routine matters. See Admission to the
Special Shareholder Meeting below for further information
regarding voting your shares that are held in street
name.
Revocation
of Proxies
If you are the record holder of Allied World shares, you can
change your vote or revoke your proxy at any time before your
proxy is voted at the Allied World Special Shareholder Meeting.
You can do this by:
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timely delivering a new, valid proxy by mail as described on the
proxy card; or
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attending the Allied World Special Shareholder Meeting and
voting in person, which will automatically cancel any proxy
previously given, or you can revoke your proxy in person. Simply
attending the Allied World Special Shareholder Meeting without
voting will not revoke any proxy that you have previously given
or change your vote.
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A registered Allied World shareholder may revoke a proxy by any
of these methods, regardless of the method used to deliver the
shareholders previous proxy.
Please note that if your shares are held in street
name through a bank, brokerage firm or other nominee, you
may change your vote by submitting new voting instructions to
your bank, brokerage firm or other nominee in accordance with
its established procedures. If your Allied World shares are held
in the name of a bank, brokerage firm or other nominee and you
decide to change your vote by attending the Allied World Special
Shareholder Meeting and voting in person, your vote in person at
the Allied World Special Shareholder Meeting will not be
effective unless you have obtained and present an executed proxy
issued in your name from the record holder (your bank, brokerage
firm or other nominee).
33
Tabulation
of Votes
A representative from Baker & McKenzie Zurich will act as
the inspector of elections and will be responsible for
tabulating the votes cast by proxy (which will have been
certified by Allied Worlds independent transfer agent) or
in person at the Allied World Special Shareholder Meeting. Under
Swiss law, Allied World is responsible for determining whether
or not a quorum is present and the final voting results.
Solicitation
of Proxies
Allied World is soliciting proxies for the Allied World Special
Shareholder Meeting. In accordance with the merger agreement,
Allied World and Transatlantic will share equally all fees and
expenses in relation to the printing, filing and distribution of
this joint proxy statement/prospectus. Allied World will pay all
of its other costs of soliciting proxies. In addition to
solicitation by use of mails, proxies may be solicited by Allied
World directors, officers and employees in person or by
telephone or other means of communication. These individuals
will not be additionally compensated, but may be reimbursed for
out-of-pocket
expenses associated with this solicitation.
Allied World has engaged MacKenzie Partners, Inc.
(MacKenzie Partners) to assist in the solicitation
of proxies for the Allied World Special Shareholder Meeting.
Allied World estimates that it will pay MacKenzie Partners a fee
of approximately $15,000. Allied World will also reimburse
MacKenzie Partners for reasonable
out-of-pocket
expenses and will indemnify MacKenzie Partners and its
affiliates against certain claims, liabilities, losses, damages
and expenses. Allied World will make arrangements with brokerage
houses, custodians, nominees and fiduciaries to forward proxy
solicitation materials to beneficial owners of shares held of
record by them. Allied World will also reimburse these brokerage
houses, custodians, nominees and fiduciaries for their
reasonable expenses incurred in forwarding the proxy materials.
Adjournments
The Allied World board of directors or chairman of the Allied
World board of directors may postpone the Allied World Special
Shareholder Meeting with sufficient factual reason, provided
that notice of postponement is given to the shareholders in the
same form as the invitation before the time for such meeting. A
new notice is then required to hold the postponed meeting. Under
Swiss law, a general meeting of shareholders for which a notice
of meeting has been duly published may not be adjourned without
publishing a new notice of meeting.
Organizational
Matters Required by Swiss Law with respect to the Allied World
Special Shareholder Meeting
Admission
to the Special Shareholder Meeting
Shareholders who are registered in Allied Worlds share
register on the Allied World record date will receive this joint
proxy statement/prospectus and proxy cards from MacKenzie
Partners, Allied Worlds proxy solicitor. Beneficial owners
of Allied World shares will receive instructions from their
bank, brokerage firm or other nominee acting as shareholder of
record to indicate how they wish their shares to be voted.
Beneficial owners who wish to vote in person at the Allied World
Special Shareholder Meeting are requested to obtain a power of
attorney from their bank, brokerage firm or other nominee that
authorizes them to vote the shares held by them on their behalf.
In addition, you must bring to the Allied World Special
Shareholder Meeting an account statement or letter from your
bank, brokerage firm or other nominee indicating that you are
the owner of the Allied World shares. Shareholders of record
registered in Allied Worlds share register are entitled to
participate in and vote at the Allied World Special Shareholder
Meeting.
Each share is entitled to one vote. The exercise of voting
rights is subject to the voting restrictions set out in the
Allied World Articles, a summary of which is contained in the
section entitled Questions and Answers How
many votes do I have?
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Granting
a Proxy
If you are an Allied World shareholder of record and do not wish
to attend the Allied World Special Shareholder Meeting, you have
the right to grant a proxy directly to the Allied World officers
named in the proxy card. In addition, under Swiss corporate law
you can: (i) appoint Mr. Paul Buergi, of Buis Buergi
AG, Muehlebachstrasse 7, P.O Box 672, CH-8024, Zurich,
Switzerland, as the independent proxy, with full rights of
substitution, with the corresponding proxy card; or
(ii) grant a written proxy to any person who need not be an
Allied World shareholder. Please see Question and
Answers How do I vote? and Questions and
Answers How do I appoint and vote via the independent
proxy if I am an Allied World shareholder of record?
elsewhere in the joint proxy statement/prospectus for more
information on appointing the independent proxy. Proxies issued
to the independent proxy must be received no later
than ,
local time,
on ,
2011.
Registered Allied World shareholders who have appointed an
Allied World officer or the independent proxy as a proxy may not
vote in person at the Allied World Special Shareholder Meeting
or send a proxy of their choice to the meeting, unless they
revoke or change their proxies. Revocations to the independent
proxy must be received by him or her by no later
than ,
local time,
on ,
2011.
With regard to the items listed on the agenda and without any
explicit instructions to the contrary, the Allied World officer
acting as proxy and the independent proxy will vote according to
the recommendations of the Allied World board of directors. If
new agenda items (other than those on the agenda) or new
proposals or motions regarding agenda items set out in the
invitation to the Allied World Special Shareholder Meeting are
being put forth before the meeting, the Allied World officer
acting as proxy and the independent proxy will vote in
accordance with the recommendation of the Allied World board of
directors in the absence of other specific instructions.
Beneficial owners who have not obtained a power of attorney
from their bank, brokerage firm or other nominee are not
entitled to participate in or vote at the Allied World Special
Shareholder Meeting.
Proxy
Holders of Deposited Shares
Proxy holders of deposited shares in accordance with Swiss
corporate law are kindly asked to inform Allied World of the
number of shares they represent as soon as possible, but prior
to the date of the Allied World Special Shareholder Meeting, at
Allied Worlds corporate headquarters.
Admission
Office
The admission office opens on the day of the Allied World
Special Shareholder Meeting
at local
time. Allied World shareholders of record attending the meeting
are kindly asked to present their proxy card as proof of
admission at the entrance.
35
THE
TRANSATLANTIC SPECIAL SHAREHOLDER MEETING
This joint proxy statement/prospectus is being provided to
the stockholders of Transatlantic as part of a solicitation of
proxies by the Transatlantic board of directors for use at the
Transatlantic Special Shareholder Meeting to be held at the time
and place specified below, and at any properly convened meeting
following an adjournment or postponement thereof. This joint
proxy statement/prospectus provides stockholders of
Transatlantic with the information they need to know to be able
to vote or instruct their vote to be cast at the Transatlantic
Special Shareholder Meeting.
Date,
Time and Place
The Transatlantic Special Shareholder Meeting is scheduled to be
held at
the on ,
2011 at [8:00 a.m.] local time.
Purpose
of the Transatlantic Special Shareholder Meeting
At the Transatlantic Special Shareholder Meeting, Transatlantic
stockholders will be asked to consider and vote on:
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the proposal to adopt the merger agreement, which is further
described in the sections entitled The Merger and
The Merger Agreement, beginning on pages 42 and
107, respectively;
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the proposal to adjourn the Transatlantic Special Shareholder
Meeting, if necessary or appropriate, to solicit additional
proxies if there are not sufficient votes to approve the
foregoing proposal; and
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the proposal, on an advisory basis (non-binding), to approve the
compensation that may be paid or become payable to
Transatlantics named executive officers in connection with
the merger, and the agreements and understandings pursuant to
which such compensation may be paid or become payable, as
described below in the section entitled
Advisory Vote on the Golden Parachute
Compensation Arrangements for Transatlantics Named
Executive Officers.
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Completion of the merger is conditioned on, among other things,
approval of the adoption of the merger agreement proposal.
Advisory
Vote on the Golden Parachute Compensation Arrangements for
Transatlantics Named Executive Officers
Recently adopted Section 14A of the Exchange Act requires
that Transatlantic provide its stockholders with the opportunity
to vote to approve, on an advisory (non-binding) basis, the
golden parachute compensation arrangements for
Transatlantics named executive officers, as disclosed in
the section entitled The Merger Interests of
Transatlantic Directors and Executive Officers in the
Merger Golden Parachute Compensation beginning
on page 96.
In accordance with Section 14A of the Exchange Act, in this
proposal Transatlantic stockholders are being asked to
approve the following non-binding resolution at the
Transatlantic Special Shareholder Meeting:
RESOLVED, that the stockholders of Transatlantic approve,
on an advisory (non-binding) basis, the compensation to be paid
by Transatlantic to Transatlantics named executive
officers that is based on or otherwise relates to the merger
with Allied World, as disclosed in the Golden Parachute
Compensation Table and related notes and narrative disclosure in
the section of the joint proxy statement/prospectus for the
Merger entitled The Merger Interests of
Transatlantics Directors and Executive Officers in the
Merger Golden Parachute Compensation.
Approval of this proposal is not a condition to completion of
the merger, and the vote with respect to this proposal is
advisory only. Accordingly, the vote will not be binding on
Transatlantic or Allied World, or the board of directors or the
compensation committee of Transatlantic or Allied World.
36
Recommendations
of the Board of Directors of Transatlantic
The Transatlantic board of directors has unanimously approved
the merger agreement and has determined that the merger
agreement and the transactions contemplated thereby, including
the merger, are advisable and in the best interests of
Transatlantic and its stockholders.
The Transatlantic board of directors unanimously recommends
that Transatlantic stockholders vote FOR each of the
proposals set forth above. See the section entitled The
Merger Transatlantics Reasons for the Merger;
Recommendations of the Transatlantic Board of Directors
beginning on page 74 for a more detailed discussion of the
Transatlantic board of directors recommendation.
Transatlantic
Record Date; Stockholders Entitled to Vote
Only holders of record of Transatlantic common stock at the
close of business on July 22, 2011, the Transatlantic
record date, will be entitled to notice of, and to vote at, the
Transatlantic Special Shareholder Meeting or any adjournments or
postponements thereof.
At the close of business on the Transatlantic record date,
62,488,896 shares of Transatlantic common stock were issued and
outstanding and held by 275 holders of record. Holders of record
of Transatlantic common stock on the Transatlantic record date
are entitled to one vote per share at the Transatlantic Special
Shareholder Meeting on each proposal. However, to satisfy the
requirements of New York State Insurance regulators, on
June 1, 2009, Davis Advisors entered into an agreement with
Transatlantic whereby Davis Advisors agreed to vote the number
of shares of Transatlantic common stock owned by Davis Advisors
in excess of 9.9% of Transatlantics outstanding shares in
a manner proportionate to the vote of the owners of the shares
(excluding Davis Advisors, stockholders beneficially owning more
than 10% of Transatlantics outstanding shares, and
directors and officers of Transatlantic) voting on such matters.
A list of stockholders of Transatlantic will be available for
review for any purpose germane to the Transatlantic Special
Shareholder Meeting at Transatlantics headquarters, at 80
Pine Street, New York, New York, during regular business hours
for a period of 10 days before the Transatlantic Special
Shareholder Meeting. The list will also be available at the
Transatlantic Special Shareholder Meeting during the whole time
thereof for examination by any stockholder of record present at
the Transatlantic Special Shareholder Meeting.
Voting by
Transatlantics Directors and Executive Officers
At the close of business on the Transatlantic record date,
directors and executive officers of Transatlantic and their
affiliates were entitled to vote 221,521 shares of
Transatlantic common stock, or approximately 0.35% of the shares
of Transatlantic common stock outstanding on that date, which
represents approximately 0.7% of the votes required for the
approval of the adoption of the merger agreement proposal. We
currently expect that Transatlantics directors and
executive officers will vote their shares in favor of each of
the proposals to be considered and voted upon at the
Transatlantic Special Shareholder Meeting, although none of them
has entered into any agreement obligating them to do so.
Quorum
No business may be transacted at the Transatlantic Special
Shareholder Meeting unless a quorum is present. Attendance in
person or by proxy at the Transatlantic Special Shareholder
Meeting of holders of record of a majority of the aggregate
voting power of the outstanding shares of Transatlantic common
stock entitled to vote at the meeting will constitute a quorum.
If a quorum is not present, or if fewer shares of Transatlantic
common stock are voted in favor of the proposal to adopt the
merger agreement than the number required for its adoption, the
Transatlantic Special Shareholder Meeting may be adjourned to
allow additional time for obtaining additional proxies or votes.
At any subsequent reconvening of the Transatlantic Special
Shareholder Meeting, all proxies will be voted in the same
manner as they would have been voted at the original convening
of the Transatlantic Special Shareholder Meeting, except for any
proxies that have been effectively revoked or withdrawn prior to
the subsequent meeting.
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Abstentions (shares of Transatlantic common stock for which
proxies have been received but for which the holders have
abstained from voting) will be included in the calculation of
the number of shares of Transatlantic common stock represented
at the Transatlantic Special Shareholder Meeting for purposes of
determining whether a quorum has been achieved. Under NYSE
rules, if brokers do not have discretion to vote on any of the
proposals at a stockholders meeting, broker non-votes will
not count toward the calculation of a quorum. As each of the
proposals to be voted on at the Transatlantic Special
Shareholder Meeting are considered non-routine under
NYSE rules, brokers do not have discretion to vote on such
proposals and, as such broker non-votes will not be included in
the calculation of the number of shares of Transatlantic common
stock represented at the Transatlantic Special Shareholder
Meeting for purposes of determining whether a quorum has been
achieved.
Required
Vote
The approval of the adoption of the merger agreement proposal
requires the affirmative vote of the holders of a majority of
the outstanding shares of Transatlantic common stock entitled to
vote thereon. Failures to vote, votes to abstain and broker
non-votes, if any, will have the effect of a vote
AGAINST the proposal.
The approval of the adjournment proposal requires the
affirmative vote of the holders of a majority of the shares of
Transatlantic common stock entitled to vote and present in
person or by proxy, whether or not a quorum is present. The
Transatlantic stockholders may so adjourn the Transatlantic
Special Shareholder Meeting to another time or place without
further notice unless the adjournment is for more than
30 days or if after the adjournment a new record date is
fixed for the adjourned meeting, in which case a notice of the
adjourned meeting shall be given to each Transatlantic
stockholder of record entitled to vote at the meeting.
Abstaining will have the same effect as a vote
AGAINST the proposal. Failures to vote and broker
non-votes, if any, will not be voted, but this will not have an
effect on the adjournment proposal.
The approval of the golden parachute proposal requires the
affirmative vote of the holders of a majority of the shares of
Transatlantic common stock present in person or represented by
proxy and entitled to vote thereon, assuming a quorum is
present. Abstentions will have the effect of a vote
AGAINST the proposal. Failures to vote and broker
non-votes, if any, will not be voted, but this will not have an
effect on the proposal, assuming a quorum is present.
Failures
to Vote, Broker Non-Votes and Abstentions
Under the rules of the NYSE, banks, brokerage firm or other
nominees holding shares of record may vote those shares in their
discretion on certain routine proposals when they do not receive
timely voting instructions from the beneficial holders. A
broker non-vote occurs under these NYSE rules when a
bank, brokerage firm or other nominee holding shares of record
is not permitted to vote on a non-routine matter without
instructions from the beneficial owner of the shares and no
instruction is given.
In accordance with these NYSE rules, banks, brokers and other
nominees who hold shares of Transatlantic common stock in
street name for their customers, but do not have
discretionary authority to vote the shares, may not exercise
their voting discretion with respect to the adoption of the
merger agreement proposal, the adjournment proposal or the
golden parachute proposal. Accordingly, if banks, brokers or
other nominees do not receive specific voting instructions from
the beneficial owner of such shares, they may not vote such
shares with respect to the adoption of the merger agreement
proposal, the adjournment proposal or the golden parachute
proposal. For shares of Transatlantic common stock held in
street name, only shares of Transatlantic common
stock affirmatively voted FOR the adoption of the
merger agreement proposal, the adjournment proposal and the
golden parachute proposal will be counted as affirmative votes
therefor.
Abstentions, failures to vote and broker non-votes, if any, will
have the same effect as a vote AGAINST the adoption
of the merger agreement proposal. Abstentions will have the same
effect as a vote AGAINST the adjournment proposal.
Failures to vote and broker non-votes, if any, will have no
effect on the approval of the adjournment proposal. Abstentions
will have the same effect as a vote AGAINST the
golden parachute proposal. Failures to vote and broker
non-votes, if any, will not be voted, but this will not have an
effect on the golden parachute proposal, assuming a quorum is
present.
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Voting at
the Transatlantic Special Shareholder Meeting
Whether or not you plan to attend the Transatlantic Special
Shareholder Meeting, please vote your shares. If you are a
registered or record holder, which means your shares
are registered in your name with American Stock
Transfer & Trust Company LLC,
Transatlantics transfer agent and registrar, you may vote
in person at the Transatlantic Special Shareholder Meeting or by
proxy. If your shares are held in street name, which
means your shares are held of record in an account with a bank,
brokerage firm or other nominee, you must follow the
instructions from your bank, brokerage firm or other nominee in
order to vote.
Voting in
Person
If you plan to attend the Transatlantic Special Shareholder
Meeting and wish to vote in person, you will be given a ballot
at the Transatlantic Special Shareholder Meeting. Please note,
however, that if your shares are held in street
name, and you wish to vote at the Transatlantic Special
Shareholder Meeting, you must bring to the Transatlantic Special
Shareholder Meeting a proxy executed in your favor from the
record holder (your bank, brokerage firm or other nominee) of
the shares authorizing you to vote at the Transatlantic Special
Shareholder Meeting.
In addition, if you are a registered Transatlantic stockholder,
please be prepared to provide proper identification, such as a
drivers license, in order to be admitted to the
Transatlantic Special Shareholder Meeting. If you hold your
shares in street name, you will need to provide
proof of ownership, such as a recent account statement or letter
from your bank, brokerage firm or other nominee, along with
proper identification.
Voting by
Proxy
If you are a holder of record, a proxy card is enclosed for your
use. Transatlantic requests that you submit a proxy by:
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logging onto http://proxy.georgeson.com/ and following the
instructions on your proxy card to vote via the internet anytime
up
to on ,
2011 and following the instructions provided on that site;
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dialing 1-800-652-VOTE (8683) and listening for further
directions to vote by telephone anytime up
to on ,
2011 and following the instructions provided in the recorded
message; or
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signing and returning the accompanying proxy card in the
enclosed postage-paid envelope. Transatlantic stockholders of
record may submit their proxies through the mail by completing
their proxy card, and signing, dating and returning it in the
enclosed, pre-addressed, postage-paid envelope. To be valid, a
returned proxy card must be signed and dated.
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You should vote your proxy in advance of the Transatlantic
Special Shareholder Meeting even if you plan to attend the
Transatlantic Special Shareholder Meeting. You can always change
your vote at the Transatlantic Special Shareholder Meeting.
If you hold your shares of Transatlantic common stock in a stock
brokerage account or if your shares are held by a bank or other
nominee (that is, in street name), you must provide the record
holder of your shares with instructions on how to vote your
shares. Please follow the voting instructions provided by your
bank, brokerage firm or other nominee. Please note that you may
not vote shares of Transatlantic common stock held in street
name by returning a proxy card directly to Transatlantic or by
voting in person at the Transatlantic Special Shareholder
Meeting unless you have a legal proxy, which you
must obtain from your bank, brokerage firm or other nominee.
Further, brokers who hold shares of Transatlantic common stock
on behalf of their customers may not give a proxy to
Transatlantic to vote those shares without specific instructions
from their customers.
If you are a Transatlantic stockholder and you do not instruct
your bank, brokerage firm or other nominee on how to vote your
shares your bank, brokerage firm broker or other nominee, as
applicable, may not vote
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your shares on any of the proposals to be considered and voted
upon at the Transatlantic Special Shareholder Meeting as all
such matters are deemed non-routine matters pursuant
to applicable NYSE rules.
How
Proxies Are Counted
All shares of Transatlantic common stock represented by properly
executed proxies received in time for the Transatlantic Special
Shareholder Meeting will be voted at the meeting in the manner
specified by the stockholders giving those proxies. Properly
executed proxies that do not contain voting instructions will be
voted FOR the adoption of the merger agreement
proposal, the adjournment proposal and the golden parachute
proposal.
Only shares of Transatlantic common stock affirmatively voted
for the applicable proposal, and properly executed proxies that
do not contain voting instructions, will be counted as favorable
votes for adoption of the merger agreement proposal, the
adjournment proposal and the golden parachute proposal.
Abstentions, failures to vote and broker non-votes, if any, will
have the same effect as votes AGAINST the adoption
of the merger agreement proposal. Abstentions will have the same
effect as a vote AGAINST the adjournment proposal.
Failures to vote and broker non-votes, if any, will have no
effect on the approval of the adjournment proposal. Abstentions
will have the same effect as a vote AGAINST the
golden parachute proposal. Failures to vote and broker
non-votes, if any, will not be voted, but this will not have an
effect on the golden parachute proposal, assuming a quorum is
present.
Revocation
of Proxies
If you are the record holder of shares of Transatlantic common
stock, you can change your vote or revoke your proxy at any time
before your proxy is voted at the Transatlantic Special
Shareholder Meeting. You can do this by:
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timely delivering a new, valid proxy bearing a later date by
submitting instructions via the internet, by telephone or by
mail as described on the proxy card;
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timely delivering a signed written notice of revocation to the
Secretary of Transatlantic; or
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attending the Transatlantic Special Shareholder Meeting and
voting in person, which will automatically cancel any proxy
previously given, or you can revoke your proxy in person. Simply
attending the Transatlantic Special Shareholder Meeting without
voting will not revoke any proxy that you have previously given
or change your vote.
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A registered Transatlantic stockholder may revoke a proxy by any
of these methods, regardless of the method used to deliver the
Transatlantic stockholders previous proxy.
Written notices of revocation and other communications with
respect to the revocation of proxies should be addressed as
follows:
Transatlantic Holdings, Inc.
80 Pine Street
New York, New York 10005
Attention: Secretary
Please note that if your shares of Transatlantic common stock
are held in street name through a bank, brokerage
firm or other nominee, you may change your vote by submitting
new voting instructions to your bank, brokerage firm or other
nominee in accordance with its established procedures. If your
shares are held in the name of a bank, brokerage firm or other
nominee and you decide to change your vote by attending the
Transatlantic Special Shareholder Meeting and voting in person,
your vote in person at the Transatlantic Special Shareholder
Meeting will not be effective unless you have obtained and
present an executed proxy issued in your name from the record
holder (your bank, brokerage firm or other nominee).
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Tabulation
of Votes
Transatlantic has appointed American Stock Transfer &
Trust Company LLC to serve as the Inspector of Election for
the Transatlantic Special Shareholder Meeting. American Stock
Transfer & Trust Company LLC will independently
tabulate affirmative and negative votes and abstentions.
Solicitation
of Proxies
Transatlantic is soliciting proxies for the Transatlantic
Special Shareholder Meeting from its stockholders. In accordance
with the merger agreement, Transatlantic and Allied World will
share equally all fees and expenses in relation to the printing,
filing and distribution of this joint proxy
statement/prospectus. Transatlantic will pay all of its other
costs of soliciting proxies. In addition to solicitation by use
of the mails, proxies may be solicited by Transatlantics
directors, officers and employees in person or by telephone or
other means of communication. These persons will not receive
additional compensation, but may be reimbursed for reasonable
out-of-pocket
expenses in connection with this solicitation.
Transatlantic has engaged Georgeson Inc. to assist in the
solicitation of proxies for the Transatlantic Special
Shareholder Meeting. Transatlantic estimates that it will pay
Georgeson Inc. a fee of approximately $16,000 for proxy
solicitation services. Transatlantic will also reimburse
Georgeson Inc. for reasonable
out-of-pocket
expenses and will indemnify Georgeson Inc. and its affiliates
against certain claims, liabilities, losses, damages and
expenses. Transatlantic will make arrangements with brokerage
houses, custodians, nominees and fiduciaries to forward proxy
solicitation materials to beneficial owners of shares of
Transatlantic common stock held of record by them. Transatlantic
will also reimburse these brokerage houses, custodians, nominees
and fiduciaries for their reasonable expenses incurred in
forwarding the proxy materials.
Adjournments
Any adjournment of the Transatlantic Special Shareholder Meeting
may be made from time to time by the Transatlantic stockholders,
by the affirmative vote of the holders of a majority of shares
of Transatlantic common stock entitled to vote and present in
person or by proxy, whether or not a quorum is present, without
further notice other than by an announcement made at the
Transatlantic Special Shareholder Meeting. If a quorum is not
present at the Transatlantic Special Shareholder Meeting, or if
a quorum is present at the Transatlantic Special Shareholder
Meeting but there are not sufficient votes at the time of the
Transatlantic Special Shareholder Meeting to approve the
adoption of the merger agreement proposal, then Transatlantic
stockholders may be asked to vote to adjourn the Transatlantic
Special Shareholder Meeting so as to permit the further
solicitation of proxies.
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THE
MERGER
Effects
of the Merger
At the effective time of the merger, Merger Sub, a wholly-owned
subsidiary of Allied World that was formed for the sole purpose
of effecting the merger, will merge with and into Transatlantic.
Transatlantic will survive the merger and become a wholly-owned
subsidiary of Allied World. Upon completion of the merger,
Allied World will be the parent company of Transatlantic, and
Allied Worlds name will be changed to TransAllied Group
Holdings, AG.
In the merger, each outstanding share of Transatlantic common
stock (other than shares owned by Transatlantic, Allied World or
Merger Sub, which shares will be cancelled) will be converted
into the right to receive 0.88 Allied World shares, together
with cash paid in lieu of fractional shares. This exchange ratio
is fixed and will not be adjusted to reflect share price changes
prior to the closing of the merger. Allied World shareholders
will continue to hold their existing Allied World shares.
Background
of the Merger
Background
of the Merger
From 1990, when Transatlantic became a public company, until
June 2009, American International Group, Inc. (together with its
subsidiaries, AIG) owned a controlling interest in
Transatlantics outstanding common stock. In the second
half of 2008, AIG experienced an unprecedented strain on its
liquidity. This strain led to a series of transactions with the
Federal Reserve Bank of New York and the U.S. Department of
the Treasury. On September 29, 2008, AIG, which then owned
approximately 59% of Transatlantics outstanding common
stock, filed an amendment to its Schedule 13D relating to
Transatlantic stating, among other things, that AIG is
exploring all strategic alternatives in connection with the
potential disposition or other monetization of its
. . . interest in [Transatlantic]. A
special committee of directors of Transatlantic that were
independent of management and of AIG (the Special
Committee) comprised of Messrs. Richard S. Press, Ian
H. Chippendale and John G. Foos was subsequently formed to
evaluate proposals received from AIG relating to the possible
disposition of, or other transactions involving, AIGs
ownership interest in Transatlantic as well as any related
business combination transactions involving Transatlantics
outstanding shares. Although several parties initially indicated
possible interest in a transaction involving
Transatlantics outstanding shares, these initial
indications did not proceed past preliminary proposals,
execution of confidentiality and standstill agreements and
exchanges of non-public information. On June 10, 2009, AIG
disposed of 29,900,000 of its shares of Transatlantics
common stock in a secondary public offering, reducing its
ownership in Transatlantic from approximately 59% to
approximately 14%. Subsequently, AIG disposed of its remaining
8,500,000 shares of Transatlantic common stock in a
secondary public offering (in which Transatlantic repurchased
2,000,000 of such shares) on March 15, 2010.
The board of directors and management of Allied World regularly
review and evaluate potential strategic transactions, including
business combinations, as part of their ongoing oversight and
management of Allied Worlds business and in furtherance of
Allied Worlds goal to increase its competitive positioning
within the market. In the years leading up to the present
transaction, Allied World, with the assistance of its respective
legal and financial advisors, reviewed and analyzed potential
strategic transactions with several companies within the
insurance and reinsurance industry, but ultimately determined
that a transaction with such companies at the relevant times was
not strategically optimal. During this time, Allied World also
engaged in a review of potential opportunities for smaller
acquisitions as well as organic growth, and executed on certain
of these initiatives. In October 2008, Allied World acquired
Darwin Professional Underwriters, Inc., a specialty
U.S. casualty insurer focused on small account primary and
healthcare business, to expand Allied Worlds
U.S. insurance platform. As part of the strategy to grow
its U.S. insurance and reinsurance platforms, Allied World
also made investments in 2008 and 2009 to hire additional
underwriting teams and support staff and build out its
infrastructure. In 2010, Allied World established a syndicate at
Lloyds of London to further expand its underwriting
activities.
42
Since AIGs June 2009 secondary offering, the Transatlantic
board of directors and senior management have regularly reviewed
and assessed strategic alternatives available to enhance
stockholder value, including possible business combination
transactions. In February 2010, Transatlantic selected Moelis to
act as its financial advisor in connection with a review of
strategic alternatives, based upon, among other things, the fact
that Moelis is an internationally recognized investment banking
firm that has substantial experience in merger and acquisition
transactions. In October 2010, the Transatlantic board of
directors disbanded the Special Committee (since AIG was no
longer a significant stockholder of Transatlantic) and
established a new strategy committee of the board of directors
(the Strategy Committee), comprised of
Messrs. Press, Chippendale, Foos and Stephen P. Bradley,
each of whom are independent, to oversee Transatlantics
review of strategic alternatives. From time to time since
AIGs June 2009 offering, at the direction of the board of
directors of Transatlantic and the Strategy Committee,
Transatlantics senior management engaged in preliminary
discussions regarding possible business combination transactions
with a number of insurance and reinsurance companies including
Validus Holdings, Ltd. (Validus). Until the
negotiations described below, these discussions did not proceed
past preliminary proposals, execution of confidentiality and
standstill agreements and limited exchanges of non-public
information.
During 2010, Allied World engaged in strategic discussions with
certain insurance and reinsurance companies, including a
potential business combination and two strategic acquisitions in
Canada and Europe. In each case, Allied World determined that
the transaction valuations sought did not provide adequate value
to Allied World and its shareholders.
During the period from February 11, 2011 to March 11,
2011, Robert F. Orlich, the Chief Executive Officer of
Transatlantic,
and/or
Michael C. Sapnar, the current Chief Operating Officer of
Transatlantic, engaged in very preliminary discussions with
Scott A. Carmilani, the Chairman and Chief Executive Officer of
Allied World, concerning the possibility of a strategic business
combination transaction involving the two companies. On
March 11, 2011, Mr. Carmilani met with
Messrs. Orlich and Sapnar to discuss the possibility of the
companies entering into a mutual confidentiality agreement, as
well as the engagement of financial advisors by both companies,
in connection with a potential transaction. The individuals also
had very preliminary discussions regarding possible senior
management roles at the combined company.
On March 13, 2011, the Allied World board of directors met
by teleconference with members of Allied Worlds senior
management in attendance, during which Mr. Carmilani
reported on his initial conversations with Messrs. Orlich
and Sapnar. At the meeting, the Allied World board of directors
requested Allied Worlds senior management team to engage
in further discussions with Transatlantic regarding the
possibility of a strategic business combination involving the
two companies and to report back to the board following such
discussions. The Allied World board of directors also requested
the retention of Deutsche Bank as Allied Worlds financial
advisor in connection with the review of the possible
transaction, based upon, among other things, the fact that
Deutsche Bank is an internationally recognized investment
banking firm that has substantial experience in merger and
acquisition transactions and the high-quality service that
Deutsche Bank provides. Shortly thereafter, representatives of
Allied Worlds senior management approached representatives
of Deutsche Bank to discuss whether Deutsche Bank would be
available to assist Allied World in connection with evaluating
the proposed transaction, and Deutsche Bank was then selected to
serve as the companys financial advisor.
On March 16, 2011, in connection with the regularly
scheduled March 17, 2011 Transatlantic board of directors
meeting, the Strategy Committee held a meeting (at which all of
Transatlantics directors were in attendance) to discuss
Messrs. Orlich and Sapnars conversations with
Mr. Carmilani and the benefits of a potential strategic
combination transaction between the companies. Members of
Transatlantics senior management and representatives from
Gibson, Dunn & Crutcher LLP, Transatlantics
outside legal counsel (Gibson Dunn), and Moelis
participated in this meeting. Representatives of Moelis reviewed
with the directors recent M&A activity in the property and
casualty insurance and reinsurance industry and provided an
overview of potential business combination partners, including
Allied World. Mr. Orlich described managements views
as to the business and strategic benefits of a potential
strategic combination transaction with Allied World, including
the increased size and capital position of the combined
companies, the combination of strong primary insurance and
reinsurance businesses, and certain expected synergies.
Mr. Orlich also noted that
43
Transatlantic and Allied World each had strong and complementary
underwriting and risk management cultures and that Transatlantic
has been conducting insurance and reinsurance business with
Allied World for many years and has had very positive
experiences with Allied World. Following this discussion, the
Strategy Committee authorized Transatlantics senior
management to continue its preliminary discussions with Allied
World and to enter into a mutual confidentiality and standstill
agreement.
On March 22, 2011, representatives of Transatlantics
senior management approached representatives of Goldman,
Sachs & Co. (Goldman Sachs) to discuss
whether Goldman Sachs would be available to assist Transatlantic
in connection with the proposed transaction.
On March 27, 2011, Transatlantic and Allied World entered
into a mutual confidentiality and standstill agreement, and both
parties and their advisors began due diligence.
On March 27, 2011, the Allied World board of directors met
by teleconference with members of Allied Worlds senior
management in attendance. At the meeting, Allied Worlds
senior management updated the board as to the companys
review of a possible transaction with Transatlantic and the
status of its discussions with Transatlantic. Allied
Worlds management indicated that the company had entered
into a mutual confidentiality and standstill agreement with
Transatlantic and would immediately commence its due diligence
review of Transatlantic.
Starting on March 27, 2011 and continuing until the
execution of the merger agreement on June 12, 2011, the
management teams of Transatlantic and Allied World, together
with their respective financial, actuarial, tax and legal
advisors, performed extensive due diligence on each other
through a series of meetings, telephonic discussions and a
review of both public and non-public information.
Beginning in late March 2011, members of Allied Worlds
senior management team, together with Allied Worlds
financial and legal advisors, discussed with members of Allied
Worlds board of directors at varying times the status of
ongoing due diligence and discussions with Transatlantic. In
particular, Mr. Carmilani provided continuous updates to
Allied Worlds lead independent director regarding the
negotiations regarding key transaction terms such as price and
governance matters and the status of due diligence, which were
in turn reported to other members of the board; met in person
with the co-chairs of the Allied World audit committee to
discuss items related to financial statements (including
differences in accounting methodologies between Allied World and
Transatlantic, differences in auditors and integration matters
related thereto), independent auditors and the internal audit
function in connection with a possible transaction; discussed
compensation matters with the chairman of Allied Worlds
compensation committee; analyzed issues relating to the
potential combined companys investment portfolio with the
chairman of Allied Worlds investment committee; and
engaged in individual discussions with directors from time to
time regarding structuring, governance, valuation and other
issues related to the potential transaction.
On April 4, 2011, Transatlantic and Allied World, together
with their financial and legal advisors, had a telephonic
organizational meeting to discuss the process and timeline for a
proposed transaction, including, among other things, due
diligence matters, tax issues, regulatory issues, rating
agencies, antitrust issues and capital management.
On April 6, 2011, members of Transatlantics senior
management met with members of Allied Worlds senior
management and discussed a potential strategic combination
transaction and various issues related thereto, including, among
other things, the potential business and strategic benefits of a
combination, a potential deal structure, due diligence matters,
proposed timeline and cultural issues. The parties did not
discuss the exchange ratio in a potential transaction at this
meeting.
Following the meeting on April 6, 2011, the Strategy
Committee held a telephonic meeting (at which additional
Transatlantic directors were in attendance), attended by members
of Transatlantics senior management and representatives of
Gibson Dunn. At this meeting, members of management updated the
Strategy Committee regarding additional discussions that had
occurred with Allied World, including with respect to due
diligence matters. Transatlantics management noted that
Transatlantic wished to engage PricewaterhouseCoopers LLP
(PWC), Transatlantics auditors, to assist with
certain tax due diligence matters. Messrs. Foos, Press and
John. L. McCarthy, constituting all the members of
Transatlantics audit committee, authorized
44
management to engage PWC as Transatlantics tax advisor in
connection with a possible transaction with Allied World.
Transatlantics senior management also informed the
Strategy Committee that Transatlantic had retained an
internationally-recognized consulting firm to perform an
independent review of Allied Worlds loss reserves in
addition to the due diligence review being performed by
Transatlantics actuaries. Members of management and
representatives of Gibson Dunn reviewed with the Strategy
Committee the rationale for entering into, and the proposed
terms of, an exclusivity agreement with Allied World.
Representatives of Gibson Dunn discussed with the directors the
applicable legal standards in the context of considering a
strategic combination transaction of the type being proposed.
Following a discussion, the Strategy Committee authorized
Transatlantics management to enter into a
30-day
exclusivity agreement with Allied World. In addition,
Transatlantics board of directors had requested that
representatives of Goldman Sachs and Moelis describe any recent
prior relationships between their respective firms and Allied
World. After consideration and discussion, Transatlantics
board of directors then selected Goldman Sachs and Moelis to act
as Transatlantics independent financial advisors in
connection with the proposed strategic combination transaction
based upon, among other things, the fact that they are
internationally recognized investment banking firms that have
substantial experience in transactions similar to the proposed
strategic combination transaction and the high quality of
service that both firms had provided to Transatlantic in the
past. The Transatlantic board of directors also determined to
seek a fairness opinion from Moelis in connection with the
potential transaction with Allied World because, among other
things, Moelis had no prior relationships with Allied World.
On April 8, 2011, the Allied World board of directors met
by teleconference with members of Allied Worlds senior
management in attendance, during which management reviewed
certain aspects of the possible transaction with Transatlantic,
including governance matters, the diligence proposed to be
completed with respect to Transatlantics loss reserves and
deal structures. Allied Worlds senior management stated
that the company had retained an internationally-recognized
consulting firm to perform an independent review of
Transatlantics loss reserves in addition to the due
diligence review being performed by Allied Worlds
actuaries. Allied Worlds senior management reported that
the company was negotiating a mutual exclusivity agreement with
Transatlantic in connection with the possible transaction and
reviewed the rationale for entering into such agreement as well
as its proposed terms. Following this informational call, the
directors requested that Allied Worlds senior management
and advisors continue their discussions with Transatlantic.
Also on April 8, 2011, Mr. Carmilani met with
Messrs. Orlich and Sapnar to discuss certain governance
matters in connection with a possible business combination
involving the companies.
On April 11, 2011, Transatlantic and Allied World entered
into a
30-day
mutual exclusivity agreement.
On April 14, 2011 and April 15, 2011, representatives
of Transatlantic and Allied World senior management, together
with their respective financial and legal advisors, met at
Deutsche Banks offices in New York City to conduct mutual
due diligence and discuss various aspects of the businesses
conducted by each of Transatlantic and Allied World.
Starting in mid-April through late May, Transatlantic and Allied
World, together with their respective advisors, evaluated a
variety of possible transaction structures for a merger of
equals transaction and jointly determined that merging
Transatlantic into a subsidiary of Allied World, with Allied
World surviving as the publicly-traded parent company,
represented the most desirable structure for the potential
transaction.
During April 2011 and through the execution of the merger
agreement on June 12, 2011, members of Allied Worlds
senior management team, together with Allied Worlds
financial and legal advisors, continued to provide updates to
members of Allied Worlds board of directors regarding the
ongoing discussions with Transatlantic.
From April 18, 2011 through April 26, 2011,
representatives of Allied Worlds senior management met
with representatives of Deutsche Bank and Allied Worlds
outside legal counsel, Willkie Farr & Gallagher LLP
(Willkie Farr), to discuss due diligence matters,
financial projections, valuation matters, potential corporate
structures and other legal issues regarding the potential
transaction with Transatlantic.
On April 18, 2011 and April 25, 2011, the Strategy
Committee held telephonic meetings (at which additional
Transatlantic directors were in attendance), attended by members
of Transatlantics management,
45
and representatives of Gibson Dunn, Goldman Sachs and Moelis, at
which they received updates regarding the status of discussions
with Allied World. At the April 25, 2011 meeting,
representatives of Goldman Sachs and Moelis reviewed with the
directors, among other things, certain preliminary financial
analyses of Transatlantic and Allied World and discussed certain
considerations with respect to the exchange ratio in a potential
stock-for-stock
transaction with Allied World, including various sources of
value that may affect the exchange ratio, and the possibility of
using alternative structures, such as contingent value rights.
Representatives of Gibson Dunn then provided the directors with
a summary of the terms of a draft merger agreement. Following a
discussion, the Strategy Committee authorized Goldman Sachs and
Moelis to commence valuation discussions with Deutsche Bank and
authorized Gibson Dunn to distribute the draft merger agreement
to Allied Worlds legal advisors.
On April 25, 2011, representatives of Goldman Sachs and
Moelis contacted representatives of Deutsche Bank to discuss
certain valuation issues and informed them that Transatlantic
would not be willing to enter into a transaction based on a
market-to-market
valuation of the two companies and would expect the transaction
to be based on
book-to-book
valuation, with appropriate adjustments for reserves, goodwill
and litigation matters. Allied Worlds financial advisors
indicated that Allied World was not contemplating a transaction
based on a
market-to-market
valuation but that it would not be willing to enter into a
transaction based on a tangible
book-to-tangible
book valuation of the two companies.
On April 26, 2011, representatives of Gibson Dunn
distributed a draft merger agreement to Willkie Farr. From
April 26, 2011 and continuing until the execution of the
merger agreement, representatives of Allied World,
Transatlantic, Willkie Farr and Gibson Dunn discussed the
provisions of the merger agreement, including the
representations and warranties, covenants (including the
non-solicitation covenant), termination rights, termination fees
and the expense reimbursement provisions.
On April 27, 2011, Mr. Press and Mr. Carmilani
met and discussed the status of the proposed transaction between
Transatlantic and Allied World, including certain governance
issues that would need to be addressed for the combined company.
Mr. Press and Mr. Carmilani discussed
Mr. Orlichs desire to retire at the closing of the
proposed strategic combination transaction (if the parties in
fact proceeded to execute an agreement and consummate a
transaction) and the need to agree on the composition of the
board and management positions for the combined company.
On May 2, 2011, representatives of Allied Worlds
senior management team met with representatives of
Transatlantics senior management team and discussed due
diligence matters and various aspects regarding the structure of
the proposed transaction. In addition, Allied World communicated
to representatives of Goldman Sachs a proposal that the combined
companys board of directors consist of 12 members,
comprised of six former Transatlantic directors, five former
independent Allied World directors and Mr. Carmilani. Later
that same day, the Strategy Committee held a telephonic meeting
(at which additional Transatlantic directors were in
attendance), attended by members of Transatlantics
management and representatives of Gibson Dunn, Goldman Sachs and
Moelis. At the meeting, members of Transatlantics
management and advisors provided the directors with an update
regarding the status of discussions with Allied World.
Mr. Orlich and the other members of management described to
the directors the progress that had occurred to date.
Representatives of Goldman Sachs described the communication
they had received from Allied Worlds advisors earlier in
the day. The Transatlantic directors also discussed the
desirability of having an in person meeting between certain of
the Transatlantic directors and senior management and certain
members of the Allied World board of directors and senior
management. Following the discussion, the Strategy Committee
authorized Goldman Sachs and Moelis to inform Deutsche Bank of
Transatlantics views with regard to the board composition
of the combined company in light of the fact that the former
Transatlantic stockholders would own a majority of the shares of
the combined company, specifically, the importance of having an
11 member board of directors comprised of six former
Transatlantic directors and five former Allied World directors,
with the board to be chaired by a current Transatlantic director.
On May 3, 2011, representatives of Allied World and
Transatlantic held a telephonic meeting to discuss the status of
each companys due diligence review and loss reserve
matters.
46
On May 5, 2011, the Allied World board of directors met
with representatives of Allied Worlds senior management
and representatives of Deutsche Bank as part of its regularly
scheduled board meeting in Zug, Switzerland. At the meeting,
representatives of Allied World and representatives of Deutsche
Bank had extensive discussions regarding the benefits of the
potential business combination transaction with Transatlantic,
including financial and strategic rationales and potential
synergies. Representatives of Deutsche Bank discussed various
financial and valuation analyses of the transaction, including
the exchange ratio based on
book-to-book
and tangible
book-to-book
values, and reviewed recent merger of equal transaction
valuations and governance metrics. Representatives of Allied
Worlds senior management provided the directors with a
substantive update on their discussions with Transatlantic and
its advisors regarding the governance of the combined company,
including the potential senior management team, board and
committee compositions and the chairmanship. Allied Worlds
senior management also discussed the status of its due diligence
review to date and reviewed certain terms of the draft merger
agreement that Transatlantic had provided to Allied World.
Allied Worlds management noted that it wished to engage
Deloitte & Touche Ltd., Allied Worlds
independent auditors, to assist with certain financial and
accounting due diligence matters. Allied Worlds audit
committee thereafter authorized management to engage
Deloitte & Touche Ltd. as its advisor in connection
with a possible transaction with Transatlantic. Following this
meeting, the directors authorized Allied Worlds management
and advisors to continue negotiations with Transatlantic.
On May 5, 2011, Allied World held its 2011 annual ordinary
general meeting of shareholders at which the Allied World
shareholders elected the Class I directors up for election,
approved the payment of dividends in the form of a par value
reduction and approved certain other matters.
On May 6, 2011, representatives of Goldman Sachs and Moelis
had a meeting with representatives of Deutsche Bank to discuss
valuation and governance issues with respect to the proposed
transaction. Deutsche Bank relayed to Transatlantics
financial advisors Allied Worlds views regarding board and
committee composition, chairmanship and valuation. At this
meeting, representatives of Goldman Sachs and Moelis discussed
with representatives of Deutsche Bank the idea of setting up an
in person meeting between certain directors and members of
senior management of Transatlantic and Allied World.
On May 8, 2011 and May 10, 2011, the Strategy
Committee held telephonic meetings (at which additional
Transatlantic directors were in attendance), attended by members
of Transatlantics management and representatives of Gibson
Dunn, Goldman Sachs and Moelis. Representatives of Goldman Sachs
and Moelis and members of Transatlantics management
provided the directors with updates regarding their
conversations with Allied World and its advisors. At the
May 8, 2011 meeting, representatives of Goldman Sachs and
Moelis reviewed with the directors, among other things, certain
preliminary financial analyses of Transatlantic and Allied
World. Following a discussion at the May 8, 2011 meeting,
the Strategy Committee requested that Goldman Sachs and Moelis
arrange for an in person meeting on May 12, 2011 between
certain Transatlantic directors and members of senior management
and certain Allied World directors and members of senior
management.
On May 9, 2011, Mr. Press and Mr. Carmilani
discussed the possible composition of the combined
companys board as between Allied World and Transatlantic
directors as well as senior management positions for the
combined company.
On May 12, 2011, Messrs. Press, Chippendale, Foos and
Mr. Sapnar met in New York City with
Messrs. Carmilani, Bart Friedman, Mark R. Patterson and Sam
Weinhoff, all directors of Allied World, to discuss the proposed
transaction, including board and committee composition and the
chairmanship of the combined company. The participants also
discussed their respective views as to the strategic direction
of the combined company.
On May 13, 2011, Mr. Press met with Mr. Carmilani
in New York City to discuss certain matters in connection with
the proposed strategic combination transaction, including board
and committee composition and senior management positions for
the combined company.
47
Also on May 13, 2011, representatives of Transatlantic and
Allied World, together with their legal advisors, participated
in a conference call to discuss, among other things, certain
matters with respect to the proposed transaction and the draft
merger agreement.
On May 14, 2011 and May 15, 2011, at the direction of
the Strategy Committee, representatives of Goldman Sachs and
Moelis had numerous conversations with representatives of
Deutsche Bank regarding valuation and governance matters
(including with respect to board and committee composition) with
respect to the proposed strategic combination transaction.
Representatives of Deutsche Bank communicated Allied
Worlds views regarding governance and certain other
economic issues.
On May 16, 2011, the Strategy Committee held a telephonic
meeting (at which additional Transatlantic directors were in
attendance), attended by members of Transatlantics
management, and representatives of Gibson Dunn, Goldman Sachs
and Moelis, to discuss Allied Worlds most recent
communications and Transatlantics response and to provide
direction to Goldman Sachs and Moelis. The Strategy Committee
also unanimously approved a motion to add John L. McCarthy to
the Strategy Committee.
On May 17, 2011, representatives of Goldman Sachs and
Moelis informed Deutsche Bank of Transatlantics position
with respect to governance of the combined company and certain
valuation issues. Later that same day, Allied World delivered a
proposal to Transatlantic setting forth certain terms of a
possible business combination transaction. Specifically, Allied
Worlds proposal included, among other things, (i) an
exchange ratio of 0.87 Allied World shares per share of
Transatlantic common stock, (ii) an 11 member board of
directors comprised of six former Transatlantic directors and
five former Allied World directors, which would be chaired by a
current, independent Transatlantic director for a period of one
year after the closing of the proposed transaction, at which
time such director would retire from the board, and (iii) a
proposed senior management team for the combined company. The
Allied World proposal also indicated that the combined
companys nominating and corporate governance committee
would undertake a search to identify an individual (who could
not be a current member of the Transatlantic or Allied World
board of directors) with substantial industry expertise to serve
as an independent, non-executive chairman upon the one-year
anniversary of the closing of the proposed transaction.
On May 18, 2011, after discussions among the directors,
senior management and Transatlantics advisors,
Transatlantic responded to Allied Worlds May 17, 2011
proposal with a counter-proposal regarding valuation and
governance issues. The counter-proposal included, among other
things, (i) a $1.00 cash dividend per share of
Transatlantic common stock to be paid immediately prior to the
closing of the proposed transaction and an exchange ratio of
0.875 Allied World shares per share of Transatlantic common
stock and (ii) that the current Transatlantic chairman
would serve as chairman of the combined companys board of
directors until the second shareholders meeting
post-closing, at which time the board would elect a successor
chair with a two-thirds vote, which successor chair could be
from among its members, but could not be a member of either
Allied Worlds or Transatlantics management team.
From the period following delivery of the May
18th
proposal, Allied World, Transatlantic and their respective
financial advisors engaged in discussions and negotiations
regarding the proposal.
On May 20, 2011, Allied World delivered its best and final
written offer to Transatlantic providing for, among other
things, (i) an exchange ratio of 0.88 Allied World shares
per share of Transatlantic common stock, (ii) an 11 member
board of directors of the combined company to be comprised of
six former Transatlantic directors and five former Allied World
directors, (iii) six committees of the combined
companys board of directors, each to be comprised of two
former Transatlantic directors and two former Allied World
directors, (iv) the nominating and corporate governance,
investment and executive committees to be chaired by former
Allied World directors and the audit, compensation and
enterprise risk committees to be chaired by former Transatlantic
directors, (v) the current chairman of the Transatlantic
board of directors to act as chairman of the combined company
for one year post-closing of the merger and then retire from the
board, to be succeeded by an independent director (who could not
be a current member of the Transatlantic or Allied World board
of directors) with substantial industry expertise, and
(vi) certain proposals with respect to senior management
and location of the combined company.
48
On May 20, 2011, the Strategy Committee held a telephonic
meeting (at which additional Transatlantic directors were in
attendance), attended by members of Transatlantics
management, and representatives from Gibson Dunn, Goldman Sachs
and Moelis, to discuss Allied Worlds latest proposal. At
the meeting, representatives of Goldman Sachs and Moelis
reviewed with the directors, among other things, a preliminary
financial analysis of the proposed transaction on the terms
proposed in the letter received from Allied World on
May 20, 2011 as well as an analysis of Transatlantics
stand-alone plan. Also at the meeting, in light of the proposal
that upon the one-year anniversary of the closing of the
proposed transaction, a new independent, non-executive chairman
of the combined company be appointed, the directors discussed
their desire to have six former Transatlantic directors serve on
the combined companys board for two years following the
closing (absent earlier retirements or resignations and subject
to re-election) and, accordingly, authorized representatives of
Goldman Sachs and Moelis to ask if Allied World would agree that
Transatlantics current chairman remain on the board of
directors of the combined company for an additional year after
resigning as non-executive chairman of the combined company.
Representatives of Allied World replied that they would agree to
consider this possibility, pending successful negotiation of
other transaction terms.
On May 20, 2011, Transatlantic publicly announced that
Mr. Sapnar had been appointed as Executive Vice President
and Chief Operating Officer of Transatlantic, that
Mr. Thomas R. Tizzio, a director of Transatlantic, had
notified the Transatlantic board of directors that he would not
stand for re-election at the upcoming Transatlantic annual
stockholders meeting for personal reasons and that the
Transatlantic board of directors intended to fill the vacancy on
the Board with Mr. Sapnar, effective following the annual
meeting of stockholders.
On May 23, 2011, the Allied World board of directors met by
teleconference with members of Allied Worlds senior
management in attendance. At the meeting, Allied Worlds
senior management updated the board as to the current status of
its discussions with Transatlantic, including the terms of
Allied Worlds May 20th proposal described above, and
managements current views regarding price and governance
matters in the possible transaction. Allied Worlds
management also provided a summary of its key due diligence
findings to date and an outline of open due diligence items.
On May 24, 2011, the Strategy Committee held a telephonic
meeting (at which additional Transatlantic directors were in
attendance), attended by members of Transatlantics
management, and representatives from Gibson Dunn, Goldman Sachs
and Moelis. Goldman Sachs and Moelis reported on the status of
their discussions with Deutsche Bank, in particular, that
Deutsche Bank reaffirmed that the May 20, 2011 proposal
from Allied World was their best and final offer. The Strategy
Committee decided to discuss Allied Worlds proposal at the
May 26, 2011 regularly scheduled Transatlantic board of
directors meeting.
On May 26, 2011, Transatlantic held its annual meeting of
stockholders at which time the Transatlantic stockholders
elected all of Transatlantics nominees for director,
ratified the selection of PWC as Transatlantics
independent registered public accounting firm for 2011,
approved, on an advisory and non-binding basis, the compensation
of executives disclosed in the proxy statement related to the
May 26, 2011 stockholder meeting, and approved, on an
advisory and non-binding basis, holding future advisory votes on
executive compensation annually.
Also on May 26, 2011, Transatlantic held a regularly
scheduled meeting of its board of directors at which the
directors discussed, among other things, the proposal received
from Allied World on May 20, 2011 and the substance of
subsequent discussions between Goldman Sachs, Moelis and
Deutsche Bank. Representatives of Goldman Sachs and Moelis
presented to the directors certain preliminary financial
analyses of the financial terms of the Allied World proposal
from May 20, 2011. The preliminary financial analyses were
prepared by Goldman Sachs and Moelis after consultation with
Transatlantics management. Representatives of Gibson Dunn
reviewed with the directors the applicable legal standards in
the context of considering a strategic combination transaction
of the type being proposed and a comparison of Delaware and
Swiss corporate law. At this meeting, the Transatlantic board of
directors formally appointed Mr. Sapnar to the
Transatlantic board of directors. Following a discussion, the
directors authorized Transatlantics management and
advisors to continue negotiations with Allied World.
49
On May 27, 2011, Transatlantic and Allied World executed an
amendment to the exclusivity agreement (which had expired on
May 11, 2011), extending its term until June 15, 2011.
Commencing on May 27, 2011 and continuing until execution
of the merger agreement on June 12, 2011, both parties and
their advisors, including Gibson Dunn, Willkie Farr,
Lenz & Staehelin (Transatlantics outside Swiss
legal counsel) and Baker & McKenzie (Allied
Worlds outside Swiss legal counsel), negotiated the terms
of the definitive merger agreement, completed their due
diligence efforts, participated in numerous meetings and
conference calls to coordinate joint presentations to rating
agencies and investors, and finalized the terms and structure of
the proposed transaction.
On May 28, 2011, Transatlantic and Allied World formally
engaged Sidley Austin LLP (Sidley Austin) as legal
counsel on a concurrent basis to coordinate insurance regulatory
filings and approvals in connection with the proposed
transaction. Given Sidley Austins historic relationship
with Transatlantic, Transatlantic and Allied World agreed that
Sidley Austin would also continue to represent Transatlantic as
insurance counsel in connection with the proposed transaction.
Between June 1, 2011 and June 10, 2011,
representatives of Transatlantic and Allied World held various
discussions with rating agencies and insurance regulators to
notify them of the proposed business combination transaction.
On June 3, 2011, Mr. Orlich received an unsolicited
telephone call from Edward J. Noonan, the chief executive
officer and Chairman of the board of directors of Validus,
regarding a possible business combination transaction between
Transatlantic and Validus. Subsequently, on June 7, 2011,
Validus delivered a letter (the Validus Indication of
Interest Letter) to Transatlantic expressing an interest
in discussing a potential business combination transaction,
which letter did not contain any economic or other specific
terms for a proposed transaction. Following discussions among
the directors, Transatlantics management and
Transatlantics advisors, the board of directors determined
to continue its negotiations with Allied World and to discuss
the Validus Indication of Interest Letter at the June 12,
2011 Transatlantic board of directors special meeting.
On June 3, 2011, the Allied World board of directors met by
teleconference with members of Allied Worlds senior
management in attendance during which management updated the
board on the progress of its discussions with Transatlantic,
reviewed Allied Worlds recent meetings with the rating
agencies with regard to the possible transaction with
Transatlantic and provided updates with respect to investment
portfolios, a Swiss tax ruling, the review of
Transatlantics loss reserves being performed by an
independent consulting firm (including the status of such
review), outstanding due diligence items and proposed timing in
connection with the possible transaction. Management also
reviewed its preliminary strategies for communicating the
transaction to public, staff and investors.
On June 10, 2011, the Allied World board of directors met
by teleconference with members of Allied Worlds senior
management in attendance, during which management provided an
update on its negotiations with Transatlantic and its advisors
since the last informational call, discussed legal matters, deal
structure, the progress in the loss reserves review, due
diligence and other financial matters related to the proposed
transaction and reviewed feedback received from the rating
agencies. Allied Worlds senior management also reported
that Transatlantic had received the Validus Indication of
Interest Letter expressing Validuss interest in discussing
a potential business combination transaction with Transatlantic.
After a discussion of the Validus Indication of Interest Letter,
the Allied World board of directors requested that senior
management continue to negotiate and finalize the proposed
transaction with Transatlantic.
On June 12, 2011, the Allied World board of directors held
a board meeting in New York City. Members of Allied Worlds
management, as well as representatives from Willkie Farr,
Deutsche Bank and Baker & McKenzie, were present at
the meeting. Representatives of Allied Worlds management
provided an extensive overview of the proposed strategic
combination transaction with Transatlantic and reviewed with the
board the potential benefits of a business combination with
Transatlantic, including the financial and strategic rationale
and the potential synergies. Management also reviewed with the
board financial and governance data from selected merger of
equal transactions and provided a final update of the
companys due diligence review of Transatlantic. Management
reported that negotiations regarding the merger agreement had
been substantially
50
finalized. Representatives of Baker & McKenzie
reviewed in detail with the board certain materials previously
distributed setting forth the applicable legal standards in the
context of considering a strategic combination transaction of
the type being proposed, which was followed by a presentation by
representatives of Willkie Farr regarding the final terms of the
merger agreement and a comparison of certain aspects of
Delaware and Swiss corporate law. Representatives of
Deutsche Bank then presented to the board various financial
analyses of the proposed merger as further described below under
Opinion of Allied Worlds Financial
Advisor. In connection with the deliberation by the Allied
World board, Deutsche Bank delivered to the Allied World board
its written opinion, to the effect that, as of June 12,
2011 and based upon and subject to the assumptions, procedures,
factors, qualifications and limitations set forth in such
opinion, the exchange ratio pursuant to the merger agreement was
fair, from a financial point of view, to Allied World, as more
fully described below under Opinion of Allied
Worlds Financial Advisor. Following these
discussions, the Allied World board unanimously determined that
the merger agreement and the transactions contemplated by the
merger agreement, including the merger, were advisable and in
the best interests of Allied World and voted unanimously to
approve the merger agreement.
On June 12, 2011, the Transatlantic board of directors met
telephonically. Members of Transatlantics management, as
well as representatives from Gibson Dunn, Goldman Sachs, Moelis
and PWC, were present at the meeting. Representatives of
Transatlantics management and Gibson Dunn provided an
overview of further developments relating to the proposed
strategic combination transaction with Allied World, including
that negotiations regarding the merger agreement had been
substantially finalized and that the Allied World board of
directors had unanimously approved the merger agreement.
Representatives of Gibson Dunn then reviewed with the directors
the applicable legal standards in the context of considering a
strategic combination transaction of the type being proposed and
the final terms of the merger agreement. Representatives from
PWC reviewed with the directors the tax implications of the
proposed transaction with respect to Transatlantic, its
stockholders and the combined company following consummation of
the merger. Members of Transatlantics management reviewed
with the board the potential benefits of a business combination
with Allied World, including the financial and strategic
rationale and the potential synergies. Representatives of
Transatlantics financial advisors then reviewed certain
publicly available information regarding Validus and analyses of
hypothetical business combination transactions with Validus. The
directors and management discussed in detail the Validus
Indication of Interest Letter, including (i) the fact that,
in the past, preliminary discussions with Validus regarding a
business combination had never advanced and (ii) that
pursuing a transaction with Validus would likely have an adverse
effect on Allied Worlds willingness to proceed with the
proposed transaction on the economic and other terms that had
been agreed to. The directors and management also discussed the
fact that a business combination with Validus would not deliver
the strategic benefits that could be achieved with the proposed
strategic combination with Allied World, including, but not
limited to, (i) the higher contribution to revenues and
earnings from primary insurance, (ii) a greater focus on
specialty insurance and reinsurance markets, (iii) the high
probability of the combined company maintaining
Transatlantics current credit ratings, and (iv) the
benefit of Allied Worlds domicile as compared to
Validuss. Representatives of Moelis then presented to the
board various financial analyses of the proposed merger as
further described below under Opinion of
Transatlantics Financial Advisor. In connection with
the deliberation by the Transatlantic board, Moelis delivered to
the Transatlantic board its oral opinion, which was subsequently
confirmed by delivery of a written opinion dated June 12,
2011, to the effect that, as of such date and based upon and
subject to the assumptions, procedures, factors, qualifications
and limitations set forth in such written opinion, the exchange
ratio pursuant to the merger agreement was fair, from a
financial point of view, to the holders of shares of
Transatlantics common stock, as more fully described below
under Opinion of Transatlantics
Financial Advisor. Following these discussions, the
Transatlantic board unanimously determined that the merger
agreement and the transactions contemplated by the merger
agreement, including the merger, were advisable and in the best
interests of Transatlantic and its stockholders and voted
unanimously to approve the merger agreement.
Following the respective board meetings of Allied World and
Transatlantic on June 12, 2011, all agreements were
finalized and the merger agreement was then executed by
Transatlantic, Allied World and Merger Sub. Later that day,
Transatlantic and Allied World issued a joint press release
announcing the proposed transaction.
51
On July 8, 2011, Allied World filed a preliminary
S-4/joint
proxy statement with the SEC.
On July 12, 2011, Mr. Orlich received an unsolicited
telephone call from Mr. Noonan. Mr. Noonan spoke to
Mr. Orlich and stated that Validus would be making a
proposal to acquire Transatlantic in a merger pursuant to which
Transatlantic stockholders would receive 1.5564 Validus voting
common shares in the merger and $8.00 per share in cash pursuant
to a one-time special dividend (the Transatlantic
Dividend) from Transatlantic (immediately prior to closing
of the merger) for each share of Transatlantic common stock they
own. Mr. Noonan also noted that Validus preferred to work
cooperatively with Transatlantic to complete a consensual
transaction, but was prepared to take the Validus offer directly
to Transatlantic stockholders if necessary.
Subsequently on July 12, 2011, the Transatlantic board of
directors received an unsolicited proposal letter from Validus
to acquire all of the outstanding shares of Transatlantic common
stock (the Validus Proposal). Pursuant to the
Validus Proposal, Transatlantic stockholders would receive
1.5564 Validus voting common shares in the merger and $8.00 per
share in cash pursuant to a one-time special dividend from
Transatlantic (immediately prior to the closing of the merger)
for each share of Transatlantic common stock they own. The
Validus Proposal was set forth in a proposal letter, accompanied
by a draft merger agreement (the Validus merger
agreement). The full text of the proposal letter is set
forth below:
July 12, 2011
Board of Directors of Transatlantic Holdings, Inc.
c/o Richard
S. Press, Chairman
c/o Robert
F. Orlich, President and Chief Executive Officer
80 Pine Street
New York, New York 10005
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Re:
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Superior Proposal by Validus Holdings, Ltd. to Transatlantic
Holdings, Inc.
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Dear Sirs:
On behalf of Validus, I am pleased to submit this proposal to
combine the businesses of Validus and Transatlantic through a
merger in which Validus would acquire all of the outstanding
stock of Transatlantic. Pursuant to our proposal, Transatlantic
stockholders would receive 1.5564 Validus voting common shares
in the merger and $8.00 per share in cash pursuant to a one-time
special dividend from Transatlantic immediately prior to closing
of the merger for each share of Transatlantic common stock they
own. This combination, which is highly compelling from both a
strategic and financial perspective, would create superior value
for our respective shareholders.
Based on our closing stock price on July 12, 2011, the
proposed transaction provides Transatlantic stockholders with
total consideration of $55.95 per share of Transatlantic common
stock based on the Validus closing price on July 12, 2011,
which represents a 27.1% premium to Transatlantics closing
price on June 10, 2011, the last trading day prior to the
announcement of the proposed acquisition of Transatlantic by
Allied World Assurance Company Holdings, AG. Our proposal also
represents a 12.1% premium over the value of stock consideration
to be paid to Transatlantic stockholders as part of the proposed
acquisition of Transatlantic by Allied World based on the
closing prices of Allied World and Validus shares on
July 12, 2011. Additionally, our proposed transaction is
structured to be tax-free to Transatlantic stockholders with
respect to the Validus voting common shares they receive in the
merger. The Allied World acquisition of Transatlantic is a
fully-taxable transaction and does not include a cash component
to pay taxes. Based on recent public statements by a number of
significant Transatlantic stockholders, we believe that
Transatlantic stockholders would welcome and support our
proposed tax-free transaction, which provides higher value, both
currently and in the long-term, to Transatlantic stockholders
than Transatlantics proposed acquisition by Allied
World.
52
Our Board of Directors and senior management have great
respect for Transatlantic and its business. As you know from our
previous outreaches to you and past discussions, including our
recent conversation on June 3rd and our letter dated
June 7th, Validus has been interested in exploring a
mutually beneficial business combination with Transatlantic for
some time. We continue to believe in the compelling logic of a
transaction between Transatlantic and Validus. Each of us has
established superb reputations with our respective brokers and
ceding companies in the markets we serve. The Flaspöler
2010 Broker Report rated Transatlantic #3 and
Validus #7 for Best Overall reinsurer and
Validus #4 and Transatlantic #7 for Best
Overall Property Catastrophe. These parallel
reputations for excellent service, creativity and underwriting
consistency, when combined with the enhanced capital strength
and worldwide scope of a combined Validus and Transatlantic,
would afford us the opportunity to execute a transaction that
would be mutually beneficial to our respective shareholders and
customers, and more attractive than the proposed acquisition of
Transatlantic by Allied World.
We believe that our proposal clearly constitutes a
Superior Proposal under the terms of the proposed
Allied World merger agreement for the compelling reasons set
forth below:
1. Superior Value. Our proposal of 1.5564
Validus voting common shares in the merger and $8.00 in cash
pursuant to a pre-closing dividend for each share of
Transatlantic common stock, which represents total consideration
of $55.95 per share of Transatlantic common stock based on the
Validus closing price on July 12, 2011, delivers a
significantly higher value to Transatlantic stockholders than
does the proposed acquisition of Transatlantic by Allied World.
As noted above, as of such date, our proposal represents a 27.1%
premium to Transatlantics closing price on June 10,
2011, the last trading day prior to the announcement of the
proposed acquisition of Transatlantic by Allied World, and a
12.1% premium over the value of stock consideration to be paid
to Transatlantic stockholders in the proposed acquisition of
Transatlantic by Allied World based on the closing prices of
Allied World and Transatlantic shares on July 12, 2011. Our
proposal also delivers greater certainty of value because it
includes a meaningful pre-closing cash dividend payable to
Transatlantic stockholders in contrast to the all-stock Allied
World offer.
2. Tax-Free Treatment. In addition to the
meaningful premium and cash consideration, the proposed
transaction with Validus is structured to be tax-free to
Transatlantic stockholders with respect to the Validus voting
common shares they receive in the merger (unlike the
fully-taxable proposed acquisition of Transatlantic by Allied
World).
3. Relative Ownership. Upon consummation of
the proposed transaction, Transatlantic stockholders would own
approximately 48% of Validus outstanding common shares on
a fully-diluted
basis.1
4. Superior Currency. Validus voting
common shares have superior performance and liquidity
characteristics compared to Allied Worlds stock:
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Validus
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Allied World
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Total Shareholder Return Since Validus IPO(a)
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+55%
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+24%
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Market Cap as of 6/10/11
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$3.0 billion
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$2.2 billion
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Average Daily Trading Volume (3 month)(b)
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$27.6 million
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$14.6 million
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Average Daily Trading Volume (6 month)(c)
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$22.4 million
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$13.4 million
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Price/As-Reported Diluted Book (Unaffected)(d)
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0.97x
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0.78x
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Price/As-Reported Diluted Book (Current)(d)
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0.98x
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0.76x
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Dividend Yield as of 6/10/11 (Unaffected)
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3.3%(e)
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2.6%(f)
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(a) |
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Including dividends. Based on the closing prices on
June 10, 2011 and July 24, 2007. Source: SNL. |
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(b) |
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Three months prior to June 12, 2011, date of announcement
of proposed Allied World acquisition of Transatlantic. Source:
Bloomberg. |
1 Fully
diluted shares calculated using treasury stock method.
53
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(c) |
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Six months prior to June 12, 2011, date of announcement of
proposed Allied World acquisition of Transatlantic. Source:
Bloomberg. |
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(d) |
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Based on March 31, 2011 GAAP diluted book value per share.
Unaffected price/as-reported diluted book value measured prior
to June 12, 2011 announcement of proposed Allied World
acquisition of Transatlantic. Current is as of closing prices of
Validus and Allied World stock on July 12, 2011. |
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(e) |
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Based on $0.25 per share quarterly dividend, as announced
May 5, 2011. |
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(f) |
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Based on $0.375 per share quarterly dividend, as disclosed in
Allied World
Form 8-K
dated June 15, 2011. |
Moreover, Validus has maintained a premium valuation on a
diluted book value per share multiple basis relative to its
peers over the past two years, including Allied World. Our
commitment to transparency and shareholder value creation has
allowed us to build a long-term institutional shareholder base,
even as our initial investors have reduced their ownership in
Validus.
5. Robust Long-Term Prospects. We believe
that a combined Validus and Transatlantic would be a superior
company to Allied World following its acquisition of
Transatlantic:
Strategic Fit:
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The combination of Validus strong positions in Bermuda
and London and Transatlantics operations in the United
States, continental Europe and Asia would produce a rare example
of a complementary business fit with minimal overlap.
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This combination will produce a well-diversified company that
will be a global leader in reinsurance.
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This combination will solidify Validus leadership in
property catastrophe, with pro forma managed catastrophe
premiums of over
$1 billion,2
while remaining within Validus historical risk
appetite. Validus has significant experience assimilating
catastrophe portfolios, most recently its acquisition of IPC
Holdings, Ltd. in 2009.
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Finally, we believe that there is a natural division of
expertise among our key executives in line with our
complementary businesses.
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Size and Market Position: This combination
would create a geographically diversified company with a top six
reinsurance industry position on a pro forma
basis,3
and makes the combined company meaningfully larger than many
of the companies considered to be in our mutual peer group. Our
merged companies would have gross premiums written over the last
twelve months of approximately $6.1 billion as of
March 31, 2011.
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As the level of capital required to support risk will
continue to rise globally, we believe that size will become an
even more important competitive advantage in the reinsurance
market. The recent renewals at June 1 and July 1, 2011
reinforced this belief as Validus was able to significantly
outperform market rate levels which we believe was a
result of our size, superior analytics and our ability to
structure private transactions at better than market terms,
while not increasing our overall risk levels.
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Significant Structural Flexibility: Given
jurisdiction, size and market position benefits, a combined
Validus and Transatlantic would have significant structural
flexibility, including its ability to optimally deploy capital
globally in different jurisdictions, e.g., through targeted
growth initiatives
and/or
capital management.
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2 Based
on property catastrophe gross premiums written for Validus and
net premiums written for Transatlantic in 2010. Pro forma for
Validus ($572 million), Transatlantic ($431 million)
and AlphaCat Re 2011 ($43 million).
3 Ranked
by 2009 net premiums written and excluding the Lloyds
market per Standard & Poors Global Reinsurance
Highlights 2010.
54
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Global, Committed Leader in
Reinsurance: Validus has a superior business
plan for the combined company that will drive earnings by
capturing the best priced segments of the reinsurance market. A
combined Validus / Transatlantic would derive a
majority of its premiums from short-tail lines and 17% of
premiums written from property catastrophe (compared to 10% for
Allied
World / Transatlantic).4
Validus believes this business mix allows for optimal cycle
management as the attractive pricing in short tail reinsurance
will allow the combined company to better position itself for
the eventual upturn in long tail lines. Validus also intends to
fortify Transatlantics reserve position through a planned
$500 million pre-tax reserve strengthening.
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We have reviewed the Allied World merger agreement and would
be prepared to enter into a merger agreement with Transatlantic
that includes substantially similar non-price terms and
conditions as the Allied World merger agreement. We are also
open to discussing an increase to the size of Validus
Board of Directors to add representation from the Transatlantic
Board of Directors. In order to facilitate your review of our
proposal, we have delivered to you a draft merger agreement.
Additionally, we expect that the proposed transaction with
Validus would be subject to customary closing conditions,
including the receipt of domestic and foreign antitrust and
insurance regulatory approvals and consents in the United States
and other relevant jurisdictions. Based upon discussions with
our advisors, we anticipate that all necessary approvals and
consents can be completed in a timely manner and will involve no
undue delay in comparison to Transatlantics proposed
acquisition by Allied World.
Validus expects that the pre-closing special dividend would
be financed entirely by new indebtedness incurred by
Transatlantic. As such, Validus has received a highly confident
letter from J.P. Morgan Securities LLC in connection with
the arrangement of the full amount of financing required for the
Transatlantic pre-closing special dividend.
Validus has completed two large acquisitions since 2007, and
has a proven track record of assimilating and enhancing the
performance of businesses that it acquires to create additional
value for shareholders. As such, we are confident that we will
be able to successfully integrate Transatlantics and
Validus businesses in a manner that will quickly maximize
the benefits of the transaction for our respective
shareholders.
Given the importance of our proposal to our respective
shareholders, we feel it appropriate to make this letter public.
We believe that our proposal presents a compelling opportunity
for both our companies and our respective shareholders, and look
forward to the Transatlantic Board of Directors response
by July 19, 2011. We are confident that, after the
Transatlantic Board of Directors has considered our proposal, it
will agree that our terms are considerably more attractive to
Transatlantic stockholders than the proposed acquisition of
Transatlantic by Allied World and that our proposal constitutes,
or is reasonably likely to lead to, a Superior
Proposal under the terms of Transatlantics merger
agreement with Allied World.
We understand that, after the Transatlantic Board of
Directors has made this determination and provided the
appropriate notice to Allied World under the merger agreement,
it can authorize Transatlantics management to enter into
discussions with us and provide information to us. We are
prepared to immediately enter into a mutually acceptable
confidentiality agreement, and we would be pleased to provide
Transatlantic with a proposed confidentiality agreement.
We understand that the terms of Transatlantics merger
agreement with Allied World do not currently permit
Transatlantic to terminate the merger agreement in order to
accept a Superior Proposal, but rather Transatlantic
has committed to bring the proposed acquisition of Transatlantic
by Allied World to a stockholder vote. We are prepared to
communicate the benefits of our proposal as compared to Allied
Worlds proposed acquisition of Transatlantic directly to
Transatlantic stockholders. In addition, while we
4 Based
on gross premiums written for Validus and net premiums written
for Transatlantic in 2010.
55
would prefer to work cooperatively with the Transatlantic
Board of Directors to complete a consensual transaction, we are
prepared to take our proposal directly to Transatlantic
stockholders if necessary.
We have already reviewed Transatlantics publicly
available information and would welcome the opportunity to
review the due diligence information that Transatlantic
previously provided to Allied World. We are also prepared to
give Transatlantic and its representatives access to
Validus non-public information for purposes of the
Transatlantic Board of Directors due diligence review of
us.
Our Board of Directors has unanimously approved the
submission of this proposal. Of course, any definitive
transaction between Validus and Transatlantic would be subject
to the final approval of our Board of Directors, and the
issuance of Validus voting common shares contemplated by our
proposal will require the approval of our shareholders. We do
not anticipate any difficulty in obtaining the required
approvals and are prepared to move forward promptly at an
appropriate time to seek these approvals.
This letter does not create or constitute any legally binding
obligation by Validus regarding the proposed transaction, and,
other than any confidentiality agreement to be entered into with
Transatlantic, there will be no legally binding agreement
between us regarding the proposed transaction unless and until a
definitive merger agreement is executed by Transatlantic and
Validus.
We believe that time is of the essence, and we, our financial
advisors, Greenhill & Co., LLC and J.P. Morgan
Securities LLC, and our legal advisor, Skadden, Arps, Slate,
Meagher & Flom LLP, are prepared to move forward
expeditiously with our proposal to pursue this transaction. We
believe that our proposal presents a compelling opportunity for
both companies and our respective shareholders, and we look
forward to receiving your response by July 19, 2011.
Sincerely,
Edward J. Noonan
Chairman and Chief Executive Officer
Enclosure
On July 13, 2011, Transatlantic issued a press release
announcing that it had received the Validus Proposal and that
the Transatlantic board of directors would carefully consider
and evaluate the Validus Proposal in due course and would inform
Transatlantic stockholders of its position. Transatlantic also
advised stockholders to not take any action at the time and to
await the recommendation of the Transatlantic board of directors.
On July 14, 2011, the Transatlantic board of directors met
telephonically to discuss the Validus Proposal. Members of
Transatlantics management, as well as representatives of
Gibson Dunn, Goldman Sachs, Moelis and PWC were present at the
meeting. At the meeting, the Transatlantic board of directors
asked the representatives of Goldman Sachs to describe any
current or recent prior relationships with Validus. During the
meeting, representatives of Goldman Sachs disclosed that Goldman
Sachs has provided certain investment banking services to
Validus and its affiliates from time to time, for which Goldman
Sachs investment banking division has received
compensation, and that funds managed by affiliates of Goldman
Sachs currently own less than 7% of the non-voting shares of
Validus. Goldman Sachs, in accordance with its internal
policies, had confirmed that such services and interests did not
present a conflict of interest that would preclude Goldman Sachs
from representing the Transatlantic board of directors in
connection with its consideration of the Validus offer.
Representatives of Gibson Dunn then reviewed with the directors
the applicable legal standards in the context of considering the
Validus Proposal and the terms of the merger agreement between
Allied World and Transatlantic. Representatives of Gibson Dunn
also discussed the principal terms of the draft Validus merger
agreement and the material differences from the merger agreement
between Allied World and Transatlantic, including that the draft
Validus merger agreement provided for (i) a closing
condition that counsel to each of
56
Transatlantic and Validus provide certain tax opinions,
(ii) a closing condition that the Transatlantic Dividend be
declared and paid and (iii) a financing covenant that
Transatlantic use its reasonable best efforts to obtain
financing to fund payment of the Transatlantic Dividend. Members
of management then discussed with the directors certain
operational and financial aspects of the Validus Proposal.
Representatives of Goldman Sachs and Moelis then provided the
directors with their preliminary analysis regarding certain
financial metrics with respect to the Validus Proposal. The
Transatlantic board of directors then discussed the Validus
Proposal and requested that its legal and financial advisors
continue to evaluate the Validus Proposal so that the directors
could be fully informed prior to making any determinations with
respect thereto.
On July 17, 2011, Validus delivered to the Transatlantic
board of directors certain supplemental materials describing,
among other things, its view as to the merits of the Validus
Proposal. Shortly thereafter, Validus issued a press release and
publicly disseminated its supplemental materials.
On July 18, 2011, the Transatlantic board of directors met
telephonically, along with members of Transatlantics
management and representatives of Gibson Dunn, Goldman Sachs,
Moelis, and Richards, Layton & Finger,
Transatlantics Delaware legal counsel. Representatives of
Gibson Dunn reviewed with the directors Transatlantics
obligations pursuant to the merger agreement between Allied
World and Transatlantic and also described the applicable legal
standards in connection with the matters being considered by the
board of directors at the meeting. Representatives of Goldman
Sachs and Moelis then reviewed with the directors certain
preliminary financial analyses of the terms of the Validus
Proposal as compared to the terms of the proposed transaction
with Allied World. Following a discussion, the Transatlantic
board of directors determined that the Validus Proposal did not
constitute a Superior Proposal under the terms of
the merger agreement between Allied World and Transatlantic. The
Transatlantic board of directors further determined that the
Validus Proposal was reasonably likely to lead to a Superior
Proposal and that the failure to enter into discussions
regarding the Validus Proposal would result in a breach of its
fiduciary duties under applicable law. As a result, the
Transatlantic board determined that Transatlantic should offer
to engage in discussions and exchange information with Validus,
subject to, in accordance with the merger agreement between
Allied World and Transatlantic, (i) providing Allied World
with three business days notice of Transatlantics
intent to furnish information to and enter into discussions with
Validus and (ii) obtaining from Validus an executed
confidentiality agreement containing terms that are
substantially similar, and not less favorable, to Transatlantic,
in the aggregate, than those contained in the confidentiality
agreement between Transatlantic and Allied World. The
Transatlantic board of directors also reaffirmed its
recommendation of, and its declaration of advisability with
respect to, the merger agreement between Allied World and
Transatlantic. Finally, representatives of Gibson Dunn and
Goldman Sachs made a presentation to the Transatlantic board of
directors regarding Transatlantics profile with respect to
unsolicited offers and a stockholder rights plan. The
Transatlantic board of directors then discussed with its
advisors the terms, timing and pros and cons of adopting such a
rights plan in light of the Validus Proposal. Transatlantic
issued a press release announcing its determinations with
respect to the Validus Proposal on July 19, 2011.
On July 20, 2011, Transatlantic disseminated supplemental
materials setting forth certain information regarding the
Validus Proposal and the merger agreement between Allied World
and Transatlantic.
Also on July 20, 2011, Validus filed a preliminary proxy
statement on Schedule 14A soliciting proxies from
Transatlantic stockholders to vote against the adoption of the
merger agreement proposal, the adjournment proposal and the
golden parachute proposal.
On July 23, 2011, following the expiration of a three
business days notice period under the merger agreement,
Transatlantic delivered a draft of a confidentiality agreement
with terms (including a standstill) substantially similar, and
not less favorable, to Transatlantic, in the aggregate, than
those contained in the confidentiality agreement between
Transatlantic and Allied World, as required pursuant to the
merger agreement between Allied World and Transatlantic. Later
on July 23, 2011, in-house legal counsel to Transatlantic
and representatives of Gibson Dunn spoke via telephone to
in-house legal counsel to Validus and a representative of
Skadden, Arps, Slate, Meagher & Flom LLP
(Skadden), outside legal counsel to Validus, to
discuss the draft of the confidentiality agreement delivered by
Transatlantic earlier that day. On this call, legal counsel to
Validus indicated that Validus would not execute a
confidentiality agreement with a standstill
57
provision as requested by Transatlantic pursuant to the terms
of the merger agreement. Later that same day, a representative
from Skadden delivered to Transatlantic and Gibson Dunn a markup
of the draft confidentiality agreement with, among other
changes, the standstill deleted. As required under the merger
agreement between Allied World and Transatlantic, a copy of such
markup was delivered to Allied World and Willkie Farr. On
July 24, 2011, a representative of Gibson Dunn communicated
to a representative of Skadden and in-house counsel to Validus
that Transatlantic was continuing to review the markup of the
confidentiality agreement and expected to respond reasonably
soon.
Subsequently on July 25, 2011, prior to receiving a
response from Transatlantic or Gibson Dunn regarding the Validus
markup of the confidentiality agreement, Validus sent a letter
to the Transatlantic board of directors informing them that
Validus was commencing an exchange offer that morning for all of
the outstanding shares of common stock of Transatlantic pursuant
to which Transatlantic stockholders would receive 1.5564 Validus
voting common shares and $8.00 in cash for each share of
Transatlantic common stock they own (the Validus exchange
offer). The letter also indicated that Validus intended to
continue soliciting Transatlantic stockholders to vote against
the transaction with Allied World. Validus also issued a press
release containing the foregoing letter and announcing the
commencement of an exchange offer and filed a prospectus/offer
to exchange with the SEC.
Also on July 25, 2011, Transatlantic issued a press release
stating that, consistent with its fiduciary duties and in
consultation with its independent financial and legal advisors,
the Transatlantic board of directors would carefully review and
evaluate the Validus exchange offer and advised
Transatlantics stockholders to take no action pending the
review of the Validus exchange offer by Transatlantics
board of directors. The press release also announced that
Transatlantic intends to make the position of the Transatlantic
board of directors with respect to the Validus exchange offer
available to stockholders in a solicitation/recommendation
statement on
Schedule 14D-9,
to be filed with the Securities and Exchange Commission. In the
press release, Transatlantic stated that its board of directors
reaffirmed its recommendation of, and declaration of
advisability with respect to, the merger agreement between
Allied World and Transatlantic.
Also on July 25, 2011, a representative of Willkie Farr
informed a representative of Gibson Dunn that (i) the
markup of the Validus confidentiality agreement provided by
Skadden did not conform to the provisions of the merger
agreement and (ii) Allied World would not waive any of the
provisions in the merger agreement with respect thereto and
reserved all of its rights in all respects should Transatlantic
proceed to accept the markup of the confidentiality agreement.
On July 26, 2011, the Transatlantic board of directors met
telephonically, along with members of Transatlantics
management and representatives of Gibson Dunn, Goldman Sachs,
and Moelis. Representatives of Gibson Dunn described the
applicable legal standards in connection with the matters being
considered by the Transatlantic board of directors at the
meeting and then reviewed with the directors the principal terms
of the Validus exchange offer as set forth in the Validus
prospectus/offer to exchange. Representatives of Goldman Sachs
and Moelis then reviewed with the directors certain financial
analyses with respect to the Validus exchange offer as compared
to the merger agreement between Allied World and Transatlantic
and also reviewed certain financial metrics with respect to both
Validus and Allied World. Following a discussion, the
Transatlantic board of directors unanimously voted to recommend
that Transatlantic stockholders reject the Validus exchange
offer and reaffirmed its recommendation of, and declaration of
advisability with respect to, the merger agreement between
Allied World and Transatlantic. Thereafter, representatives of
Gibson Dunn discussed with the Transatlantic board of directors
the principal terms of a stockholder rights plan that
Transatlantic could consider adopting. The Transatlantic board
of directors then discussed with its advisors the terms, timing
and pros and cons of adopting the stockholder rights plan in
light of Validuss filings with the SEC as they relate to
the Validus Proposal, proxy solicitation and Validus exchange
offer. Representatives of Gibson Dunn then discussed with the
Transatlantic board of directors certain proposed amendments to
the Transatlantic bylaws related to the conduct of stockholder
meetings. The directors then discussed with representatives of
Gibson Dunn the investigation of potential claims against
Validus for violations of U.S. securities and other laws in
connection with the Validus exchange offer and proxy
solicitation. Following a discussion, the Transatlantic board
of directors adopted a stockholder rights plan, which has a one
year term and a 10% beneficial ownership threshold, to encourage
the fair and equal treatment of Transatlantic
58
stockholders in connection with any initiative to acquire
effective control of Transatlantic and to reduce the likelihood
that any person, including Validus, would gain control of
Transatlantic by open market accumulation or otherwise without
paying a control premium for all common stock. The
Transatlantic board of directors also approved certain
amendments to the Transatlantic bylaws relating to the conduct
of stockholder meetings, which would enable the Transatlantic
board of directors to postpone a stockholder meeting to give
stockholders sufficient time to consider new information
released immediately prior to a meeting. Finally, the
Transatlantic board of directors approved the commencement of
litigation, as appropriate, against Validus.
On July 28, 2011, Transatlantic filed with the Securities
and Exchange Commission a
Schedule 14D-9
solicitation/recommendation statement recommending that the
Transatlantic stockholders reject the Validus exchange offer.
Also on July 28, 2011, Transatlantic issued a press release
relating to the determinations made at the July 26, 2011
meeting of the Transatlantic board of directors. Additionally,
on July 28, 2011, Transatlantic filed a lawsuit against
Validus in the United States District Court for the District of
Delaware, alleging that Validus had violated certain securities
laws by making materially false
and/or
misleading statements in the Validus exchange offer and proxy
solicitation materials filed with the SEC.
On July 31, 2011, the Transatlantic board of directors met
telephonically to discuss the progress of the merger with Allied
World, as well as recent events surrounding Validuss
exchange offer. A representative of Gibson Dunn discussed with
the directors certain legal matters relating to these events.
On August 2, 2011, Validus announced that it had obtained
amendments to its applicable credit facilities necessary for
satisfying a condition to the Validus exchange offer.
On August 3, 2011, Validus filed with the SEC a preliminary
proxy statement with respect to a special meeting of Validus
shareholders at which Validus will seek the approval of the
issuance of Validus voting common shares in connection with the
Validus exchange offer or other acquisition transaction
involving Transatlantic.
On August 4, 2011, at Transatlantics request, Messrs.
Orlich and Sapnar met with Messrs. Noonan and Consolino to
discuss Transatlantics request that Validus enter into a
mutual confidentiality agreement, on the terms required under
the merger agreement.
On August 4, 2011, Mr. Orlich received a telephone
call from Ajit Jain, head of Berkshire Hathaway Reinsurance
Group (together with Berkshire Hathaway Inc. and its affiliates,
Berkshire) regarding a possible business combination
between Transatlantic and Berkshire. Subsequently, on
August 5, 2011, Berkshire delivered a letter (the
Berkshire Indication of Interest Letter) to
Transatlantic expressing an interest in acquiring Transatlantic
for $52.00 per share (the Berkshire Proposal). The
full text of the Berkshire Indication of Interest Letter is set
forth below:
August 5, 2011
Mr. Robert Orlich
President & CEO
Transatlantic Holdings, Inc.
80 Pine Street
New York, NY 10005
Dear Bob:
As you can imagine, subsequent to our telephone conversation
yesterday, I have been watching the screen all morning. With
your stock trading at $45.83, I have to believe that you will
find our offer to buy all of Transatlantic shares outstanding at
$52.00 per share to be an attractive offer. As such, I am now
writing to formally inform you of National Indemnitys
commitment to do so at $52.00 per share under
59
customary terms for a stock purchase agreement of a publicly
traded company to be agreed (but not subject to any due
diligence review or financing condition of any nature). This
commitment is subject to:
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A formal response from you no later than the close of
business, Monday, August 8, 2011.
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Should you decide to accept this offer, your agreement that
should the deal not close for any reasons that are under your
control by December 31, 2011, a
break-up fee
of $75.0 million would be paid to us.
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Your commitment that until the deal closes, you will continue
to manage the affairs of the company in a manner that is
consistent with how you have managed it historically.
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I have deliberately tried to be brief and to the point. I
will be happy to discuss any details that you would like at your
convenience. I can be reached at [number withheld] (work),
[number withheld] (cell) or [number withheld] (home).
Regards,
/s/ Ajit Jain
Ajit Jain
AJ/bw
On August 5, 2011, Allied World filed Amendment No. 1
to the joint proxy statement/prospectus with the SEC.
On August 7, 2011, Transatlantic issued a press release
announcing that it had received the Berkshire Indication of
Interest Letter and that the Transatlantic board of directors
would carefully consider and evaluate the Berkshire Proposal and
would inform Transatlantics stockholders of its position.
Transatlantic also advised its stockholders not to take any
action at that time and to await the recommendation of the
Transatlantic board of directors. The Transatlantic board of
directors also reaffirmed its recommendation of, and its
declaration of advisability with respect to, the merger
agreement.
On the morning of August 8, 2011, the Transatlantic board
of directors met telephonically to discuss the Berkshire
Proposal and other recent developments. Members of
Transatlantics management, as well as representatives of
Gibson Dunn, Goldman Sachs, Moelis and Richards,
Layton & Finger were present at the meeting.
Representatives of Gibson Dunn and Richards, Layton &
Finger reviewed with the directors the applicable legal
standards in the context of considering the Berkshire Proposal.
Representatives of Goldman Sachs and Moelis then provided the
directors with their preliminary analysis regarding certain
financial metrics with respect to the Berkshire Proposal and
certain other matters. After extensive discussion, the
Transatlantic board of directors then decided to adjourn the
meeting in order to consider further the issues discussed.
Later on August 8, 2011, the Transatlantic board of
directors reconvened telephonically. Members of
Transatlantics management, as well as representatives of
Gibson Dunn and Richards, Layton & Finger were present
at the meeting. Following a discussion, the Transatlantic board
of directors determined that the Berkshire Proposal did not
constitute a Superior Proposal under the terms of
the merger agreement between Allied World and Transatlantic. The
Transatlantic board of directors further determined that the
Berkshire Proposal was reasonably likely to lead to a
Superior Proposal and that the failure to enter into
discussions regarding the Berkshire Proposal would result in a
breach of its fiduciary duties under applicable law. As a
result, the Transatlantic board of directors determined that
Transatlantic should offer to engage in discussions and exchange
information with Berkshire, subject to, and in accordance with
the merger agreement between Allied World and Transatlantic,
(i) providing Allied World with three business days
notice of Transatlantics intent to furnish information to
and enter into discussions with Berkshire and
(ii) obtaining from Berkshire an executed confidentiality
agreement containing terms that are substantially similar, and
no less favorable, to Transatlantic, in the aggregate, than
those contained in the confidentiality agreement between
Transatlantic and Allied World. The Transatlantic board of
directors also reaffirmed its recommendation of, and its
declaration of advisability with respect to, the merger
agreement between Allied World and Transatlantic. Transatlantic
issued a press release announcing the Transatlantic board of
directors determinations after the close of the market on
August 8, 2011. Also on August 8, 2011, Transatlantic
filed with the SEC an amended
Schedule 14D-9
solicitation/recommendation statement.
60
Allied
Worlds Reasons for the Merger; Recommendations of the
Allied World Board of Directors
In reaching its decision to approve the merger agreement and
recommend approval of both the issuance of Allied World shares
to Transatlantic stockholders pursuant to the merger and the
adoption of Allied Worlds amended Articles of Association,
the Allied World board of directors consulted with Allied
Worlds management, as well as with Allied Worlds
legal and financial advisors, and also considered a number of
factors that the Allied World board of directors viewed as
supporting its decisions, including, but not limited to, the
following:
the potential to create a leading specialty focused
insurance and reinsurance company with a global reach;
the potential for revenue growth and synergies to
generate additional free cash flow available for investment and
expansion opportunities;
that although no assurance can be given that any
level of operating and structural synergies would be achieved
following the completion of the merger, management estimated
that the combination of Allied World and Transatlantic would
create $80 million of annual gross savings with the
combined company realizing approximately 60% of those savings on
an annualized run-rate (after-tax) basis in the first year
following the closing of the merger in the principal areas of
reduced public company costs, consolidated corporate governance,
reduced labor, shared platform costs and structural flexibility
in allocation of capital;
that the greater scale, scope and reach of the
combined company, including its enhanced business mix diversity
and expanded European and Asian presence, should make it a more
attractive partner for potential customers with both national
and international businesses and help to enhance brand
recognition;
the fact that the merger will create a company with
a greater size and economies of scale, enabling it to have
incremental excess capital, greater capital flexibility, ability
to respond to competitive pressures, greater diversification
opportunities and an increased opportunity to compete profitably;
that although no assurance can be given on any level
of reaction by any independent rating agency, the pro forma
independent rating agency capital adequacy models of the
combined company, generate increased quantitative capital
adequacy scores and, potentially improved debt and financial
strength ratings for the combined company;
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the combination of the businesses through the merger will result
in greater product offerings and improved market positions;
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the combination of the strong and experienced management teams
from Allied World and Transatlantic will add significant value
to the combined company;
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the addition of a global reinsurance platform will provide
Allied World with access to a profitable business segment that
will allow Allied World to better serve its customers;
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the significant role in the combined company to be played by
members of management and the current board of directors of
Allied World, including Scott A. Carmilani, Allied Worlds
current Chairman, President and Chief Executive Officer (who
will continue as the combined companys President and Chief
Executive Officer), and other Allied World employees, which the
Allied World board of directors believed would enhance the
prospects of the combined company after completion of the merger
for the benefit of Allied World shareholders; and
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the financial analyses presented by Deutsche Bank to the Allied
World board of directors described below under
Opinion of Allied Worlds Financial
Advisor, and the opinion of Deutsche Bank rendered to the
Allied World board of directors that, as of the date such merger
agreement was signed, based upon and subject to the factors and
assumptions set forth in its written opinion. See
Opinion of Allied Worlds Financial
Advisor.
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In addition to considering the factors described above, the
Allied World board of directors also considered the following
factors:
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its knowledge of Allied Worlds business, operations,
financial condition, earnings and prospects and of
Transatlantics business, operations, financial condition,
earnings and prospects, taking into account the results of
Allied Worlds due diligence review of Transatlantic;
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the integration risks, resulting from similar cultures focused
on underwriting discipline and risk management, the overlap in
use of information systems, limited business overlap and the
proven integration track record of Allied World;
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the anticipated market capitalization, liquidity and capital
structure of the combined company;
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the projected financial results of Allied World as a standalone
company and the ability of Allied World to achieve strategic
goals previously established by the Allied World board of
directors;
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the fact that the exchange ratio of 0.88 Allied World shares for
each share of Transatlantic common stock is fixed, which the
Allied World board of directors believed was consistent with
market practice for mergers of this type and with the strategic
purpose of the merger; and
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the terms and conditions of the merger agreement and the
likelihood of completing the merger on the anticipated schedule.
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The Allied World board of directors weighed the foregoing
against a number of potentially negative factors, including:
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the restrictions on the conduct of Allied Worlds business
during the period between execution of the merger agreement and
the consummation of the merger, including the inability to
repurchase shares;
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the potential effect of the merger on Allied Worlds
overall business, including its relationships with customers,
employees, suppliers and regulators;
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the challenges inherent in combining the businesses, operations
and workforces of two companies, including the potential for
(i) unforeseen difficulties in integrating operations and
systems, (ii) the possible distraction of management
attention for an extended period of time and
(iii) difficulties in assimilating employees;
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the substantial costs to be incurred in connection with the
merger, including the costs of integrating the businesses of
Allied World and Transatlantic and the transaction expenses
arising from the merger;
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the risk that governmental entities may oppose or refuse to
approve the merger or impose conditions on Allied World
and/or
Transatlantic prior to approving the merger that may adversely
impact the ability of the combined company to realize synergies
that are projected to occur in connection with the merger;
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the risk that, despite the combined efforts of Allied World and
Transatlantic prior to the consummation of the merger, the
combined company may lose key personnel;
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the possibility of merger arbitrage activity as a result of the
stock price premium being paid;
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the risk that Transatlantics loss reserves may prove to be
inadequate;
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the risk that the combined company, with increased policies and
geographic coverage, will have a level of volatility higher than
Allied Worlds after the merger as a result of additional
catastrophe risk exposure;
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the risk of not capturing all of the anticipated operational and
structural synergies between Allied World and Transatlantic and
the risk that other anticipated benefits may not be
realized; and
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the risks of the type and nature described under the heading
Risk Factors, and the matters described under the
heading Special Note Regarding Forward-Looking
Statements.
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62
This discussion of the information and factors considered by the
Allied World board of directors in reaching its conclusions and
recommendation includes the material factors considered by the
board, but is not intended to be exhaustive. In view of the wide
variety of factors considered in connection with its evaluation
of the merger and the complexity of these matters, the Allied
World board of directors did not find it practicable, and did
not attempt, to quantify, rank or assign any relative or
specific weights to the various factors that it considered in
reaching its determination to approve the merger agreement and
to recommend that Allied World shareholders vote in favor of the
share capital increase proposals, the NYSE share issuance
proposal, the name change proposal, the election of directors
proposal, the capital reduction proposal and the Stock Incentive
Plan proposal. The Allied World board of directors conducted an
overall analysis of the factors described above, including
through discussions with, and questioning of, Allied
Worlds management and outside legal and financial advisors
regarding certain of the matters described above. In considering
the factors described above, individual members of the Allied
World board of directors may have given differing weights to
different factors.
The Allied World board of directors unanimously approved the
merger agreement and determined that the merger agreement and
the transactions contemplated thereby, including the merger, are
advisable and in the best interests of Allied World. The Allied
World board of directors unanimously recommends that Allied
World shareholders vote FOR the proposals set forth
herein.
Opinion
of Allied Worlds Financial Advisor
Opinion
of Deutsche Bank Securities Inc.
Allied World engaged Deutsche Bank pursuant to a letter
agreement dated June 2, 2011, to act as its financial
advisor in connection with the merger. At the meeting of the
Allied World board of directors on June 12, 2011, Deutsche
Bank rendered an oral and written opinion, to the Allied World
board of directors to the effect that, based upon and subject to
the assumptions, limitations, qualifications and conditions set
forth in the opinion, as of the date of such opinion, the
exchange ratio was fair, from a financial point of view, to
Allied World.
The full text of the written opinion of Deutsche Bank, dated
June 12, 2011, which sets forth, among other things, the
assumptions made, matters considered, and limitations,
qualifications and conditions of the review undertaken by
Deutsche Bank in connection with the opinion, is attached as
Annex B to this joint proxy statement/prospectus and is
incorporated herein by reference. Allied World shareholders are
urged to read Deutsche Banks opinion carefully and in its
entirety. Deutsche Bank expressed no opinion as to the merits of
the underlying decision by Allied World to engage in the merger
or the relative merits of the merger as compared to any
alternative transactions or business strategies, nor did
Deutsche Bank express an opinion as to how any holder of Allied
World shares should vote with respect to the merger.
In connection with Deutsche Banks role as financial
advisor to Allied World, and in arriving at its opinion,
Deutsche Bank reviewed certain publicly available financial and
other information concerning Allied World and Transatlantic,
including certain statutory statements filed by the insurance
subsidiaries of both Allied World and Transatlantic. Deutsche
Bank also reviewed certain internal analyses, financial
forecasts and other information relating to Allied World and
Transatlantic prepared by management of Allied World and
Transatlantic, respectively, and certain analyses relating to
Transatlantic prepared by management of Allied World. Deutsche
Bank also reviewed certain reports regarding
Transatlantics reserves for losses and loss adjustment
expenses prepared for Allied World by third party actuaries.
Deutsche Bank also held discussions with certain senior officers
and other representatives and advisors of Allied World and
Transatlantic regarding the businesses and prospects of Allied
World, Transatlantic and the combined company, including certain
cost savings and operating synergies jointly projected by the
managements of Allied World and Transatlantic to result from the
merger. In addition, Deutsche Bank:
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reviewed the reported prices and trading activity for both the
Allied World shares and the Transatlantic common stock;
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to the extent publicly available, compared certain financial and
stock market information for Allied World and Transatlantic with
similar information for certain other companies it considered
relevant whose securities are publicly traded;
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to the extent publicly available, reviewed the financial terms
of certain recent business combinations which it deemed relevant;
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reviewed a draft of the merger agreement, dated June 10,
2011; and
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performed such other studies and analyses and considered such
other factors as it deemed appropriate.
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Deutsche Bank did not assume responsibility for independent
verification of, and did not independently verify, any
information, whether publicly available or furnished to it,
concerning Allied World or Transatlantic, including, without
limitation, any financial information considered in connection
with the rendering of its opinion. Accordingly, for purposes of
its opinion, Deutsche Bank, with the permission of the Allied
World board of directors, assumed and relied upon the accuracy
and completeness of all such information. Deutsche Bank did not
conduct a physical inspection of any of the properties or
assets, and did not prepare or obtain any independent evaluation
or appraisal of any of the assets or liabilities (including,
without limitation, any contingent, derivative or
off-balance-sheet assets and liabilities), of Allied World or
Transatlantic or any of their respective subsidiaries, nor did
Deutsche Bank evaluate the solvency or fair value of Allied
World or Transatlantic under any state or federal law relating
to bankruptcy, insolvency or similar matters. With respect to
the financial forecasts, including, without limitation, the
analyses and forecasts of the amount and timing of certain cost
savings, operating efficiencies, revenue effects, financial
synergies and other strategic benefits projected by Allied World
to be achieved as a result of the merger (collectively, the
Synergies), made available to Deutsche Bank and used
in its analyses, Deutsche Bank assumed, with the permission of
the Allied World board of directors, that they had been
reasonably prepared on bases reflecting the best currently
available estimates and judgments of the managements of Allied
World and Transatlantic, as applicable, as to the matters
covered thereby. In rendering its opinion, Deutsche Bank
expressed no view as to the reasonableness of such forecasts and
projections, including, without limitation, the Synergies, or
the assumptions on which they were based. Deutsche Banks
opinion was necessarily based upon economic, market and other
conditions as in effect on, and the information made available
to it as of, the date of the opinion. Deutsche Bank expressly
disclaimed any undertaking or obligation to advise any person of
any change in any fact or matter affecting its opinion of which
it becomes aware after the date of its opinion.
For purposes of rendering its opinion, Deutsche Bank assumed,
with the permission of the Allied World board of directors,
that, in all respects material to its analysis, the merger would
be consummated in accordance with its terms, without any
material waiver, modification or amendment of any term,
condition or agreement. Deutsche Bank also assumed that all
material governmental, regulatory, contractual or other
approvals and consents required in connection with the
consummation of the merger would be obtained and that in
connection with obtaining any necessary governmental,
regulatory, contractual or other approvals and consents, no
material restrictions, terms or conditions would be imposed.
Deutsche Bank is not a legal, regulatory, tax or accounting
expert and Deutsche Bank relied on the assessments made by
Allied World and its advisors with respect to such issues. In
particular, Deutsche Bank assumed, with the permission of the
Allied World board of directors, that Transatlantic will be the
accounting acquirer in the merger. Deutsche Bank is also not an
expert in the evaluation of reserves for losses and loss
adjustment expenses and was not requested to, and did not, make
any actuarial determinations or evaluations or attempt to
evaluate actuarial assumptions. Deutsche Bank made no analysis
of, and did not express any view with respect to, the adequacy
of Allied Worlds or Transatlantics loss and loss
adjustment expense reserves. Representatives of Allied World
informed Deutsche Bank, and Deutsche Bank has further assumed,
that the final terms of the merger agreement would not differ
materially from the terms set forth in the drafts it reviewed.
The Deutsche Bank opinion was approved and authorized for
issuance by a fairness opinion review committee and was
addressed to, and for the use and benefit of, the Allied World
board of directors in connection with and for the purposes of
its evaluation of the merger and is not a recommendation to the
shareholders of Allied World as to how they should vote with
respect to the merger, the amendment of Allied Worlds
Articles or the issuance of Allied World shares in the merger,
in each case as contemplated by the
64
merger agreement. The Deutsche Bank opinion was limited to the
fairness, from a financial point of view, of the exchange ratio
to Allied World and did not address any other terms of the
merger or the merger agreement, is subject to the assumptions,
limitations, qualifications and other conditions contained
therein and is necessarily based on the economic, market and
other conditions, and information made available to Deutsche
Bank, as of the date of the opinion. Deutsche Bank was not asked
to, and its opinion did not, address the fairness of the merger,
or any consideration received in connection therewith, to the
holders of any other class of securities, creditors or other
constituencies of Allied World, nor did it address the fairness
of the contemplated benefits of the merger. Deutsche Bank did
not express any view or opinion as to the underlying decision by
Allied World to engage in the merger or the relative merits of
the merger as compared to any alternative transactions or
business strategies. In addition, Deutsche Bank did not express
any view or opinion as to the fairness, financial or otherwise,
of the amount or nature of any compensation payable to or to be
received by any of the officers, directors, or employees of any
parties to the merger, or any class of such persons, relative to
the exchange ratio. The Deutsche Bank opinion did not in any
manner address the prices at which the Allied World shares or
any other securities would trade following the announcement or
consummation of the merger.
The following is a summary of the material financial analyses
contained in the presentation that was made by Deutsche Bank to
the Allied World board of directors on June 12, 2011 and
that were used by Deutsche Bank in connection with rendering its
opinion described above. The following summary, however, does
not purport to be a complete description of the financial
analyses performed by Deutsche Bank, nor does the order in which
the analyses are described represent the relative importance or
weight given to the analyses by Deutsche Bank. Some of the
summaries of the financial analyses include information
presented in tabular format. The tables must be read together
with the full text of each summary and are alone not a complete
description of Deutsche Banks financial analyses. Except
as otherwise noted, the following quantitative information, to
the extent that it is based on market data, is based on market
data as it existed on or before June 10, 2011, and is not
necessarily indicative of current market conditions.
Historical
Multiples Trends
Deutsche Bank reviewed and analyzed the average multiples of the
price per share to book value per share for each of Allied World
and Transatlantic over historical time periods prior to
June 10, 2011. The results of this analysis are as follows:
|
|
|
|
|
|
|
|
|
|
|
Average Multiples of Price
|
|
|
to Book Value
|
|
|
Allied World
|
|
Transatlantic
|
|
Current (as of June 10, 2011)
|
|
|
0.78
|
x
|
|
|
0.69
|
x
|
10-day
|
|
|
0.76
|
|
|
|
0.69
|
|
1-month
|
|
|
0.76
|
|
|
|
0.71
|
|
3-month
|
|
|
0.79
|
|
|
|
0.73
|
|
6-month
|
|
|
0.78
|
|
|
|
0.74
|
|
1-year
|
|
|
0.75
|
|
|
|
0.75
|
|
2-year
|
|
|
0.74
|
|
|
|
0.80
|
|
5-year
|
|
|
0.92
|
|
|
|
1.08
|
|
65
Historical
Exchange Ratio Analysis
Deutsche Bank calculated, reviewed and analyzed the average
historical exchange ratios implied by dividing the daily closing
prices of Transatlantics common stock over Allied
Worlds shares, over historical periods prior to
June 10, 2011. The results of this analysis are as follows:
|
|
|
|
|
|
|
Average Exchange Ratios
|
|
Current (as of June 10, 2011)
|
|
|
0.76
|
x
|
10-day
|
|
|
0.76
|
|
1-month
|
|
|
0.76
|
|
3-month
|
|
|
0.77
|
|
6-month
|
|
|
0.81
|
|
1-year
|
|
|
0.87
|
|
2-year
|
|
|
0.99
|
|
In addition, Deutsche Bank reviewed the range of exchange ratios
over the 52-week period prior to June 10, 2011. Deutsche
Bank found that the exchange ratio ranged from 0.74x to 1.07x
over that period. Deutsche Bank noted that the exchange ratio of
0.88x fell within that range.
Trading
Range Analysis
Deutsche Bank reviewed the 52-week trading range of Allied World
shares and Transatlantics common stock measured as of
June 10, 2011. Deutsche Bank found that the price per share
of Allied Worlds shares over that period ranged from $45
to $65 and that Transatlantics common stock over that
period ranged from $44 to $54. Based on the foregoing, Deutsche
Bank calculated an implied exchange ratio range of 0.68 to 1.21x
shares of Allied World to be issued in exchange for one share of
Transatlantic common stock. The low exchange ratio represents
the ratio of the lowest Transatlantic value per share and the
highest Allied World value per share over the 52-week period
considered. The high exchange ratio represents the ratio of the
highest Transatlantic value per share and the lowest Allied
World value per share over the 52-week period considered.
Deutsche Bank noted that the exchange ratio of 0.88x fell within
that range.
Contribution
Analysis
Based upon the exchange ratio of 0.88 Allied World shares per
share of Transatlantic common stock to be effected in the merger
and the closing price of $58.07 per Allied World share on
June 10, 2011, Deutsche Bank calculated that the pro forma
fully diluted ownership of Allied World and Transatlantic
shareholders in the combined company was approximately 42% and
58%, respectively. Deutsche Bank then compared such pro forma
fully diluted ownership percentages of Allied World and
Transatlantic shareholders to Allied Worlds and
Transatlantics respective relative contributions to the
combined company based upon current fully diluted market
capitalization for each company on a stand-alone basis as of
June 10, 2011, total assets, shareholders equity and
shareholders tangible equity for each company on a
stand-alone basis as of March 31, 2011, as well as each
companys relative contribution to actual after-tax
operating income for 2010 and estimated after-tax operating
income for 2011, 2011 (normalized for a catastrophe loss ratio
of 5%), 2012 and
66
2013 based upon estimates prepared by the management of Allied
World and Transatlantic for their respective companies. The
results of these calculations are summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
Relative Contribution
|
|
|
Allied World
|
|
Transatlantic
|
|
Financial metrics
|
|
|
|
|
|
|
|
|
Current fully diluted market capitalization (as of 6/10/11)
|
|
|
45
|
%
|
|
|
55
|
%
|
Total assets (as of 3/31/2011)
|
|
|
40
|
|
|
|
60
|
|
Shareholders equity (as of 3/31/2011)
|
|
|
42
|
|
|
|
58
|
|
Shareholders tangible equity (as of 3/31/2011)
|
|
|
39
|
|
|
|
61
|
|
2010 Actual after-tax operating income
|
|
|
51
|
|
|
|
49
|
|
2011 Estimated after-tax operating income
|
|
|
52
|
|
|
|
48
|
|
2011 Estimated after-tax operating income normalized
cat losses
|
|
|
39
|
|
|
|
61
|
|
2012 Estimated after-tax operating income
|
|
|
39
|
|
|
|
61
|
|
2013 Estimated after-tax operating income
|
|
|
41
|
|
|
|
59
|
|
In addition to noting the relative pro forma ownership
percentages for holders of Allied World shares and Transatlantic
common stock described above, Deutsche Bank noted that the board
of directors of the combined company would consist of
11 directors, five appointed by Allied World and six
appointed by Transatlantic and that such relative ownership
amounts and board composition are consistent with precedent
mergers of equals.
Implied
Exchange Ratio Analysis
Deutsche Bank assessed the fairness of the exchange ratio by
deriving values for each of Allied World and Transatlantic using
several valuation methodologies, including an analysis of
comparable companies using valuation multiples from selected
publicly-traded companies, and dividend discount analysis, each
of which is described in more detail in the summaries set forth
below. Each of these methodologies was used to generate implied
per share valuation ranges on a fully-diluted common share
basis. The implied per share valuation ranges were used to
assess the exchange ratio implied by each methodology.
The following table outlines the ranges of approximate implied
values per Allied World share and shares of Transatlantic common
stock and the implied exchange ratios derived using each of
these methodologies. With respect to any given range of exchange
ratios, the low exchange ratio represents the ratio of the
lowest Transatlantic value per share and the highest Allied
World value per share, and the high exchange ratio represents
the ratio of the highest Transatlantic value per share and the
lowest Allied World value per share. The table should be read
together with the more detailed summary of each of the valuation
analyses set forth below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Approximate Implied
|
|
|
Implied
|
|
|
|
Value per Share
|
|
|
Exchange Ratio
|
|
|
|
Allied World
|
|
|
Transatlantic
|
|
|
|
|
|
Trading Multiple Valuation:
|
|
|
|
|
|
|
|
|
|
|
|
|
Price/3/31/2011 Book Value Per Share
|
|
$
|
56-$71
|
|
|
$
|
45-$64
|
|
|
|
0.63x-1.15
|
x
|
Price/3/31/2011 Tangible Book Value Per Share
|
|
|
53-66
|
|
|
|
45-67
|
|
|
|
0.67-1.26
|
|
Price/2012 Estimated After-Tax Operating Earnings
|
|
|
61-76
|
|
|
|
43-71
|
|
|
|
0.56-1.17
|
|
Dividend Discount Analysis (Price/Book Value)
|
|
|
70-86
|
|
|
|
57-76
|
|
|
|
0.67-1.10
|
|
Dividend Discount Analysis (Price/Earnings)
|
|
|
68-85
|
|
|
|
56-70
|
|
|
|
0.66-1.03
|
|
Deutsche Bank noted that the exchange ratio of 0.88x fell within
each of the above implied exchange ratio ranges.
67
Comparable
Companies Analysis Allied World
Deutsche Bank reviewed and compared certain financial
information and commonly used valuation measurements for Allied
World to corresponding financial information and measurements
for the following selected companies.
|
|
|
|
|
Arch Capital Group Ltd.
|
|
|
|
Argo Group International Holdings, Ltd.
|
|
|
|
Aspen Insurance Holdings Limited
|
|
|
|
Axis Capital Holdings Limited
|
|
|
|
Endurance Specialty Holdings Ltd.
|
|
|
|
HCC Insurance Holdings, Inc.
|
|
|
|
Markel Corporation
|
|
|
|
The Navigators Group, Inc.
|
|
|
|
RLI Corp.
|
|
|
|
W.R. Berkley Corporation
|
Although none of the selected companies is either identical or
directly comparable to Allied World, the companies included were
chosen because they are publicly traded companies with
operations that, for purposes of analysis, may be considered
similar to certain operations of Allied World. Accordingly, the
analysis of publicly traded comparable companies was not simply
mathematical. Rather, it involved complex considerations and
qualitative judgments, reflected in Deutsche Banks
opinion, concerning differences in financial and operating
characteristics of the selected companies and other factors that
could affect the public trading value of such companies.
With respect to each of the selected companies and Allied World,
Deutsche Bank calculated the following trading multiples:
|
|
|
|
|
the multiple of price to book value per share, which we refer to
as P/B;
|
|
|
|
the multiple of price to tangible book value per share, which we
refer to as P/B Tangible; and
|
|
|
|
the multiple of price to estimated operating earnings per share,
which we refer to as P/E, for 2012.
|
Deutsche Bank did not use the multiple of price to estimated
operating earnings per share for 2011 because it believed
extraordinary catastrophe losses in the first quarter of 2011
(including Japan, New Zealand and Australia losses) resulted in
estimated operating earnings for 2011 being non-representative
of potential future financial performance with disproportionate
impact on each comparable company.
The trading multiples of Allied World and the selected companies
were calculated using the closing prices of the Allied World
shares and the common stock of the selected companies on
June 10, 2011 and were based upon the most recent publicly
available information, Allied Worlds managements
estimates and
68
analysts consensus earnings estimates for 2012 provided by
CapitalIQ. The results of these analyses are summarized as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
P/B
|
|
|
2012E
|
|
|
|
P/B
|
|
|
Tangible
|
|
|
P/E
|
|
|
Allied World
|
|
|
0.78
|
x
|
|
|
0.88
|
x
|
|
|
7.6
|
x
|
Selected Companies
|
|
|
|
|
|
|
|
|
|
|
|
|
Arch Capital Group Ltd.
|
|
|
1.01
|
|
|
|
1.01
|
|
|
|
12.3
|
|
Argo Group International Holdings, Ltd.
|
|
|
0.62
|
|
|
|
0.74
|
|
|
|
12.4
|
|
Aspen Insurance Holdings Limited
|
|
|
0.62
|
|
|
|
0.63
|
|
|
|
8.2
|
|
Axis Capital Holdings Limited
|
|
|
0.78
|
|
|
|
0.79
|
|
|
|
7.5
|
|
Endurance Specialty Holdings Ltd.
|
|
|
0.75
|
|
|
|
0.82
|
|
|
|
8.1
|
|
HCC Insurance Holdings, Inc.
|
|
|
1.10
|
|
|
|
1.47
|
|
|
|
10.9
|
|
Markel Corporation
|
|
|
1.21
|
|
|
|
1.59
|
|
|
|
24.0
|
|
The Navigators Group, Inc.
|
|
|
0.90
|
|
|
|
0.91
|
|
|
|
16.2
|
|
RLI Corp.
|
|
|
1.54
|
|
|
|
1.59
|
|
|
|
13.8
|
|
W.R. Berkley Corporation
|
|
|
1.25
|
|
|
|
1.28
|
|
|
|
12.6
|
|
Based in part on the trading multiples described above, Deutsche
Bank selected certain reference ranges of multiples and
calculated corresponding ranges of implied equity values per
Allied World share as follows:
|
|
|
|
|
Deutsche Bank applied multiples of price to book value per share
ranging from 0.75x to 0.95x to the book value per Allied World
share as of March 31, 2011;
|
|
|
|
Deutsche Bank applied multiples of price to tangible book value
per share ranging from 0.80x to 1.00x to the tangible book value
per Allied World share as of March 31, 2011; and
|
|
|
|
Deutsche Bank applied multiples of price to estimated after-tax
operating earnings ranging from 8.0x to 10.0x to the estimated
after-tax operating earnings of Allied World for 2012 based on
the Allied World estimates.
|
The ranges of approximate implied equity values per Allied World
share resulting from the foregoing calculations, which are the
same as the ranges of implied equity values per share used in
the Implied Exchange Ratio Analysis discussed above, are
presented in the following table:
|
|
|
|
|
|
|
Approximate Implied
|
|
|
|
Value per Share
|
|
|
Price/Book Value Per Share
|
|
|
|
|
3/31/11 Book Value Per Share
|
|
$
|
57 - $71
|
|
3/31/11 Tangible Book Value Per Share
|
|
|
53 - 66
|
|
Price/2012 Estimated After-Tax Operating Earnings
|
|
|
61 - 76
|
|
Comparable
Companies Analysis Transatlantic
Deutsche Bank reviewed and compared certain financial
information and commonly used valuation measurements for
Transatlantic to corresponding financial information and
measurements for the following selected companies.
|
|
|
|
|
ACE Limited
|
|
|
|
Everest Re Group, Ltd.
|
|
|
|
Münchener Rückversicherungs AG (Munich Re)
|
|
|
|
PartnerRe Ltd.
|
|
|
|
RenaissanceRe Ltd.
|
69
|
|
|
|
|
SCOR SE
|
|
|
|
Swiss Reinsurance Co. Ltd.
|
|
|
|
Validus Holdings, Ltd.
|
|
|
|
XL Capital plc
|
Although none of the selected companies is either identical or
directly comparable to Transatlantic, the companies included
were chosen because they are publicly traded companies with
operations that, for purposes of analysis, may be considered
similar to certain operations of Transatlantic. Accordingly, the
analysis of publicly traded comparable companies was not simply
mathematical. Rather, it involved complex considerations and
qualitative judgments, reflected in Deutsche Banks
opinion, concerning differences in financial and operating
characteristics of the selected companies and other factors that
could affect the public trading value of such companies.
With respect to each of the selected companies and
Transatlantic, Deutsche Bank calculated the following trading
multiples:
|
|
|
|
|
the multiple of price to book value per share, which we refer to
as P/B;
|
|
|
|
the multiple of price to tangible book value per share, which we
refer to as P/B Tangible; and
|
|
|
|
the multiple of price to estimated operating earnings per share,
which we refer to as P/E, for 2012.
|
Deutsche Bank did not use the multiple of price to estimated
operating earnings per share for 2011 because it believed
extraordinary catastrophe losses in the first quarter of 2011
(including Japan, New Zealand and Australia losses) resulted in
estimated operating earnings for 2011 being non-representative
of potential future financial performance with disproportionate
impact on each comparable company.
The trading multiples of Transatlantic and the selected
companies were calculated using the closing prices of the
Transatlantic common stock and the common stock of the selected
companies on June 10, 2011 and were based upon the most
recent publicly available information, Transatlantics
management estimates and analysts consensus earnings
estimates for 2012 provided by CapitalIQ. The results of these
analyses are summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
P/B
|
|
|
2012E
|
|
|
|
P/B
|
|
|
Tangible
|
|
|
P/E
|
|
|
Transatlantic
|
|
|
0.69
|
x
|
|
|
0.69
|
x
|
|
|
6.2
|
x
|
Selected Companies
|
|
|
|
|
|
|
|
|
|
|
|
|
ACE Limited
|
|
|
0.96
|
|
|
|
1.21
|
|
|
|
8.9
|
|
Everest Re Group, Ltd.
|
|
|
0.76
|
|
|
|
0.76
|
|
|
|
7.4
|
|
Münchener Rückversicherungs AG (Munich Re)
|
|
|
0.91
|
|
|
|
1.21
|
|
|
|
10.1
|
|
PartnerRe Ltd.
|
|
|
0.79
|
|
|
|
0.88
|
|
|
|
8.4
|
|
RenaissanceRe Ltd.
|
|
|
1.07
|
|
|
|
1.08
|
|
|
|
9.3
|
|
SCOR SE
|
|
|
1.21
|
|
|
|
1.54
|
|
|
|
9.8
|
|
Swiss Reinsurance Co. Ltd.
|
|
|
0.81
|
|
|
|
0.98
|
|
|
|
9.6
|
|
Validus Holdings, Ltd.
|
|
|
0.97
|
|
|
|
1.02
|
|
|
|
7.0
|
|
XL Capital plc
|
|
|
0.64
|
|
|
|
0.69
|
|
|
|
9.4
|
|
Based in part on the trading multiples described above, Deutsche
Bank selected certain reference ranges of multiples and
calculated corresponding ranges of implied equity values per
share of Transatlantic common stock as follows:
|
|
|
|
|
Deutsche Bank applied multiples of price to book value per share
ranging from 0.70x to 1.00x to the book value per share of
Transatlantic common stock as of March 31, 2011;
|
|
|
|
Deutsche Bank applied multiples of price to tangible book value
per share ranging from 0.70x to 1.05x to the tangible book value
per share of Transatlantic common stock as of March 31,
2011; and
|
70
|
|
|
|
|
Deutsche Bank applied multiples of price to estimated after-tax
operating earnings ranging from 6.0x to 10.0x to the estimated
after-tax operating earnings of Transatlantic for 2012 based on
the Transatlantic estimates.
|
The ranges of approximate implied equity values per share of
Transatlantic common stock resulting from the foregoing
calculations, which are the same as the ranges of implied equity
values per share used in the Implied Exchange Ratio Analysis
discussed above, are presented in the following table:
|
|
|
|
|
|
|
Approximate Implied
|
|
|
|
Value per Share
|
|
|
Price/Book Value Per Share
|
|
|
|
|
3/31/11 Book Value Per Share
|
|
$
|
45 - $64
|
|
3/31/11 Tangible Book Value Per Share
|
|
|
45 - 67
|
|
Price/2012 Estimated After-Tax Operating Earnings
|
|
|
43 - 71
|
|
Dividend
Discount Analysis Allied World
Based on the Allied World estimates, Deutsche Bank performed a
dividend discount analysis to determine a range of implied
present values per Allied World share, assuming Allied World
continued to operate as a standalone company. The values were
determined by adding the present value of the estimated free
cash flow per share for the nine months ended December 31,
2011 and for the years 2012 through 2015 and the present value
of the estimated terminal value per Allied World share as of the
end of 2015. Deutsche Bank calculated a range of present equity
values for Allied World as the sum of (1) the present value
of the estimated cash flow per share for the nine months ended
December 31, 2011 and for the years 2012 through 2015 using
discount rates ranging from 8.5% to 10.5%, which were chosen by
Deutsche Bank based upon an analysis of the cost of equity of
Allied World, and (2) the present value of illustrative
terminal value per share derived by applying a range of price to
book value multiples and price to earnings multiples to Allied
Worlds estimated shareholders equity and net income
and applying discount rates ranging from 8.5% to 10.5% to such
terminal values. For the terminal value based on price to book
value multiples, Deutsche Bank applied multiples ranging from
0.90x to 1.10x to Allied Worlds estimated
shareholders equity for 2015. Based on the above analysis,
Deutsche Bank determined a range of present values per Allied
World share of approximately $70 to $86. For the terminal value
based on price to earnings multiples, Deutsche Bank applied
multiples ranging from 8.0x to 10.0x to Allied Worlds
estimated net income for 2015. Based on the above analysis,
Deutsche Bank determined a range of present values per Allied
World share of approximately $68 to $85. Deutsche Bank selected
the terminal value multiples used in this analysis based upon
the current and historical trading values and multiples of
Allied World and the selected companies discussed in the
Comparable Companies Analysis above.
Dividend
Discount Analysis Transatlantic
Based on the Transatlantic estimates, Deutsche Bank performed a
dividend discount analysis to determine a range of implied
present values per share of Transatlantic common stock, assuming
Transatlantic continued to operate as a standalone company. The
values were determined by adding the present value of the
estimated free cash flow per share for the nine months ended
December 31, 2011 and for the years 2012 through 2015 and
the present value of the estimated terminal value per share of
Transatlantic common stock as of the end of 2015. Deutsche Bank
calculated a range of present equity values for Transatlantic as
the sum of (1) the present value of the estimated cash flow
per share for the nine months ended December 31, 2011 and
for the years 2012 through 2015 using discount rates ranging
from 9% to 11%, which were chosen by Deutsche Bank based upon an
analysis of the cost of equity of Transatlantic, and
(2) the present value of illustrative terminal value per
share derived by applying a range of price to book value
multiples and price to earnings multiples to
Transatlantics estimated shareholders equity and net
income and applying discount rates ranging from 9% to 11% to
such terminal values. For the terminal value based on price to
book value multiples, Deutsche Bank applied multiples ranging
from 0.85x to 1.15x to Transatlantics estimated
shareholders equity for 2015. Based on the above analysis,
Deutsche Bank determined a range of present values per share of
Transatlantic common stock of approximately $57 to $76. For the
terminal value based on price to earnings multiples,
71
Deutsche Bank applied multiples ranging from 8.0x to 10.0x to
Transatlantics estimated net income for 2015. Based on the
above analysis, Deutsche Bank determined a range of present
values per share of Transatlantic common stock of approximately
$56 to $70. Deutsche Bank selected the terminal value multiples
used in this analysis based upon the current and historical
trading values and multiples of the selected companies discussed
in the Comparable Companies Analysis above.
The preparation of a fairness opinion is a complex process
involving the application of subjective business judgment in
determining the most appropriate and relevant methods of
financial analysis and the application of those methods to the
particular circumstances and, therefore, is not readily
susceptible to summary description. Deutsche Bank believes that
its analyses must be considered as a whole and that considering
any portion of such analyses and of the factors considered
without considering all analyses and factors could create a
misleading view of the process underlying the opinion. In
arriving at its fairness determination, Deutsche Bank did not
assign specific weights to any particular analyses.
In conducting its analyses and arriving at its opinion, Deutsche
Bank utilized a variety of generally accepted valuation methods.
The analyses were prepared solely for the purpose of enabling
Deutsche Bank to provide its opinion to the Allied World board
of directors as to the fairness, from a financial point of view,
to Allied World of the exchange ratio described above as of the
date of its opinion and do not purport to be appraisals or
necessarily reflect the prices at which businesses or securities
actually may be sold, which are inherently subject to
uncertainty. In connection with its analyses, Deutsche Bank
made, and was provided by the management of Allied World with,
numerous assumptions with respect to industry performance,
general business and economic conditions and other matters, many
of which are beyond the control of Deutsche Bank, Transatlantic
or Allied World. Analyses based on estimates or forecasts of
future results are not necessarily indicative of actual past or
future values or results, which may be significantly more or
less favorable than suggested by such analyses. Because such
analyses are inherently subject to uncertainty, being based upon
numerous factors or events beyond the control of Transatlantic,
Allied World or their respective advisors, none of
Transatlantic, Allied World, Deutsche Bank nor any other person
assumes responsibility if future results or actual values are
materially different from these forecasts or assumptions.
The terms of the merger, including the exchange ratio, were
determined through arms-length negotiations between Allied
World and Transatlantic and were approved by the Allied World
board of directors. Representatives of Deutsche Bank provided
advice to Allied World during these negotiations. Deutsche Bank,
however, did not recommend any specific exchange ratio to Allied
World or its board of directors or that any specific exchange
ratio constituted the only appropriate exchange ratio for the
merger. The decision to enter into the merger was solely that of
the Allied World board of directors. As described above, the
opinion and presentation of Deutsche Bank to the Allied World
board of directors were only one of a number of factors taken
into consideration by the Allied World board of directors in
making its determination to approve the merger agreement and the
transactions contemplated by it, including the merger.
Allied World selected Deutsche Bank as its financial advisors in
connection with the merger based on Deutsche Banks
qualifications, expertise, reputation and experience in mergers
and acquisitions. Pursuant to the engagement letter dated
June 2, 2011 between Allied World and Deutsche Bank, Allied
World agreed to pay Deutsche Bank (i) a fee (an
Opinion Fee) equal to $2.5 million payable upon
the delivery of its opinion (or upon Deutsche Bank advising
Allied World that it was unable to render an opinion) and
(ii) in the event the merger is consummated, a fee equal to
$14.5 million payable at the time of closing less the
amount of any Opinion Fee previously paid. If the merger is not
completed and Allied World receives a
break-up
fee, lock-up
option, topping fee or other termination fee or other similar
payment, Deutsche Bank is entitled to receive a fee equal to
$5 million. Allied World has also agreed to reimburse
Deutsche Bank for reasonable fees and disbursements of Deutsche
Banks counsel and Deutsche Banks reasonable travel
and other
out-of-pocket
expenses incurred in connection with the merger or otherwise
arising out of the retention of Deutsche Bank under the
engagement letter. Allied World has also agreed to indemnify
Deutsche Bank and certain related persons to the full extent
lawful against certain liabilities, including certain
liabilities under the U.S. federal securities laws arising
out of its engagement or the merger.
72
Deutsche Bank is an internationally recognized investment
banking firm experienced in providing advice in connection with
mergers and acquisitions and related transactions. Deutsche Bank
is an affiliate of Deutsche Bank AG, which, together with its
affiliates, we refer to as the Deutsche Bank Group.
One or more members of the Deutsche Bank Group have, from time
to time, provided investment banking, commercial banking
(including extension of credit) and other financial services to
Allied World, Transatlantic or their respective affiliates for
which it has received compensation. A member of the Deutsche
Bank Group acted as a
joint-lead
manager in a public offering of senior notes by Allied World in
November 2010 for which it received aggregate fees of $150,000.
A member of the Deutsche Bank Group is also acting as a lender
of Allied Worlds senior credit facility for which it has
received aggregate fees of $20,000 and is acting as an asset
manager for certain investment portfolios of Transatlantic for
which it received aggregate fees of approximately $75,000 during
the first quarter of 2011. The Deutsche Bank Group may also
provide investment and commercial banking services to Allied
World, Transatlantic or their respective affiliates in the
future, for which the Deutsche Bank Group would expect to
receive compensation. In the ordinary course of business,
members of the Deutsche Bank Group may actively trade in the
securities and other instruments and obligations of Allied World
and Transatlantic (or their respective affiliates) for their own
accounts and for the accounts of their customers. Accordingly,
the Deutsche Bank Group may at any time hold a long or short
position in such securities, instruments and obligations. In
addition, as of June 12, 2011, Deutsche Bank and affiliates
owned approximately 250,000 shares of Transatlantic common
stock.
Certain
Allied World Prospective Financial Information
Allied World does not as a matter of course make public
long-term forecasts as to future performance or other
prospective financial information beyond the current fiscal
year, and Allied World is especially wary of making forecasts or
projections for extended periods due to the unpredictability of
the underlying assumptions and estimates. However, as part of
the due diligence review of Allied World in connection with the
merger, Allied Worlds management prepared and provided to
Transatlantic and Goldman Sachs, as well as to Deutsche Bank and
Moelis, in connection with their respective evaluation of the
fairness of the merger consideration, certain non-public,
internal financial forecasts regarding Allied Worlds
projected future operations for the 2011 through 2015 fiscal
years. Allied World has included below a summary of these
forecasts for the purpose of providing shareholders and
investors access to certain non-public information that was
furnished to third parties and such information may not be
appropriate for other purposes. These forecasts were also
considered by the Allied World board of directors for purposes
of evaluating the merger. The Allied World board of directors
also considered non-public, financial forecasts prepared by
Transatlantic regarding Transatlantics anticipated future
operations for the 2011 through 2015 fiscal years for purposes
of evaluating Transatlantic and the merger. See The
Merger Certain Transatlantic Prospective Financial
Information beginning on page 87 for more information
about the forecasts prepared by Transatlantic.
The Allied World internal financial forecasts were not prepared
with a view toward public disclosure, nor were they prepared
with a view toward compliance with published guidelines of the
SEC, SAP or the guidelines established by the American Institute
of Certified Public Accountants for preparation and presentation
of financial forecasts or generally accepted accounting
principles in the United States. Deloitte & Touche
Ltd. has not examined, compiled or performed any procedures with
respect to the accompanying prospective financial information
and, accordingly, Deloitte & Touche Ltd. does not
express an opinion or any other form of assurance with respect
thereto. The Deloitte & Touche Ltd. reports
incorporated by reference in this joint proxy
statement/prospectus relate only to Allied Worlds
historical financial information. They do not extend to the
prospective financial information and should not be read to do
so. The summary of these internal financial forecasts included
below is not being included to influence your decision whether
to vote for the merger and the transactions contemplated in
connection with the merger, but because these internal financial
forecasts were provided by Allied World to Transatlantic and
Deutsche Bank, Goldman Sachs and Moelis.
While presented with numeric specificity, these internal
financial forecasts were based on numerous variables and
assumptions (including, but not limited to, those related to
industry performance and competition and general business,
economic, market and financial conditions and additional matters
specific to Allied Worlds businesses) that are inherently
subjective and uncertain and are beyond the control of Allied
Worlds
73
management. Important factors that may affect actual results and
cause these internal financial forecasts to not be achieved
include, but are not limited to, risks and uncertainties
relating to Allied Worlds business (including its ability
to achieve strategic goals, objectives and targets over
applicable periods), industry performance, general business and
economic conditions and other factors described in the
Risk Factors section of Allied Worlds Annual
Report on
Form 10-K,
as updated by subsequent Quarterly Reports on
Form 10-Q
and Current Reports on
Form 8-K
all of which are filed with the SEC and incorporated by
reference into this joint proxy
statement/prospectus.
These internal financial forecasts also reflect numerous
variables, expectations and assumptions available at the time
they were prepared as to certain business decisions that are
subject to change. As a result, actual results may differ
materially from those contained in these internal financial
forecasts. Accordingly, there can be no assurance that the
forecasted results summarized below will be realized.
The inclusion of a summary of these internal financial forecasts
in this joint proxy statement/prospectus should not be regarded
as an indication that any of Allied World, Transatlantic or
their respective affiliates, advisors or representatives
considered these internal financial forecasts to be predictive
of actual future events, and these internal financial forecasts
should not be relied upon as such nor should the information
contained in these internal financial forecasts be considered
appropriate for other purposes. None of Allied World,
Transatlantic or their respective affiliates, advisors,
officers, directors or representatives can give you any
assurance that actual results will not differ materially from
these internal financial forecasts, and none of them undertakes
any obligation to update or otherwise revise or reconcile these
internal financial forecasts to reflect circumstances existing
after the date these internal financial forecasts were generated
or to reflect the occurrence of future events, even in the event
that any or all of the assumptions underlying these forecasts
are shown to be in error. Since the forecasts cover multiple
years, such information by its nature becomes less meaningful
and predictive with each successive year. Allied World does not
intend to make publicly available any update or other revision
to these internal financial forecasts.
None of Allied World or its affiliates, advisors, officers,
directors or representatives has made or makes any
representation to any shareholder or other person regarding
Allied Worlds ultimate performance compared to the
information contained in these internal financial forecasts or
that the forecasted results will be achieved. Allied World has
made no representation to Transatlantic, in the merger agreement
or otherwise, concerning these internal financial forecasts. The
below forecasts do not give effect to the merger. Allied World
urges all shareholders to review Allied Worlds most recent
SEC filings for a description of Allied Worlds reported
financial results.
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year
|
|
2011
|
|
|
2012
|
|
|
2013
|
|
|
2014
|
|
|
2015
|
|
|
|
(All dollar amounts in millions of dollars)
|
|
|
Net Premiums Written
|
|
$
|
1,586
|
|
|
$
|
1,817
|
|
|
$
|
2,015
|
|
|
$
|
2,115
|
|
|
$
|
2,221
|
|
Net Income
|
|
$
|
201
|
|
|
$
|
284
|
|
|
$
|
325
|
|
|
$
|
356
|
|
|
$
|
393
|
|
Loss Ratio
|
|
|
69.1
|
%
|
|
|
62.6
|
%
|
|
|
62.5
|
%
|
|
|
63.3
|
%
|
|
|
63.3
|
%
|
Combined Ratio
|
|
|
99.5
|
%
|
|
|
92.4
|
%
|
|
|
91.3
|
%
|
|
|
92.1
|
%
|
|
|
92.1
|
%
|
Total Shareholders Equity
|
|
$
|
3,002
|
|
|
$
|
3,197
|
|
|
$
|
3,504
|
|
|
$
|
3,841
|
|
|
$
|
4,215
|
|
Transatlantics
Reasons for the Merger; Recommendations of the Transatlantic
Board of Directors
In approving the merger agreement and recommending its adoption
by Transatlantic stockholders, Transatlantics board of
directors considered a number of factors and a substantial
amount of information presented by and reviewed and discussed
with Transatlantics management and legal and financial
advisors, and considered numerous factors, including the
following:
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managements belief that the merger has the potential to
create a leading, diversified, specialty focused reinsurance and
insurance company with a global reach and a local presence in
key markets, based upon, among other things, the fact that the
combined company would have 39 locations with local
underwriters, would combine a leading specialty reinsurance
brand (including with respect to directors and officers, errors
and omissions and medical malpractice reinsurance) with a
leading specialty
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74
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insurance brand (including with respect to professional
liability and healthcare insurance), and would have a diverse
portfolio between reinsurance and insurance;
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managements belief that the combined company would have a
strengthened balance sheet with $8.5 billion of total
capital;
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although no assurance can be given on the reaction of any
independent rating agency, managements belief that the
combined company would be able to maintain the financial
strength ratings of Transatlantic, especially at S&P, which
has significant value to Transatlantics business;
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managements belief that the combination would diversify
risk, which should allow the combined company to weather
cyclical conditions, reduce volatility of earnings and deliver
more stable results under a wider range of market conditions and
economic environments while creating a foundation for future
growth, based upon, among other things, the fact that the
combined company would have both a significant insurance and
reinsurance business, and would have greater diversification
with respect to (i) duration of risk, (ii) premiums and reserves
by lines of business and geography and (iii) catastrophe
exposures;
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the fact that Transatlantic would gain multiple platforms,
including European Union based operating subsidiaries;
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Transatlantic board of directors belief, based upon
discussions with Transatlantics management and after a
thorough review of Transatlantics strategic alternatives,
that the merger would provide greater value to the Transatlantic
stockholders within a shorter timeframe than other potential
strategic alternatives available to Transatlantic, including the
continued operation of Transatlantic as a standalone company,
based on, among other things, the fact that the combined company
would have greater flexibility to allocate capital in a more
efficient manner, increased financial strength and scale, and
meaningful incremental combined excess capital;
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managements belief that property catastrophe exposure of
the combined company would remain below its respective stated
tolerances, allowing for future growth;
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although no assurance can be given that any level of operating
and structural synergies would be achieved following the
completion of the merger, managements estimate, consistent
with Allied Worlds managements estimate, that the
combination of Transatlantic and Allied World would create
$80 million of annual gross savings, with the combined
company realizing approximately 60% of these savings on an
annualized run-rate (after-tax) basis in the first year
following the closing of the merger, in part, to more efficient
allocation of capital and cost savings;
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the fact that, with a Swiss domicile, the combined company
should have greater capital flexibility;
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the fact that Transatlantic stockholders immediately prior to
the merger would hold approximately 58% of the voting power of
the combined company on a fully diluted basis immediately
following completion of the merger;
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the fixed exchange ratio of 0.88 Allied World shares for each
share of Transatlantic common stock, which represented a premium
of 16% to the closing price of Transatlantic common stock, based
on the closing price of Allied World shares on June 10,
2011 (the last trading day before public announcement of the
merger);
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the complementary nature of Transatlantics and Allied
Worlds businesses and cultures, including the fact that
the two companies have complementary lines of business (for
example, with respect to medical malpractice and healthcare,
Transatlantic has a focus on physicians and Allied World has a
focus on hospitals and other facilities), and that both
companies have strong underwriting and risk management cultures;
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the view of the Transatlantic board of directors that there will
be limited integration risk due to the similar cultures of
Transatlantic and Allied World with respect to underwriting
discipline and risk management, common information technology
systems, and limited business overlap;
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75
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the structure of the transaction as a merger of equals,
including the provisions in the merger agreement that:
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the combined companys board of directors would initially
be comprised of 11 members, six of which would be designated by
Transatlantic;
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the combined companys board committee assignments would be
split evenly between designees from the Transatlantic board of
directors and designees from the Allied World board of directors;
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Mr. Press would initially be the non-executive chairman of
the board of directors of the combined company;
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Mr. Sapnar would be appointed as the President and Chief
Executive Officer of Global Reinsurance of the combined
company; and
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the remaining members of management of the combined company
would be drawn from the two companies on a fair and equitable
basis with a roughly equal number of people coming from each;
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the expectation of the Transatlantic board of directors that the
integration of the two companies will be completed in a timely
and efficient manner with minimal disruption to customers and
employees;
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the fact that the combined company would have a highly
experienced management team with extensive industry experience
in the most significant facets of the insurance and reinsurance
industry. See the section entitled Executive
Officers Following the Merger beginning on page 99;
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the Transatlantic board of directors knowledge of
Transatlantics business, financial condition, results of
operations and prospects as a standalone company, as well as
Allied Worlds business, financial condition, results of
operations and prospects, taking into account the results of
Transatlantics due diligence review of Allied World;
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the strong commitment on the part of both parties to complete
the merger pursuant to their respective obligations under the
terms of the merger agreement;
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the fact that the merger agreement allows the Transatlantic
board of directors to change or withdraw its recommendation
regarding the merger proposal if a superior proposal is received
from a third party or in response to certain material
developments or changes in circumstances, if in either case the
Transatlantic board of directors determines that a failure to
change its recommendation would result in a breach of its
fiduciary duties under applicable law, subject to the payment of
a termination fee upon termination under certain circumstances;
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the Transatlantic board of directors belief, after
consultation with its internal and outside legal counsel, that
the transactions are likely to receive necessary regulatory
approvals in a relatively timely manner without material adverse
conditions, which increases the likelihood the transactions will
be consummated; and
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the financial analyses presented by Moelis to the Transatlantic
board of directors described below under
Opinion of Transatlantics Financial
Advisor and the opinion of Moelis, delivered orally at the
Transatlantic board of directors meeting on June 12,
2011, and subsequently confirmed in writing by delivery of a
written opinion dated the same date, to the effect that, as of
that date and based upon and subject to the assumptions,
procedures, factors, qualifications and limitations set forth in
such written opinion, the exchange ratio pursuant to the merger
agreement was fair, from a financial point of view, to the
holders of Transatlantic common stock. See
Opinion of Transatlantics Financial
Advisor.
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The Transatlantic board of directors also weighed the factors
described above against a number of risks and other factors
identified in its deliberations as weighing negatively against
the merger:
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the restrictions on the conduct of Transatlantics business
during the period between execution of the merger agreement and
the consummation of the merger;
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the substantial costs to be incurred in connection with the
merger, including the substantial cash and other costs of
integrating the businesses of Transatlantic and Allied World, as
well as the transaction expenses arising from the merger;
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76
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the fact that forecasts of future results of operations and
synergies are necessarily estimates based on assumptions, and
that for these and other reasons there is a risk of not
capturing anticipated operational synergies and cost savings
between Transatlantic and Allied World and the risk that other
anticipated benefits might not be realized;
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|
the potential effect of the merger on Transatlantics
business and relationships with employees, customers, suppliers,
brokers, regulators and the communities in which it operates;
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|
the fact that the transaction would be taxable to
Transatlantics stockholders that are U.S. holders for
U.S. federal income tax purposes;
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|
the risk that governmental entities may not approve the merger
or may impose conditions on Transatlantic or Allied World in
order to gain approval for the merger that may adversely impact
the ability of the combined company to realize the synergies
that are projected to occur in connection with the merger;
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|
the possibility that the merger may not be completed, or that
completion may be unduly delayed, for reasons beyond the control
of Transatlantic
and/or
Allied World;
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|
the potential that the termination fee provisions of the merger
agreement could have the effect of discouraging a bona fide
alternative acquisition proposal for Transatlantic;
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the merger agreements requirement that the Transatlantic
board of directors call and hold a meeting of Transatlantic
stockholders to vote upon the merger, regardless of whether or
not the Transatlantic board of directors has withdrawn or
adversely modified its recommendation to the Transatlantic
stockholders regarding the merger in response to a superior
proposal or certain material developments or changes in
circumstances;
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|
potential withholding taxes associated with reallocating capital
among different jurisdictions;
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|
the risk that Allied Worlds loss reserves may prove to be
inadequate;
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|
the challenges of combining Transatlantics business with
Allied Worlds business, including technical, accounting
and other challenges, and the risk of diverting management
resources for an extended period of time to accomplish this
combination;
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|
the loss of key personnel could delay or prevent the combined
entity from fully implementing its business strategy and,
consequently, significantly and negatively affect its business;
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|
risks of the type and nature described in the section entitled
Risk Factors beginning on page 22 and
Special Note Regarding Forward-Looking Statements
beginning on page 21; and
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the fact that Transatlantics directors and executive
officers have interests in the merger that may be different
from, or in addition to, those of Transatlantic stockholders.
See the section entitled The Merger Interests
of Transatlantics Directors and Executive Officers in the
Merger beginning on page 95.
|
This discussion of the information and factors considered by the
Transatlantic board of directors in reaching its conclusions and
recommendation includes the material factors considered by the
Transatlantic board of directors, but is not intended to be
exhaustive. In view of the wide variety of factors considered in
connection with its evaluation of the merger and the complexity
of these matters, the Transatlantic board of directors did not
find it practicable, and did not attempt, to quantify, rank or
assign any relative or specific weights to the various factors
that it considered in reaching its determination to approve the
merger agreement and to recommend that Transatlantic
stockholders vote in favor of the adoption of the merger
agreement proposal. The Transatlantic board of directors
conducted an overall analysis of the factors described above,
including through discussions with, and questioning of,
Transatlantics management and outside legal and financial
advisors regarding certain of the matters described above. In
considering the factors described above, individual members of
the Transatlantic board of directors may have given differing
weights to different factors.
77
The Transatlantic board of directors unanimously approved the
merger agreement and determined that the merger agreement and
the transactions contemplated thereby, including the merger, are
advisable and in the best interests of Transatlantic and its
stockholders. The Transatlantic board of directors unanimously
recommends that Transatlantic stockholders vote FOR
the adoption of the merger agreement proposal.
Opinion
of Transatlantics Financial Advisor
Opinion
of Moelis & Company LLC
In connection with the merger, on June 12, 2011, Moelis
delivered its oral opinion, which was subsequently confirmed in
writing, that based upon and subject to the conditions and
limitations set forth in its written opinion, as of
June 12, 2011, the exchange ratio set forth in the merger
agreement was fair, from a financial point of view, to the
holders of Transatlantic common stock.
The full text of Moelis written opinion, dated
June 12, 2011, which sets forth the assumptions made,
procedures followed, matters considered and limitations on the
review undertaken in connection with the opinion, is attached to
this joint proxy statement/prospectus as Annex C and is
incorporated into this joint proxy statement/prospectus by
reference. Holders of Transatlantic common stock are urged to
read Moelis written opinion and this section carefully and
in their entirety. The following summary describes the material
analyses underlying Moelis opinion, but does not purport
to be a complete description of the analyses performed by Moelis
in connection with its opinion. Moelis opinion is limited
solely to the fairness, from a financial point of view, of the
exchange ratio set forth in the merger agreement to the holders
of Transatlantic common stock as of the date of the opinion and
does not address Transatlantics underlying business
decision to effect the merger or the relative merits of the
merger as compared to any alternative business strategies or
transactions that might be available to Transatlantic.
Moelis opinion does not constitute a recommendation to any
stockholder of Transatlantic as to how such stockholder should
vote with respect to the merger or any other matter.
Moelis opinion was approved by a Moelis fairness opinion
committee.
In arriving at its opinion, Moelis, among other things:
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reviewed certain publicly available business and financial
information relating to Transatlantic and Allied World that
Moelis deemed relevant;
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|
|
reviewed certain internal information relating to the business,
including financial forecasts, earnings, cash flow, assets,
liabilities and prospects of Transatlantic, furnished to Moelis
by Transatlantic;
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|
reviewed certain internal information relating to the business,
including financial forecasts, earnings, cash flow, assets,
liabilities and prospects of Allied World, furnished to Moelis
by Allied World;
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|
conducted discussions with members of senior management and
representatives of Transatlantic and Allied World concerning the
matters described in the foregoing, as well as their respective
businesses and prospects before and after giving effect to the
merger;
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|
reviewed publicly available financial and stock market data,
including valuation multiples, for Transatlantic and Allied
World and compared them with those of certain other companies in
lines of business that Moelis deemed relevant;
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|
compared the proposed financial terms of the merger with the
financial terms of certain other transactions that Moelis deemed
relevant;
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|
reviewed a draft of the merger agreement, dated June 11,
2011;
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|
participated in certain discussions and negotiations among
representatives of Transatlantic and Allied World and their
financial and legal advisors; and
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|
conducted such other financial studies and analyses and took
into account such other information as Moelis deemed appropriate.
|
78
In connection with Moelis review, it did not assume any
responsibility for independent verification of any of the
financial, legal, regulatory, tax, accounting and other
information supplied to, discussed with, or reviewed by Moelis
for the purpose of its opinion and has, with the consent of the
board of directors of Transatlantic, relied on such information
being complete and accurate in all material respects. In
addition, with the consent of the Transatlantic board of
directors, Moelis did not make any independent evaluation or
appraisal of any of the assets or liabilities (contingent,
derivative, off-balance-sheet, or otherwise) of Transatlantic or
Allied World, nor was Moelis furnished with any such evaluation
or appraisal. Moelis is not an expert in the evaluation of
reserves for insurance losses and loss adjustment expenses, and
did not make an independent evaluation of the adequacy of
reserves of Transatlantic or Allied World. In that regard,
Moelis did not make an analysis of, and expressed no opinion as
to, the adequacy of the loss and loss adjustment expense
reserves of, the value of redundant reserves to, or the ability
to achieve reserve releases by, Transatlantic or Allied World.
Moelis was not requested, and did not undertake, to make any
independent valuation of Transatlantics pending
arbitration matters concerning AIG and certain of its
subsidiaries, and for purposes of Moelis analysis, at the
direction of the Transatlantic board of directors, Moelis
assumed that Transatlantic will obtain a recovery in the amount
and at the time estimated by Transatlantic management. In
addition, with respect to the forecasted financial information
referred to above, Moelis assumed, at the direction of the
Transatlantic board of directors, that such financial
information was reasonably prepared on a basis reflecting the
best currently available estimates and judgments of the
management of Transatlantic and Allied World as to the future
performance of their respective companies and that such future
financial results will be achieved at the times and in the
amounts projected by management of Transatlantic and Allied
World.
Moelis opinion is necessarily based on economic, monetary,
market and other conditions as in effect on, and the information
made available to Moelis as of, the date thereof. Moelis
assumed, with the consent of the Transatlantic board of
directors, that all governmental, regulatory or other consents
and approvals necessary for the completion of the merger will be
obtained without the imposition of any delay, limitation,
restriction, divestiture or condition that would have an adverse
effect on Transatlantic or Allied World or on the expected
benefits of the merger. Subsequent developments may affect
Moelis opinion but Moelis does not have any obligation to
update, revise or reaffirm its opinion. Moelis opinion
does not constitute legal, tax or accounting advice.
The following is a summary of the material financial analyses
presented by representatives of Moelis to the Transatlantic
board of directors at its meeting held on June 12, 2011, in
connection with the delivery of the oral opinion at that meeting
and Moelis subsequent written opinion.
Some of the summaries of financial analyses below include
information presented in tabular format. In order to fully
understand Moelis analyses, the tables must be read
together with the text of each summary. The tables alone do not
constitute a complete description of the analyses. Considering
the data described below without considering the full narrative
description of the financial analyses, including the
methodologies and assumptions underlying the analyses, could
create a misleading or incomplete view of Moelis analyses.
The analyses performed by Moelis include analyses based upon
forecasts of future results, which results might be
significantly more or less favorable than those upon which
Moelis analyses were based. The analyses do not purport to
be appraisals or to reflect the prices at which Transatlantic
common stock might trade at any time following the announcement
of the merger. Because the analyses are inherently subject to
uncertainty, being based upon numerous factors and events,
including, without limitation, factors relating to general
economic and competitive conditions beyond the control of the
parties or their respective advisors, neither Moelis nor any
other person assumes responsibility if future results or actual
values are materially different from those contemplated below.
Dividend
Discount Model Analysis
Moelis conducted a dividend discount model analysis for
Transatlantic and Allied World. A dividend discount model
analysis is a method of evaluating the equity value of a company
using estimates of the future dividends to stockholders
generated by a company and taking into consideration the time
value of money with respect to those future dividends by
calculating their present value. Present
value refers to the current
79
value of future dividends to stockholders paid by such company
and is obtained by discounting those future dividends back to
the present using a discount rate that takes into account
macro-economic assumptions, estimates of risk, the opportunity
cost of capital, and other appropriate factors.
Based on estimates provided by Transatlantic management as to
the maximum amount of possible dividends that can be paid out by
Transatlantic and estimates provided by Allied World management
as to the maximum amount of possible dividends that can be paid
out by Allied World, in each case, during fiscal years
(FYs) 2011 through 2015 (assuming no capital is
returned through share repurchases and, in the case of
Transatlantic, adjusted for its first quarter 2011 dividend and
the potential tax-effected full recovery from pending
arbitration with American International Group, Inc. and certain
of its subsidiaries and, in the case of Allied World, adjusted
for its first quarter 2011 share repurchase and purchase of
founder warrants), Moelis discounted the applicable amounts to
present values using a range of discount rates from 8.8% to
10.8% for Transatlantic, and 9.3% to 11.3% for Allied World,
both of which were chosen by Moelis based upon an analysis of
the cost of equity of Transatlantic and Allied World. Moelis
also calculated a range of terminal values for Transatlantic and
Allied World at the end of the
5-year
period ending FY 2015 by applying, in the case of Transatlantic,
a terminal book value multiple ranging from 0.70x to 1.00x and
Transatlantics projected FY 2015 book value as provided by
Transatlantic management, and, in the case of Allied World, a
terminal book value multiple ranging from 0.80x to 1.10x and
Allied Worlds projected FY 2015 book value as provided by
Allied World management, and discounting the terminal value
using a range of discount rates from 8.8% to 10.8% for
Transatlantic, and 9.3% to 11.3% for Allied World.
Terminal value refers to the capitalized value of
all future dividends to stockholders paid by a company for
periods beyond the final forecast period.
Using, in the case of Transatlantic, a terminal book value
multiple ranging from 0.75x to 0.95x and Transatlantics
projected FY 2015 book value as provided by Transatlantic
management, and, in the case of Allied World, a terminal book
value multiple ranging from 0.85x to 1.05x and Allied
Worlds projected FY 2015 book value as provided by Allied
World management, and discounting the maximum amounts of
possible dividends that can be paid out by each of Transatlantic
and Allied World, in each case, during FYs 2011 through 2015 and
the respective terminal values, using a range of discount rates
from 9.3% to 10.3% for Transatlantic, and 9.8% to 10.8% for
Allied World, Moelis calculated a low and high implied equity
value per share for Transatlantic of $59.00 per share and $70.75
per share and for Allied World of $65.46 per share and $78.67
per share.
Moelis then calculated (1) the ratio of the lowest implied
equity value per share for Transatlantic to the highest implied
equity value per share for Allied World, and (2) the ratio
of the highest implied equity value per share for Transatlantic
to the lowest implied equity value per share for Allied World to
derive an implied exchange ratio range as set forth below:
|
|
|
|
|
|
|
Implied Exchange
|
|
|
Ratio
|
|
Highest Transatlantic equity value per share to lowest Allied
World equity value per share
|
|
|
0.750
|
x
|
Lowest Transatlantic equity value per share to highest Allied
World equity value per share
|
|
|
1.081
|
x
|
Selected
Public Companies Analysis
Moelis performed a selected public companies analysis by
comparing certain financial information of Transatlantic and
Allied World with corresponding financial information of
selected public companies. Although none of the selected
companies is directly comparable to Transatlantic or Allied
World, Moelis selected reinsurance
and/or
insurance companies with similar operations to Transatlantic and
Allied World, and then used publicly available information
regarding these companies to conduct a selected public companies
analysis. The companies Moelis selected are as follows:
|
|
|
|
|
ACE Limited;
|
|
|
|
Alterra Capital Holdings Limited;
|
80
|
|
|
|
|
Arch Capital Group Ltd.;
|
|
|
|
Aspen Insurance Holdings Limited;
|
|
|
|
AXIS Capital Holdings Limited;
|
|
|
|
Endurance Specialty Holdings Ltd.;
|
|
|
|
EverestRe Group Ltd.;
|
|
|
|
Flagstone Reinsurance Holdings Limited;
|
|
|
|
Montpelier Re Holdings Ltd.;
|
|
|
|
PartnerRe Ltd.;
|
|
|
|
Platinum Underwriters Holdings, Ltd.;
|
|
|
|
RenaissanceRe Holdings Ltd.;
|
|
|
|
Validus Holdings, Ltd.; and
|
|
|
|
XL Capital Ltd.
|
From such list of 14 companies, Moelis then selected those
that predominately write reinsurance (excluding those that write
property casualty reinsurance) as Transatlantics core
selected companies, which are the following:
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|
|
|
|
EverestRe Group Ltd.;
|
|
|
|
PartnerRe Ltd.; and
|
|
|
|
Platinum Underwriters Holdings, Ltd.
|
From the list of 14 companies, Moelis selected those that
write both direct insurance and reinsurance as Allied
Worlds core selected companies, which are the following:
|
|
|
|
|
ACE Limited;
|
|
|
|
Alterra Capital Holdings Limited;
|
|
|
|
Arch Capital Group Ltd.;
|
|
|
|
Aspen Insurance Holdings Limited;
|
|
|
|
AXIS Capital Holdings Limited;
|
|
|
|
Endurance Specialty Holdings Ltd; and
|
|
|
|
XL Capital Ltd.
|
As part of its selected public companies analysis, Moelis
calculated and analyzed each selected companys
price-to-earnings
(P/E) ratio,
price-to-book
value (P/BV) and
price-to-tangible-book
value (P/TBV) multiples. Moelis noted that given the significant
catastrophic events that occurred during the first quarter of
2011, the use of FY 2011 projected earnings would not provide an
accurate representation of the earnings of Transatlantic or
Allied World going forward. Thus, for purposes of its analysis,
Moelis used FY 2012 projected earnings per share for the
selected public companies based on consensus analyst estimates
compiled by FactSet, as well as March 31, 2011 amounts for
purposes of calculating book values and tangible book values.
81
The following summarizes the results of this analysis:
Transatlantics
Core Selected Companies
|
|
|
|
|
|
|
|
|
|
|
Median
|
|
|
Mean
|
|
|
P/E
|
|
|
|
|
|
|
|
|
2012E
|
|
|
7.4
|
x
|
|
|
7.7
|
x
|
P/BV
|
|
|
|
|
|
|
|
|
2012E
|
|
|
0.77
|
x
|
|
|
0.80
|
x
|
P/TBV
|
|
|
|
|
|
|
|
|
2012E
|
|
|
0.77
|
x
|
|
|
0.84
|
x
|
Allied
Worlds Core Selected Companies
|
|
|
|
|
|
|
|
|
|
|
Median
|
|
|
Mean
|
|
|
P/E
|
|
|
|
|
|
|
|
|
2012E
|
|
|
8.9
|
x
|
|
|
9.0
|
x
|
P/BV
|
|
|
|
|
|
|
|
|
2012E
|
|
|
0.85
|
x
|
|
|
0.87
|
x
|
P/TBV
|
|
|
|
|
|
|
|
|
2012E
|
|
|
0.88
|
x
|
|
|
0.94
|
x
|
Overall
All Selected Public Companies
|
|
|
|
|
|
|
|
|
|
|
Median
|
|
|
Mean
|
|
|
P/E
|
|
|
|
|
|
|
|
|
2012E
|
|
|
8.0
|
x
|
|
|
8.1
|
x
|
P/BV
|
|
|
|
|
|
|
|
|
2012E
|
|
|
0.83
|
x
|
|
|
0.87
|
x
|
P/TBV
|
|
|
|
|
|
|
|
|
2012E
|
|
|
0.88
|
x
|
|
|
0.91
|
x
|
Based on its analysis of the foregoing core selected public
companies for Transatlantic, Moelis selected the following
valuation multiple ranges: 7.0x to 8.5x for equity value as a
multiple of Transatlantics projected FY 2012 operating
income as provided by Transatlantic management, 0.75x to 0.85x
for equity value as a multiple of Transatlantics
March 31, 2011 book value and 0.75x to 1.00x for equity
value as a multiple of its March 31, 2011 tangible book
value. Moelis applied the selected ranges to the relevant
statistics for Transatlantic using Transatlantics
projected FY 2012 operating income as provided by Transatlantic
management and March 31, 2011 book and tangible book values
and calculated an implied range of Transatlantic common stock
prices on a fully diluted basis of $50.06 to $60.79 based on
projected FY 2012 operating income as provided by Transatlantic
management, of $47.93 to $54.33 based on its March 31, 2011
book value and of $47.74 to $63.65 based on its March 31,
2011 tangible book value.
Based on its analysis of the foregoing core selected public
companies for Allied World, Moelis selected the following
valuation multiple ranges: 7.5x to 11.0x for its equity value as
a multiple of Allied Worlds projected FY 2012 operating
income as provided by Allied World management, 0.70x to 1.15x
for its equity value as a multiple of its March 31, 2011
book value and 0.70x to 1.20x for its equity value as a multiple
of Allied Worlds March 31, 2011 tangible book value.
Moelis applied the selected ranges to the relevant statistics
for Allied World using Allied Worlds projected FY 2012
operating income as provided by Allied World management and
March 31, 2011 book and tangible book values and calculated
an implied range of Allied World share prices on a fully diluted
basis of $53.58 to $78.59 based on projected FY 2012 operating
income as provided by Allied World management, of $52.05 to
$85.51 based on its March 31, 2011 book value and of $46.32
to $79.41 based on its March 31, 2011 tangible book value.
82
Based on the foregoing applicable valuation ranges for each of
Transatlantic and Allied World, Moelis then calculated the
ranges of implied exchange ratio set forth below:
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|
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|
|
|
|
|
|
|
|
Low
|
|
|
High
|
|
|
FY 2012 Operating Income
|
|
|
0.637
|
|
|
|
1.134
|
|
Book Value (as of 3/31/11)
|
|
|
0.561
|
|
|
|
1.044
|
|
Tangible Book Value (as of 3/31/11)
|
|
|
0.601
|
|
|
|
1.374
|
|
Selected
Transactions Analysis
Moelis compared selected financial and transaction metrics of
the merger with similar data (where available) of selected
transactions in the reinsurance sector since 1999 valued in
excess of $1.0 billion, which were the following:
|
|
|
|
|
Max Capital Group Ltd.s merger with Harbor Point, Ltd.
announced on March 3, 2010;
|
|
|
|
Validus Holdings Ltd.s merger with IPC Holdings Ltd.
announced on July 9, 2009;
|
|
|
|
PartnerRe Holdings Ltd.s acquisition of PARIS Re Holdings
Ltd. announced on July 4, 2009; and
|
|
|
|
SCOR Holding (Switzerland) Ltd.s acquisition of Converium
Holding AG announced on May 10, 2007.
|
The selected transactions were selected because they represented
in Moelis view the transactions most relevant to the
merger.
For each such transaction, Moelis calculated valuation multiples
based on information that was publicly available, focusing on
P/BV and P/TBV multiples (in each case, based on the book value
and tangible book value reflected on the financial statements of
the applicable target company prepared pursuant to GAAP), to
evaluate such transactions. Moelis noted that given the
significant catastrophic events that occurred during the first
quarter of 2011, a focus on valuation multiples based on
last-twelve months net income would not provide an accurate
comparison. Thus, for purposes of this analysis, Moelis focused
on P/BV and P/TBV valuation multiples. The following table
presents the results of such calculations:
|
|
|
|
|
|
|
|
|
|
|
P/BV
|
|
|
P/TBV
|
|
|
Max Capital/Harbor Point
|
|
|
0.79
|
x
|
|
|
0.92
|
x
|
Validus/IPC1
|
|
|
0.85
|
x
|
|
|
0.85
|
x
|
Partner Re/PARIS Re
|
|
|
0.97
|
x
|
|
|
1.09
|
x
|
SCOR/Converium
|
|
|
1.69
|
x
|
|
|
1.42
|
x
|
|
|
|
|
1
|
Subsequent to Moelis presentation to the Transatlantic
board of directors on June 12, 2011, Moelis noted that it
made an immaterial computational error in its calculation of the
P/BV and P/TBV multiples for the Validus/IPC transaction. Such
multiples were 0.83x and not 0.85x.
|
Based on its analysis of the foregoing selected transactions,
Moelis selected a range of 0.80x to 0.95x for equity value as a
multiple of P/B and a range of 0.85x to 1.05x for equity value
as a multiple of P/TBV. Moelis applied the selected ranges to
the relevant statistics for Transatlantic using
Transatlantics March 31, 2011 book and tangible book
values and calculated an implied range of Transatlantic common
stock prices on a fully diluted basis of $51.13 to $60.72 and of
$54.11 to $66.84, respectively. Moelis applied the selected
ranges to the relevant statistics for Allied World using Allied
Worlds March 31, 2011 book and tangible book values
and calculated an implied range of Allied World share prices on
a fully diluted basis of $59.48 to $70.64 and $56.25 to $69.49,
respectively.
83
Based on the foregoing applicable valuation ranges for each of
Transatlantic and Allied World, Moelis then calculated the
following ranges of implied exchange ratio as set forth below:
|
|
|
|
|
|
|
|
|
|
|
Low
|
|
|
High
|
|
|
Book Value (as of 3/31/11)
|
|
|
0.724
|
|
|
|
1.021
|
|
Tangible Book Value (as of 3/31/11)
|
|
|
0.779
|
|
|
|
1.188
|
|
52-Week
Trading Range
Moelis reviewed the trading range of Transatlantic common stock
and Allied World shares for the 52-week period ending
June 10, 2011, which ranged from $43.90 to $54.08 in the
case of Transatlantic and from $44.27 to $65.70 in the case of
Allied World. Based on the foregoing 52-week trading ranges,
Moelis then calculated a range of implied exchange ratio of
0.668 to 1.222.
Contribution
Analysis
Moelis calculated the hypothetical relative contributions of
Transatlantic and Allied World to a combined company in terms of:
|
|
|
|
|
implied equity ownership as a result of the merger (based on
fully diluted shares outstanding) and market capitalization (on
a fully diluted basis based on closing share price as of
June 10, 2011);
|
|
|
|
FY 2010 net premiums written;
|
|
|
|
FY 2010 and projected FYs 2011 and 2012 operating income as
provided by Transatlantic and Allied World management
respectively; and
|
|
|
|
cash and investments, net policy reserves, equity (including
accumulated other comprehensive income (AOCI)), and
tangible equity (including AOCI), in each case, as per the
applicable companys March 31, 2011 balance sheet.
|
The results of Moelis calculations are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Implied Exchange
|
Metric
|
|
Transatlantic
|
|
Allied World
|
|
Ratio
|
|
Implied Equity Ownership
|
|
|
58.4
|
%
|
|
|
41.6
|
%
|
|
|
0.880
|
x
|
Market Capitalization
|
|
|
54.7
|
%
|
|
|
45.3
|
%
|
|
|
0.758
|
x
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income Statement
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010 Net Premiums Written
|
|
|
73.6
|
%
|
|
|
26.4
|
%
|
|
|
1.750
|
x
|
2010A Operating Income
|
|
|
49.0
|
%
|
|
|
51.0
|
%
|
|
|
0.604
|
x
|
2011E Operating Income
|
|
|
41.2
|
%
|
|
|
58.8
|
%
|
|
|
0.439
|
x
|
2012E Operating Income
|
|
|
61.5
|
%
|
|
|
38.5
|
%
|
|
|
1.001
|
x
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance Sheet as of 3/31/11
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and Investments
|
|
|
62.8
|
%
|
|
|
37.2
|
%
|
|
|
1.059
|
x
|
Net Policy Reserves
|
|
|
68.4
|
%
|
|
|
31.6
|
%
|
|
|
1.356
|
x
|
Equity (including AOCI)
|
|
|
57.8
|
%
|
|
|
42.2
|
%
|
|
|
0.860
|
x
|
Tangible Equity (including AOCI)
|
|
|
60.5
|
%
|
|
|
39.5
|
%
|
|
|
0.962
|
x
|
The preparation of a fairness opinion is a complex analytical
process and is not necessarily susceptible to partial analysis
or summary description. Selecting portions of the analyses or
summary set forth above, without considering the analyses as a
whole, could create an incomplete view of the processes
underlying Moelis opinion. In arriving at its fairness
determination, Moelis considered the results of all of its
analyses and did not attribute any particular weight to any
factor or analysis. Rather, Moelis made its fairness
determination on the basis of its experience and professional
judgment after considering the results of all of its analyses.
84
No company or transaction used in the analyses described above
for purposes of comparison is directly comparable to
Transatlantic, Allied World or the merger. In addition, such
analyses do not purport to be appraisals, nor do they
necessarily reflect the prices at which businesses or securities
actually may be sold. Analyses based upon forecasts of future
results are not necessarily indicative of actual future results,
which may be significantly more or less favorable than suggested
by such analyses. Because the analyses described above are
inherently subject to uncertainty, being based upon numerous
factors or events beyond the control of the parties or their
respective advisors, neither Transatlantic, nor Moelis or any
other person assumes responsibility if future results are
materially different from those forecast.
The exchange ratio set forth in the merger agreement was
determined through arms length negotiations between
Transatlantic and Allied World and was approved by the
Transatlantic board of directors. The decision by the
Transatlantic board of directors to approve, adopt and authorize
the merger was solely that of the Transatlantic board of
directors. Representatives of Moelis provided advice to
Transatlantic during these negotiations. Moelis did not,
however, recommend any specific exchange ratio to Transatlantic
or the Transatlantic board of directors, or that any specific
amount or type of consideration constituted the only appropriate
consideration for the merger.
The Moelis opinion and financial analyses, taken together,
represented only one of many factors considered by the
Transatlantic board of directors in its evaluation of the merger
and was not determinative of the views of the Transatlantic
board of directors or Transatlantics management with
respect to the merger, the exchange ratio set forth in the
merger agreement or whether the Transatlantic board of directors
would have been willing to agree to different consideration.
Moelis opinion was prepared for the use and benefit of the
Transatlantic board of directors in its evaluation of the
merger. Moelis was not asked to address, and its opinion does
not address, the fairness to, or any other consideration of, the
holders of any class of securities, creditors or other
constituencies of Transatlantic, other than the holders of
Transatlantic common stock. In addition, Moelis opinion
does not express any opinion as to the fairness of the amount or
nature of any compensation to be received by any of
Transatlantics officers, directors or employees, or any
class of such persons, relative to the exchange ratio set forth
in the merger agreement. At the direction of the Transatlantic
board of directors, Moelis was not asked to, nor did it, offer
any opinion as to the material terms of the merger agreement or
the form of the merger. Moelis expressed no opinion as to what
the value of Allied World shares would be when issued pursuant
to the merger or the prices at which such Allied World shares
would trade in the future. In rendering its opinion, Moelis
assumed, with the consent of the Transatlantic board of
directors, that the final executed form of the merger agreement
would not differ in any material respect from the draft that
Moelis examined, that the representations and warranties of each
of Transatlantic and Allied World are true and correct, that
Transatlantic and Allied World would perform all of the
covenants and agreements required to be performed by each of
them, and that all conditions to the completion of the merger
will be satisfied without waiver thereof and that the merger
will be consummated in a timely manner in accordance with the
terms of the merger agreement, without any modifications or
amendments thereto or any adjustment of the exchange ratio set
forth in the merger agreement.
Pursuant to the terms of Moelis engagement as financial
advisor to the Transatlantic board of directors, Moelis has
earned a fee of $2.5 million for rendering its opinion,
payable upon delivery of its opinion, regardless of whether the
merger is consummated. Moelis will also be entitled to receive a
one-time transaction fee of $1 million if the merger is
consummated. Solely at the discretion of Transatlantic, Moelis
may receive an additional one-time fee of $1.5 million,
payable upon completion of the merger. Moelis engagement
letter with Transatlantic provides that if Moelis is requested
by Transatlantic to deliver an additional opinion, Moelis shall
be entitled to an additional $0.5 million upon delivery of
such additional opinion, which fee shall be creditable towards
the $1.0 million transaction fee referenced above. In
addition, Transatlantic has agreed to reimburse Moelis for all
reasonable and documented
out-of-pocket
expenses incurred in connection with its rendering of the
opinion, including the expense of legal counsel, up to a
specified maximum amount that is not to be exceeded without the
prior written consent of Transatlantic (which is not to be
unreasonably withheld). Transatlantic has also agreed to
indemnify Moelis for certain liabilities arising out of its
engagement.
85
Pursuant to the terms of a prior engagement letter between
Moelis and the Special Committee entered into in February 2010,
pursuant to which Moelis received a quarterly retainer fee and
customary reimbursement for expenses, Moelis was engaged to
(i) undertake (in consultation with members of
Transatlantic management and the Special Committee) a customary
business and financial analysis of Transatlantic and
(ii) meet with the Special Committee to discuss strategic
opportunities for Transatlantic and their financial
implications, in each case, to the extent requested by the
Special Committee. The aggregate amount of retainer fees
collected by Moelis pursuant to such engagement letter was
$50,000. The prior engagement letter expressly contemplated that
if Moelis was asked to act for the Special Committee or
Transatlantic Holdings in any formal capacity other than as
described in the first sentence of this paragraph, the terms of
such additional engagement would be embodied in a new written
agreement. Moelis subsequently entered into the engagement
letter described in the paragraph above as a result of the
Transatlantic board of directors requesting Moelis to provide
its opinion in connection with the merger. Moelis may provide
investment banking services to Transatlantic, Allied World and
their respective affiliates
and/or
successors in the future for which Moelis would expect to
receive compensation. In the ordinary course of business,
Moelis affiliates may trade securities of Transatlantic or
Allied World for their own accounts and the accounts of their
customers and, accordingly, may at any time hold a long or short
position in such securities.
The Transatlantic board of directors selected Moelis as its
financial advisor in connection with the merger because, among
other things, Moelis has substantial experience in transactions
similar to the merger. Moelis is regularly engaged in the
valuation of businesses and their securities in connection with
mergers and acquisitions, strategic transactions, corporate
restructurings, and valuations for corporate and other purposes.
Certain
Information Regarding Transatlantics Financial
Advisor Goldman Sachs
Goldman Sachs and its affiliates are engaged in investment
banking and financial advisory services, commercial banking,
securities trading, investment management, principal investment,
financial planning, benefits counseling, risk management,
hedging, financing, brokerage activities and other financial and
non-financial activities and services for various persons and
entities. In the ordinary course of these activities and
services, Goldman Sachs and its affiliates may at any time make
or hold long or short positions and investments, as well as
actively trade or effect transactions, in the equity, debt and
other securities (or related derivative securities) and
financial instruments (including bank loans and other
obligations) of Transatlantic, Allied World and any of their
respective affiliates and third parties or any currency or
commodity that may be involved in the transaction contemplated
by the merger agreement for their own account and for the
accounts of their customers. Goldman Sachs acted as financial
advisor to Transatlantic in connection with, and participated in
certain of the negotiations leading to, the merger. Goldman
Sachs has provided certain investment banking services to
Transatlantic and its affiliates from time to time for which
Goldman Sachs Investment Banking Division has received,
and may receive, compensation, including acting as a joint
bookrunning manager in connection with the secondary public
offering of 29.9 million shares of Transatlantic common
stock by American International Group, Inc. and its indirect
subsidiary, American Home Assurance Company, in June 2009, as an
underwriter in connection with the public offering of
Transatlantics 8.00% Senior Notes due 2039
($350 million aggregate principal amount) in November 2009
and as an underwriter in connection with the secondary public
offering of 8.5 million shares of Transatlantic common
stock by American Home Assurance Company in March 2010. Goldman
Sachs may also in the future provide investment banking services
to Transatlantic, Allied World and their respective affiliates
for which Goldman Sachs Investment Banking Division may
receive compensation. Affiliates of Goldman Sachs owned Allied
World shares and warrants to acquire additional Allied World
shares until November 2010, when Allied World repurchased all
Allied World shares and warrants then held by such Goldman Sachs
affiliates.
The Transatlantic board of directors selected Goldman Sachs as
its financial advisor because it is an internationally
recognized investment banking firm that has substantial
experience in transactions similar to the merger. Pursuant to a
letter agreement, dated June 9, 2011, Transatlantic engaged
Goldman Sachs to act as its financial advisor in connection with
the merger. Pursuant to the terms of this engagement letter,
Transatlantic has agreed to pay Goldman Sachs a transaction fee,
all of which is contingent upon consummation of the merger, in
an amount that will depend on the aggregate consideration in the
merger, which in turn
86
will depend on the average trading price of Allied World shares
during the five days preceding the stockholder vote relating to
the merger. For illustrative purposes, based on the average
trading price of Allied World shares from June 13, 2011
through June 17, 2011, this transaction fee would have
equaled approximately $20 million. In addition,
Transatlantic has agreed to reimburse Goldman Sachs for its
expenses arising, and to indemnify Goldman Sachs and related
persons against certain liabilities that may arise out of its
engagement.
Certain
Transatlantic Prospective Financial Information
Transatlantic does not, as a matter of course, make public
long-term forecasts as to future performance or other
prospective financial information beyond the current fiscal
year, and Transatlantic is especially wary of making forecasts
or projections for extended periods due to the unpredictability
of the underlying assumptions and estimates. However, as part of
the due diligence review of Transatlantic in connection with the
merger, Transatlantics management prepared and provided to
Allied World and Goldman Sachs, as well as to Deutsche Bank and
Moelis in connection with their respective evaluations of the
fairness of the merger consideration, certain non-public,
internal financial forecasts regarding Transatlantics
projected future operations for fiscal years 2011 through 2015.
Transatlantic has included below a summary of these forecasts
for the purpose of providing stockholders and investors access
to certain non-public information that was furnished to third
parties and such information may not be appropriate for other
purposes. These forecasts were also considered by the
Transatlantic board of directors for purposes of evaluating the
merger. The Transatlantic board of directors also considered
non-public, financial forecasts prepared by Allied World
regarding Allied Worlds projected future operations for
fiscal years 2011 through 2015 for purposes of evaluating Allied
World and the merger. See the section entitled The
Merger Certain Allied World Prospective Financial
Information beginning on page 73 for more information
about the forecasts prepared by Allied World.
These internal financial forecasts were not prepared with a view
toward public disclosure, nor were they prepared with a view
toward compliance with published guidelines of the SEC, GAAP,
SAP, IFRS or the guidelines established by the American
Institute of Certified Public Accountants for preparation and
presentations of financial forecasts. The prospective financial
information included in this joint proxy statement/prospectus
has been prepared by, and is the responsibility of,
Transatlantics management. PricewaterhouseCoopers LLP,
Transatlantics independent auditor, has neither examined,
compiled nor performed any procedures with respect to the
accompanying prospective financial information and, accordingly,
PricewaterhouseCoopers LLP does not express an opinion or any
other form of assurance with respect thereto. The
PricewaterhouseCoopers LLP report incorporated by reference in
this joint proxy statement/prospectus relates to
Transatlantics historical financial information. It does
not extend to the prospective financial information and should
not be read to do so. The summary of these internal financial
forecasts included below is not being included to influence your
decision whether to vote for the merger and the transactions
contemplated in connection with the merger, but instead because
these internal financial forecasts were provided by
Transatlantic to Allied World, Goldman Sachs, Moelis and
Deutsche Bank.
While presented with numeric specificity, these internal
financial forecasts were based on numerous variables and
assumptions (including, but not limited to, those related to
industry performance and competition and general business,
economic, market and financial conditions and additional matters
specific to Transatlantics businesses) that are inherently
subjective and uncertain and are beyond the control of
Transatlantics management. Important factors that may
affect actual results and cause these internal financial
forecasts to not be achieved include, but are not limited to,
risks and uncertainties relating to Transatlantics
business (including its ability to achieve strategic goals,
objectives and targets over applicable periods), industry
performance, general business and economic conditions, the
occurrence of unpredictable catastrophe events and other factors
described in the sections entitled Special Note Regarding
Forward-Looking Statements and Risk Factors,
beginning on page 21 and page 22, respectively. These
internal financial forecasts also reflect numerous variables,
expectations and assumptions available at the time they were
prepared as to certain business decisions that are subject to
change. As a result, actual results may differ materially from
those contained in these internal financial forecasts.
Accordingly, there can be no assurance that the forecasted
results summarized below will be realized.
87
The inclusion of a summary of these internal financial forecasts
in this joint proxy statement/prospectus should not be regarded
as an indication that any of Transatlantic, Allied World or
their respective affiliates, advisors or representatives
considered these internal financial forecasts to be predictive
of actual future events, and these internal financial forecasts
should not be relied upon as such nor should the information
contained in these internal financial forecasts be considered
appropriate for other purposes. None of Transatlantic, Allied
World or their respective affiliates, advisors, officers,
directors, partners or representatives can give you any
assurance that actual results will not differ materially from
these internal financial forecasts, and none of them undertakes
any obligation to update or otherwise revise or reconcile these
internal financial forecasts to reflect circumstances existing
after the date these internal financial forecasts were generated
or to reflect the occurrence of future events, even in the event
that any or all of the assumptions underlying these forecasts
are shown to be in error. Since the forecasts cover multiple
years, such information by its nature becomes less meaningful
and accurate with each successive year. Transatlantic does not
intend to make publicly available any update or other revision
to these internal financial forecasts. None of Transatlantic or
its affiliates, advisors, officers, directors or representatives
has made or makes any representation to any stockholder,
investor or other person regarding Transatlantics ultimate
performance compared to the information contained in these
internal financial forecasts or that the forecasted results will
be achieved.
None of Transatlantic, or its affiliates, advisors, officers,
directors or representatives have made any representation to any
stockholder, Allied World or any other person, in the merger
agreement or otherwise, concerning these internal financial
forecasts. The below forecasts do not give effect to the merger.
Transatlantic urges all stockholders to review
Transatlantics most recent SEC filings for a description
of Transatlantics reported financial results.
Subject to the foregoing qualifications, the net premiums
written, net income, loss ratio, combined ratio and
stockholders equity reflected below by fiscal year through
the year 2015 were prepared by, or as directed by,
Transatlantics management and were delivered to Allied
World, Deutsche Bank, Goldman Sachs and Moelis.
Fiscal year ending December 31 ($ in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2011E
|
|
|
2012E
|
|
|
2013E
|
|
|
2014E
|
|
|
2015E
|
|
|
Net premiums written
|
|
$
|
4,050
|
|
|
$
|
4,150
|
|
|
$
|
4,250
|
|
|
$
|
4,400
|
|
|
$
|
4,550
|
|
Net income(1)(2)(3)
|
|
$
|
189
|
|
|
$
|
465
|
|
|
$
|
476
|
|
|
$
|
494
|
|
|
$
|
515
|
|
Loss ratio
|
|
|
79.1
|
%
|
|
|
67.0
|
%
|
|
|
67.0
|
%
|
|
|
67.0
|
%
|
|
|
67.0
|
%
|
Combined ratio
|
|
|
107.2
|
%
|
|
|
95.6
|
%
|
|
|
95.6
|
%
|
|
|
95.7
|
%
|
|
|
95.7
|
%
|
Stockholders equity(1)(2)(4)
|
|
$
|
4,395
|
|
|
$
|
4,815
|
|
|
$
|
5,240
|
|
|
$
|
5,680
|
|
|
$
|
6,135
|
|
|
|
|
(1) |
|
Includes impact of assumed continuation of historical dividends. |
|
(2) |
|
Excludes impact of repurchases of Transatlantics
outstanding common stock or senior notes. |
|
(3) |
|
Operating income (not provided above) is net income excluding
realized net capital gains (losses) and the gain (loss) on early
extinguishment of debt, net of taxes. |
|
(4) |
|
As of December 31. |
Interests
of Allied Worlds Directors and Executive Officers in the
Merger
In considering the recommendation of the board of directors of
Allied World that you vote to approve the adoption of the Allied
World Articles, the issuance of shares of Allied World in
connection with the merger and the election of directors, you
should be aware that Allied Worlds directors and executive
officers have financial interests in the merger that may be
different from, or in addition to, those of Allied World
shareholders generally. The board of directors of Allied World
was aware of and considered these potential interests, among
other matters, in evaluating and negotiating the merger
agreement and the merger and in recommending to you that you
approve the issuance of Allied World shares in connection with
the merger and the adoption of the Allied World Articles.
88
Allied World does not expect a significant reduction in
workforce as a result of the merger, subject to the discussion
above regarding the potential difficulty of retaining key
management personnel in the section entitled Risk
Factors Risk Factors Relating to the Merger.
As described in further detail below under the heading
Board of Directors and Management Following
the Merger, certain of Allied Worlds executive
officers and members of the Allied World board of directors will
continue to serve as officers or directors of the combined
company upon completion of the merger. Specifically, Scott A.
Carmilani will serve as the President and Chief Executive
Officer of the combined company unless he is not the Chief
Executive Officer of Allied World immediately prior to the
effective time of the merger. Additionally, Wesley D. Dupont
will continue to serve as the Executive Vice President, General
Counsel and Corporate Secretary of the combined company, John J.
Gauthier will continue to serve as the Executive Vice President,
Chief Investment Officer of the combined company and David A.
Bell will continue to serve as the Executive Vice President,
Chief Operating Officer of the combined company, in each case,
if they are employed by Allied World immediately prior to the
effective time of the merger.
Treatment of Equity Awards. Allied
Worlds executive officers and directors participate in
Allied Worlds equity-based compensation plans. Allied
Worlds directors hold restricted share units granted under
the Allied World Assurance Company Holdings, AG Third Amended
and Restated 2004 Stock Incentive Plan (the 2004
Plan), which are not subject to accelerated vesting in
connection with the merger, except that, pursuant to
Section 6.9(f) of the merger agreement, the independent
directors of Allied World who are selected to serve as directors
of TransAllied will be entitled to immediate vesting of their
unvested equity awards if they cease to be a director of Allied
World (or, following the merger, TransAllied) prior to the end
of their term. Allied Worlds executive officers hold
options, restricted share units and performance shares granted
under Allied Worlds Third Amended and Restated 2001
Employee Stock Option Plan, the 2004 Plan and Allied
Worlds Third Amended and Restated Long-Term Incentive Plan
(the LTIP). Each executive officers employment
agreement with Allied World provides for single
trigger equity acceleration, meaning, upon the occurrence
of a change in control, all equity awards held by the executive
officer would, absent an express waiver, fully vest immediately
prior to such change in control. As described in more detail
below under the captions Waiver Agreement with
Scott A. Carmilani and Executive Officer
Retention Agreements, it is expected that certain of
Allied Worlds executive officers will waive their right to
single trigger equity acceleration in connection
with the merger but will retain their right, upon their
involuntary termination of employment prior to December 31,
2013, to full vesting of unvested equity awards held by the
executive officer as of the closing date of the merger.
Executive Officer Employment
Agreements. Allied World is a party to employment
agreements with Messrs. Carmilani, Bell, DOrazio,
Dupont, Grossack, Gauthier, Knight and Sennott, and
Ms. Dillard. If the executive officer (other than
Mr. Sennott) is involuntarily terminated without
cause (as defined in the agreements) or terminates
his or her employment with good reason (as defined
in the agreements) (such termination hereinafter referred to as
a qualifying change in control termination), in each
case, within twelve months following a change in control, the
executive officer will be entitled to the following double
trigger severance payments and benefits: (i) a cash
payment in an amount equal to three times his or her current
base salary and the highest annual cash bonus paid or payable
for the two immediately prior fiscal years, payable in
substantially equal monthly installments over the period
commencing on the date of termination and ending on the date
that is one day prior to two and one-half months following the
end of Allied Worlds fiscal year in which termination
occurs; (ii) participation in Allied Worlds health
and insurance plans (or the economic equivalent of such
participation) for a period of three years from the date of such
termination; and (iii) vesting in the number of equity
awards held by the executive officer that otherwise would have
vested during the two-year period from the date of such
termination. Mr. Sennotts employment agreement only
provides for single trigger equity acceleration (as
described in the previous paragraph), and does not provide for
enhanced double trigger severance benefits in the
event of a qualifying change in control termination following
the consummation of the merger.
Waiver Agreement with Scott A. Carmilani. It
is expected that Mr. Carmilani will enter into a waiver
agreement that will modify the compensation and benefits that he
would otherwise have been eligible to receive under his
employment agreement in connection with the merger. In the event
the merger is not
89
completed, the waiver agreement will not become effective and
Mr. Carmilanis employment agreement will continue in
full force and effect. In the waiver agreement,
Mr. Carmilani will (i) waive the single
trigger equity acceleration provided under his employment
agreement in connection with the merger; (ii) agree to
enter into an amended and restated employment agreement as of
the closing date of the merger, which will be substantially
similar to his existing employment agreement but which will
contain a fixed three-year term; (iii) agree that any
change made to his employment position immediately following the
merger will not constitute good reason for purposes of his
employment agreement and any other compensatory agreement to
which he is a party (the limited good reason
waiver); and (iv) be eligible, upon a qualifying
change in control termination (after application of any limited
good reason waiver) that occurs prior to December 31, 2013,
for full vesting of unvested equity awards that are outstanding
as of the closing date of the merger and the double
trigger severance benefits provided under his employment
agreement (including partial accelerated vesting of unvested
equity awards that were not outstanding as of the closing date
of the merger).
Waiver Agreement with Joan Dillard. It is
expected that Ms. Dillard will enter into a waiver
agreement that will modify the compensation that she would
otherwise have been eligible to receive under her employment
agreement in connection with the merger. In the event the merger
is not completed, the waiver agreement will not become effective
and Ms. Dillards employment agreement will continue
in full force and effect. Pursuant to the terms of the waiver
agreement, Ms. Dillard will be entitled to receive all of
the benefits provided for by her employment agreement, except
that she will waive single trigger accelerated
vesting of performance units granted in 2009 pursuant to the
LTIP and the 2004 Plan. Ms. Dillard will be entitled to
double trigger vesting of performance units granted
in 2009 pursuant to the LTIP and the 2004 Plan upon a
termination by TransAllied without cause prior to the payment of
the 2009 award. Except as described in the previous sentence,
Ms. Dillard will not be entitled to any additional
severance payments or benefits upon a qualifying change in
control termination that occurs following the consummation of
the merger.
Executive Officer Retention Arrangements with Frank N.
DOrazio, Wesley D. Dupont, John J. Gauthier, Marshall J.
Grossack and W. Gordon Knight. It is expected
that Messrs. DOrazio, Dupont, Gauthier, Grossack and
Knight will enter into retention agreements which, as described
below, will modify the compensation and benefits that they would
otherwise have been eligible to receive under their employment
agreements in connection with the merger. The intended purpose
of the retention agreements is to facilitate retaining the
executive officers following the merger and to enable the
combined company to establish a uniform approach toward the
compensation of all executive officers of the combined company,
which will include the cancellation of existing employment
agreements following the expiration of the initial retention
period on December 31, 2013. In the event the merger is not
completed, the retention agreements will not become effective
and the executive officer employment agreements will continue in
full force and effect.
It is expected that Messrs. DOrazio, Dupont,
Gauthier, Grossack and Knight will enter into substantially
similar retention agreements, other than differences in
retention award amounts, pursuant to which each (i) will
waive the single trigger equity acceleration
provided under his employment agreement in connection with the
merger; (ii) will agree that his existing employment
agreement will be cancelled as of December 31, 2013;
(iii) will agree to the limited good reason waiver;
(iv) will receive a retention award (a retention
award) in the form of restricted stock units that may be
settled in cash or shares of the combined company, 50% of which
will vest and settle on each of September 30, 2012 and
December 31, 2013, subject to continuous employment through
the specified date; and (v) will be eligible, upon a
qualifying change in control termination (after application of
any limited good reason waiver) that occurs prior to
December 31, 2013, for full vesting of unvested equity
awards that are outstanding as of the closing date of the
merger, the double trigger severance benefits
provided under his employment agreement (including partial
accelerated vesting of unvested equity awards that were not
outstanding as of the closing date of the merger), and pro-rata
acceleration of any unvested portion of the retention award
based upon service during the period from July 1, 2011
until December 31, 2013. Additionally, pursuant to the
expected terms of his retention agreement, if Mr. Knight
resigns without good reason on or after January 1, 2013, he
will be eligible for full vesting of unvested equity awards that
are outstanding as of the closing date of the merger and
pro-rata acceleration of any unvested portion of his retention
award based upon service during the period from
September 30, 2012
90
until December 31, 2013. The retention agreement for Mr.
Gauthier would also extend the term of his employment agreement
from July 1, 2013 to December 31, 2013.
The retention awards for Messrs. DOrazio, Dupont,
Gauthier, Grossack and Knight will be valued at $1,000,000,
$1,500,000, $1,500,000, $2,100,000 and $2,000,000, respectively,
based on a per share price of $57.58, the closing market price
of Allied Worlds shares as of June 30, 2011. The
payments and benefits provided for under the retention
agreements are conditioned upon continued compliance by each of
Messrs. DOrazio, Dupont, Gauthier, Grossack and
Knight with the restrictive covenants set forth in his
employment agreement (described below under the caption
Double Trigger Payments and Benefits Triggered
Upon the Consummation of the Merger) from the closing date
of the merger until December 31, 2013 or, if his employment
is terminated prior to December 31, 2013, until the
one-year anniversary of such termination.
Supplemental Executive Retirement Plan. Allied
World maintains the Allied World Assurance Company (U.S.) Inc.
Second Amended and Restated Supplemental Executive Retirement
Plan (the SERP) for certain senior employees of
Allied World and its subsidiaries that are U.S. taxpayers,
including each of Allied Worlds executive officers. The
SERP provides for vesting acceleration upon a change in control.
The SERP also provides for distribution of the entire balance of
each of Allied Worlds executive officers SERP
account, which distributions will be made in a lump sum upon
completion of the merger.
The following table sets forth the cash value of the payments
and benefits that Messrs. Bell, DOrazio, Gauthier and
Grossack would receive in connection with the merger under the
employment agreements, as expected to be modified by the
retention agreements where applicable, and the SERP, if the
merger were completed on July 31, 2011 and the executives
experience a qualifying change in control termination
immediately thereafter. These amounts assume a per share price
of Allied Worlds shares of $55.33, the average closing
market price of Allied Worlds shares over the first five
business days following public announcement of the merger. All
amounts are shown before the deduction of any applicable
withholding taxes. Certain of the amounts payable may vary
depending on the actual dates on which a triggering event is
completed and the executive officer terminates employment. As a
result, the actual amounts, if any, to be received by an
executive officer may differ in material respects from the
amounts set forth below. An estimate of the cash value of the
payments and benefits that each of Messrs. Carmilani,
Dupont, Knight, and Sennott, and Ms. Dillard (collectively,
the named executive officers) would receive under
the employment agreements, as expected to be modified by the
waiver or retention agreements where applicable, is set forth
below on the Allied World Golden Parachute Compensation
Table.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
|
|
|
Equity
|
|
|
Pension/NQDC
|
|
|
Perquisites/Benefits
|
|
|
Total
|
|
|
|
($)(1)
|
|
|
($)(2)
|
|
|
($)(3)
|
|
|
($)(4)
|
|
|
($)
|
|
|
David A. Bell
|
|
|
2,310,000
|
|
|
|
2,124,949
|
|
|
|
|
|
|
|
66,401
|
|
|
|
4,501,350
|
|
Frank N. DOrazio
|
|
|
2,340,000
|
|
|
|
2,241,142
|
|
|
|
|
|
|
|
51,263
|
|
|
|
4,632,405
|
|
John J. Gauthier
|
|
|
2,550,000
|
|
|
|
1,818,276
|
|
|
|
21,731
|
|
|
|
61,141
|
|
|
|
4,451,148
|
|
Marshall J. Grossack
|
|
|
2,100,000
|
|
|
|
2,008,202
|
|
|
|
|
|
|
|
63,766
|
|
|
|
4,171,968
|
|
|
|
|
(1) |
|
Represents a cash severance payment equal to three times the
executive officers current base salary and the highest
annual cash bonus paid or payable for the two immediately prior
fiscal years. The amount of Messrs. DOrazio, Gauthier
and Grossacks retention awards are described above under
the Executive Officer Retention Arrangements
caption. Since such amounts are in consideration for
post-closing service, such amounts are not reflected in this
table. Mr. Bell is not expected to enter into a retention
agreement, and accordingly, upon a qualifying change in control
termination within 12 months following consummation of the
merger, Mr. Bell will be entitled to the benefits he would
otherwise have received in the event of such termination
pursuant to his employment agreement. |
|
(2) |
|
Represents an amount equal to the value of full vesting of
unvested equity awards held by the executive officer as of the
closing date of the merger, assuming that the merger was
completed on July 31, 2011. Pursuant to the expected terms
of their retention agreements, Messrs. DOrazio,
Gauthier and Grossack will waive single trigger
equity acceleration upon completion of the merger but will be
eligible for full vesting of unvested equity awards that are
outstanding as of the closing date of the merger upon a |
91
|
|
|
|
|
qualifying change in control termination that occurs prior to
December 31, 2013 (after application of any limited good
reason waiver). Mr. Bell is not expected to enter into a
retention agreement, and accordingly, he will be entitled to the
single trigger equity acceleration provided under
his employment agreement in connection with the merger. The
dollar value reflected above assumes (i) acceleration of
all unvested shares that are subject to options based on a per
share price of $55.33 and (ii) all equity awards held by
the executive officer (x) that settle in Allied World
shares vested, were exercised and sold as of July 31, 2011
and (y) that settle in cash vested as of July 31,
2011. The amounts reflected above do not include the value of
double trigger acceleration of equity awards,
because, assuming that both the completion of the merger and a
qualifying change in control termination occurred on
July 31, 2011, full vesting of all equity awards held by
Messrs. Bell, DOrazio, Gauthier and Grossack as of
such date would occur pursuant to the single trigger
equity acceleration provision of the employment agreements. The
valuation also assumes that the tax withholding, if any,
associated with the vesting of the equity awards will be paid in
cash and not through the surrender of Allied World shares in
satisfaction of such tax withholding. The estimated value of
options vesting for Messrs. Bell, DOrazio and
Grossack is zero because the exercise price of options subject
to accelerated vesting exceeds the per share price of $55.33.
The estimated value of option vesting for Mr. Gauthier is
$8,155, as 500 of his outstanding options are exercisable at a
price of $39.02 per share. The amounts reflected above assume
that the performance units would be granted assuming performance
at target levels of achievement. Up to 150% of the performance
units may be granted if maximum performance levels are achieved. |
|
(3) |
|
Represents the increase in the value of the SERP benefits for
the executive officers attributable to vesting acceleration of
contributions made by Allied World to the SERP on behalf of each
executive officer upon the consummation of the merger.
Messrs. Bell, DOrazio and Grossack are fully vested
in their SERP contributions, and accordingly, no value is
represented above. |
|
(4) |
|
Represents a double trigger payment equal to the
value of continued participation in Allied Worlds health
and insurance plans, calculated based on the current monthly
premiums for participation in the plans as of July 31, 2011. |
Indemnification of Allied World Directors and
Officers. Allied World directors and executive
officers have rights to indemnification and directors and
officers liability insurance that will survive completion
of the merger.
Allied
World Golden Parachute Compensation
Single
Trigger Payments and Benefits Triggered Upon the
Consummation of the Merger
Accelerated Vesting of Equity Awards. As
discussed above under the caption Treatment of
Equity Awards, Allied World is party to employment
agreements with each of its named executive officers, the terms
of which provide for single trigger equity
acceleration. As discussed above under the captions
Waiver Agreement with Scott A. Carmilani
and Executive Officer Retention
Arrangements, it is expected that Mr. Carmilani will
enter into a waiver agreement and that Messrs. Dupont and
Knight will enter into retention agreements, pursuant to which
they will waive the single trigger equity
acceleration in connection with the merger. It is also expected
that Messrs. Carmilani, Dupont and Knight will remain
eligible for full vesting provided under his employment
agreement upon a qualifying change in control termination (after
application of any limited good reason waiver) that occurs prior
to December 31, 2013. An estimated value of the accelerated
vesting (after application of any waiver) for each of Allied
Worlds named executive officers is set forth below on the
Allied World Golden Parachute Compensation Table.
Accelerated Vesting Under the SERP. As
discussed above under the caption Interests of
Allied Worlds Directors and Executive Officers in the
Merger Supplemental Executive Retirement Plan,
the SERP provides for single trigger vesting
acceleration and distribution of the entire balance of each of
Allied Worlds named executive officers SERP account,
which distributions will be made in a lump sum upon completion
of the merger. An estimate of the value attributable to the
accelerated vesting of the SERP benefit for each of Allied
Worlds named executive officers is set forth below on the
Allied World Golden Parachute Compensation Table.
92
Double
Trigger Payments and Benefits Triggered Upon the
Consummation of the Merger
Severance Payments. As discussed above under
the caption Executive Officer Employment
Agreements, the employment agreements with Allied
Worlds named executive officers (other than
Mr. Sennott) provide for double trigger
severance payments (including partial accelerated vesting of
unvested equity awards that were not outstanding as of the
closing date of the merger) upon a qualifying change in control
termination that occurs within twelve months of the completion
of the merger. The double trigger severance payments
are conditioned upon a named executive officers continued
compliance with the restrictive covenants set forth in his or
her employment agreement and, at the request of Allied World,
execution of a general release in favor of Allied World and its
affiliates. The restrictive covenants, which generally apply
during the
24-month
period immediately following a termination of employment,
generally prohibit each named executive officer from
(i) soliciting Allied Worlds employees, customers or
other business relations; or (ii) engaging in activities
that compete with Allied Worlds business in certain
jurisdictions.
As discussed above, it is expected that Mr. Carmilani will
enter into a waiver agreement and that Messrs. Dupont and
Knight will enter into retention agreements, pursuant to which
they will remain eligible to receive the double
trigger severance benefits (including partial accelerated
vesting of unvested equity awards that were not outstanding as
of the closing date of the merger) provided under his or her
employment agreement upon a qualifying change in control
termination (after application of any limited good reason
waiver) that occurs prior to December 31, 2013. As
discussed above, Ms. Dillard will be paid her severance
benefits as if her termination occurred as of the consummation
of the merger and will remain eligible to vest in her 2009 award
if she is terminated without cause prior to the settlement of
the award.
Mr. Sennotts employment agreement does not provide
for enhanced double trigger severance benefits.
Accordingly, to the extent Mr. Sennotts employment is
terminated by Allied World without cause or by Mr. Sennott
with good reason following the merger, he will be entitled to
the benefits he would otherwise have received in the event of
such termination pursuant to his employment agreement. For more
information on the compensation and benefits payable to
Mr. Sennott in the event of a termination by Allied World
without cause or by Mr. Sennott with good reason, please
see Allied Worlds Proxy Statement on Schedule 14A
filed with the SEC on March 17, 2011.
The following table sets forth the estimated amounts of
golden parachute compensation (for purposes of
Item 402(t) of
Regulation S-K)
that each named executive officer of Allied World could receive
in connection with the merger under the employment agreements,
as expected to be modified by the waiver or retention agreements
where applicable, and the SERP. These amounts assume that the
merger was completed on July 31, 2011, the last practicable
date prior to the filing of this Registration Statement, and
assume a per share price of Allied Worlds shares of
$55.33, the average closing market price of Allied Worlds
shares over the first five business days following public
announcement of the merger. Where applicable, these amounts
assume that the named executive officers of Allied World
experienced a qualifying change in control termination (after
application of any limited good reason waiver) as of
July 31, 2011, the last practicable date prior to the
filing of this Registration Statement. All amounts are shown
before the deduction of any applicable withholding taxes.
Certain of the amounts payable may vary depending on the actual
dates on which the merger is completed and the named executive
officer terminates employment. As a result, the actual amounts,
if any, to be received by a named executive officer may differ
in material respects from the amounts set forth
93
below. The compensation payable by Allied World to its named
executive officers that is based on or otherwise related to the
merger is not subject to a shareholder vote.
Allied
World Golden Parachute Compensation Table
|
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
|
|
|
Equity
|
|
|
Pension/NQDC
|
|
|
Perquisites/Benefits
|
|
|
Total
|
|
Name
|
|
($)
|
|
|
($)
|
|
|
($)(5)
|
|
|
($)
|
|
|
($)
|
|
|
Scott A. Carmilani
|
|
|
7,275,000
|
(1)
|
|
|
20,524,995
|
(2)
|
|
|
|
|
|
|
60,875
|
(6)
|
|
|
27,860,870
|
|
Joan H. Dillard
|
|
|
3,390,000
|
(1)
|
|
|
3,461,998
|
(3)
|
|
|
|
|
|
|
89,921
|
(6)
|
|
|
6,941,919
|
|
Wesley D. Dupont
|
|
|
2,640,000
|
(1)
|
|
|
2,691,528
|
(2)
|
|
|
|
|
|
|
66,375
|
(6)
|
|
|
5,397,903
|
|
W. Gordon Knight
|
|
|
4,125,000
|
(1)
|
|
|
4,097,690
|
(2)
|
|
|
46,141
|
|
|
|
62,180
|
(6)
|
|
|
8,331,011
|
|
John L. Sennott, Jr.
|
|
|
0.00
|
(6)
|
|
|
2,548,666
|
(4)
|
|
|
|
|
|
|
0.00
|
(7)
|
|
|
2,548,666
|
|
|
|
|
(1) |
|
Represents a double trigger cash severance payment
equal to three times the named executive officers current
base salary and the highest annual cash bonus paid or payable
for the two immediately prior fiscal years. The amount of
Messrs. Dupont and Knights retention awards are
described above under the Executive Officer
Retention Arrangements caption. Since such amounts are in
consideration for post-closing service, such amounts are not
reflected in this table. |
|
(2) |
|
Represents an amount equal to the value of full vesting of
unvested equity awards held by the named executive officer as of
the closing date of the merger, assuming that the merger was
completed on July 31, 2011. Pursuant to the expected terms
of their waiver or retention agreements, as applicable,
Messrs. Carmilani, Dupont and Knight will waive
single trigger equity acceleration upon completion
of the merger but will be eligible for full vesting of unvested
equity awards that are outstanding as of the closing date of the
merger upon a qualifying change in control termination that
occurs prior to December 31, 2013. The dollar value
reflected above assumes (i) acceleration of all unvested
shares that are subject to options based on a per share price of
$55.33 and (ii) all equity awards held by the named
executive officer (x) that settle in Allied World shares
vested, were exercised and sold as of July 31, 2011 and
(y) that settle in cash vested as of July 31, 2011.
The amounts reflected above do not include the value of
double trigger acceleration of equity awards,
because, assuming that both the completion of the merger and a
qualifying change in control termination occurred on
July 31, 2011, full vesting of all equity awards held by
Messrs. Carmilani, Dupont and Knight as of such date would
occur pursuant to the single trigger equity
acceleration provision of the employment agreements. The
valuation also assumes that the tax withholding, if any,
associated with the vesting of the equity awards will be paid in
cash and not through the surrender of Allied World shares in
satisfaction of such tax withholding. The estimated value of
option vesting for Messrs. Carmilani and Dupont is zero
because the average exercise price of options subject to
accelerated vesting exceeds the per share price of $55.33. The
estimated value of option vesting for Mr. Knight is
$49,748, as 4,125 of his outstanding options are exercisable at
a price of $43.27 per share. The amounts reflected above assume
that the performance units would be granted assuming performance
at target levels of achievement. Up to 150% of the performance
units may be granted if maximum performance levels are achieved. |
|
(3) |
|
Represents an amount equal to the value of single
trigger acceleration of equity awards, other than certain
performance units granted in 2009 pursuant to the LTIP and the
2004 Plan, plus the value of double trigger
acceleration of such performance units. Pursuant to the expected
terms of her waiver agreement, Ms. Dillard will waive
single trigger accelerated vesting with respect to
performance units granted in 2009 pursuant to the LTIP and the
2004 Plan, but will retain her right to double
trigger vesting of such performance units upon a
termination by TransAllied without cause prior to settlement of
the award. The dollar value reflected above assumes
(i) acceleration of all unvested shares that are subject to
options based on a per share price of $55.33 and (ii) all
equity awards held by Ms. Dillard (x) that settle in
Allied World shares vested, were exercised and sold as of
July 31, 2011 and (y) that settle in cash vested as of
July 31, 2011. The valuation also assumes that the tax
withholding, if any, associated with the vesting of the equity
awards will be paid in cash and not through the surrender of
Allied World shares in satisfaction of such tax withholding. The
estimated value of option vesting is zero because the average
exercise price of options subject to accelerated vesting exceeds
the per share price of $55.33. The amounts reflected |
94
|
|
|
|
|
above assume that the performance units would be granted
assuming performance at target levels of achievement. Up to 150%
of the performance units may be granted if maximum performance
levels are achieved. |
|
(4) |
|
Represents an amount equal to the value of single
trigger acceleration of equity awards. The dollar value
reflected above assumes (i) acceleration of all unvested
shares that are subject to options based on a per share price of
$55.33 and (ii) all equity awards held by Mr. Sennott
(x) that settle in Allied World shares vested, were
exercised and sold as of July 31, 2011 and (y) that
settle in cash vested as of July 31, 2011. The amounts
reflected above do not include the value of double
trigger acceleration of equity awards, because
Mr. Sennotts employment agreement does not provide
for enhanced double trigger severance benefits. The
valuation also assumes that the tax withholding, if any,
associated with the vesting of the equity awards will be paid in
cash and not through the surrender of Allied World shares in
satisfaction of such tax withholding. The estimated value of
option vesting is zero because the average exercise price of
options subject to accelerated vesting exceeds the per share
price of $55.33. The amounts reflected above assume that the
performance units would be granted assuming performance at
target levels of achievement. Up to 150% of the performance
units may be granted if maximum performance levels are achieved. |
|
(5) |
|
Represents the increase in the value of the SERP benefits for
the named executive officers attributable to single
trigger vesting acceleration of contributions made by
Allied World to the SERP on behalf of each named executive
officer upon the consummation of the merger.
Messrs. Carmilani, Dupont and Sennott, and
Ms. Dillard, are fully vested in their SERP contributions,
and accordingly, no value is represented above. |
|
(6) |
|
Represents a double trigger payment equal to the
value of continued participation in Allied Worlds health
and insurance plans, calculated based on the current monthly
premiums for participation in the plans as of July 31,
2011. Ms. Dillards continued participation in Allied
Worlds health and insurance plans is valued in Swiss
Francs, and the amount reflected above was determined based on a
foreign currency exchange rate of 1.2718 U.S. dollars for 1
Swiss Franc, which reflects the spot conversion rate for
July 31, 2011. |
|
(7) |
|
Mr. Sennotts employment agreement does not provide
for enhanced double trigger severance benefits. If
Mr. Sennotts employment is terminated by Allied World
without cause or by Mr. Sennott with good reason following
the merger, he will be entitled to the benefits he would
otherwise have received in the event of such termination
pursuant to his employment agreement. |
Interests
of Transatlantics Directors and Executive Officers in the
Merger
In considering the recommendation of the board of directors of
Transatlantic to vote to adopt the merger agreement, you should
be aware that Transatlantics directors and executive
officers have financial interests in the merger that may be in
addition to, or different from, the interests of Transatlantic
stockholders generally. The board of directors of Transatlantic
was aware of and considered these potential interests, among
other matters, in evaluating and negotiating the merger
agreement and in recommending to you that you approve the merger
and the other transactions contemplated by the merger.
As detailed below under Board of Directors and
Management Following the Merger, certain of
Transatlantics executive officers and members of the
Transatlantic board of directors will continue to serve as
officers or directors of the combined company upon completion of
the merger. Specifically, Richard S. Press, the current
non-executive chairman of the board of directors of
Transatlantic, will be the non-executive chairman of the board
of directors of the combined company following the merger.
Michael C. Sapnar will be appointed to serve as President and
Chief Executive Officer of Global Reinsurance of the combined
company.
Transatlantic does not expect a significant reduction in
workforce as a result of the merger, subject to the discussion
above regarding the potential difficulty of retaining key
management personnel in the section entitled Risk
Factors Relating to the Merger.
On June 30, 2011, the Compensation Committee (the
Transatlantic Compensation Committee) of the
Transatlantic board of directors approved the form of retention
agreements (the Retention Agreements, and each, a
Retention Agreement) that have been offered to
certain executives of Transatlantic, including Steven
95
S. Skalicky, Paul A. Bonny, and Javier E. Vijil, each a named
executive officer of Transatlantic. Each of the Retention
Agreements has a term beginning on the date of execution and
ending on the earlier of December 31, 2013 or a mutually
agreed upon termination date by the executive and Transatlantic.
The Retention Agreements will remain effective whether or not
the merger closes.
Each of the Retention Agreements generally provides that until
December 31, 2012, the executives base salary level,
target bonus amount, target fair value of equity awards and
other benefits included in the executives total
compensation will not be reduced below the levels in effect
prior to the merger. Each of the Retention Agreements also
provides for a grant of restricted stock unit awards
(RSUs), or in the event that there are not enough
share reserves, phantom stock awards (together with the RSUs,
the Retention Grant), immediately prior to the
merger (or at a date chosen by the Transatlantic board of
directors in its discretion, if the closing of the merger does
not occur), pursuant to Transatlantics 2009 Long Term
Equity Incentive Plan (but only in the case of the RSUs),
consisting of that number of shares of Transatlantic common
stock equal in value to $1,500,000 for each of
Messrs. Skalicky and Vijil and $2,000,000 for
Mr. Bonny. The Retention Grant vests 50% on
September 30, 2012 and 50% on December 31, 2013.
Pursuant to the Retention Agreements, the Retention Grant is
generally subject to pro rata vesting upon a termination by
Transatlantic without Cause, or due to death or
Disability, or by the executive with Good
Reason, in each case prior to December 31, 2013.
Further, pursuant to the Retention Agreements, all of the
outstanding, unvested equity awards held by each of the
executives as of the effective date of the Retention Agreements
is subject to full vesting upon a termination by Transatlantic
without Cause, or by the executive with Good
Reason, in each case prior to December 31, 2013. In
consideration for entering into the Retention Agreements, each
executive shall provide a limited waiver of the executives
right to resign for Good Reason in connection with
the merger as a result of the executives new employment
position immediately following the merger.
The Retention Agreements include restrictive covenants similar
to those included in Transatlantics Executive Severance
Plan.
Treatment
of Equity Awards
Transatlantic directors and executive officers
outstanding stock options to acquire Transatlantic common stock
will be converted pursuant to the merger agreement into options
to acquire Allied World shares. Similarly, Transatlantic
directors and executive officers outstanding
stock-based awards will be converted into Allied World shares or
other compensatory awards denominated in Allied World shares.
The equity holdings of Transatlantic directors and executive
officers will be treated in the same manner as the equity
holdings of all other equity holders provided, however, that
pursuant to the merger agreement, any independent Transatlantic
or Allied World director who ceases to be a member of the
reconstituted TransAllied board prior to the end of his or her
term shall have immediate vesting of all of his or her unvested
Allied World stock-based awards.
Each of Allied World and Transatlantic will use the existing
performance goals to determine performance awards through fiscal
year 2011. Thereafter, following the closing of the merger,
TransAllieds Compensation Committee will make a decision
regarding the performance awards for the 2012 fiscal year and
thereafter.
Golden
Parachute Compensation
As described above, each of Transatlantics named executive
officers has been offered a Retention Agreement providing for
the issuance of certain awards in connection with the merger.
Other than as described above regarding such Retention
Agreements, the merger is not considered a change in control
under any plans or agreements of Transatlantic to which
Transatlantics named executive officers are a party.
The following table sets forth the estimated amounts of
golden parachute compensation (for purposes of
Item 402(t) of
Regulation S-K)
that each named executive officer of Transatlantic could receive
in connection with the merger. These amounts assume that the
merger is completed
on ,
2011 and, where applicable, that the named executive officer is
entitled to the full amount for which he or she is eligible
pursuant to the terms of the applicable Retention Agreement.
Certain of the amounts payable may vary depending on the actual
dates on which the merger is completed and the named executive
officer terminates
96
employment. As a result, the actual amounts, if any, to be
received by a named executive officer may differ in material
respects from the amounts set forth below.
Golden
Parachute Compensation Table
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
|
|
|
(Non-
|
|
|
|
|
|
Pension/
|
|
|
Perquisites/
|
|
|
Tax
|
|
|
|
|
|
|
|
|
|
(Severance)
|
|
|
Severance)
|
|
|
Equity
|
|
|
NQDC
|
|
|
Benefits
|
|
|
Reimbursement
|
|
|
Other
|
|
|
Total
|
|
Name
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
($)(1)
|
|
|
($)
|
|
|
Robert F. Orlich
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Steven S. Skalicky
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,500,000
|
|
|
|
1,500,000
|
|
Paul A. Bonny
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,000,000
|
|
|
|
2,000,000
|
|
Javier E. Vijil
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,500,000
|
|
|
|
1,500,000
|
|
Michael C. Sapnar
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
As noted above, these amounts assume that the named executive
officer is entitled to the full amount for which he is eligible
under the applicable Retention Agreement. These amounts would
also be paid out, on a pro rata basis pursuant to the applicable
Retention Agreement upon termination by Transatlantic without
Cause, or due to death or Disability or
by the executive with Good Reason prior to
December 31, 2013, or upon death or disability of the
executive prior to December 31, 2013. In consideration for
entering into the Retention Agreements, each executive shall
provide a limited waiver of the executives right to resign
for Good Reason in connection with the merger. |
Transatlantic Executive Severance Plan. As
discussed above, the merger is not considered a change in
control under Transatlantics compensation plans or
arrangements and a reduction in force is not anticipated in
connection with the merger, including at the executive level.
Whether or not the merger occurs, Transatlantics
executives are entitled to certain payments in connection with
certain terminations of employment. Under the Transatlantic
Executive Severance Plan (ESP) severance protection
is provided to senior executives who participate in the
Transatlantic Partners or Senior Partners Plan. Upon a
termination by Transatlantic without Cause (as
defined in the ESP) or by the executive for Good
Reason (as defined in the ESP), in addition to accrued
wages and expense reimbursement, eligible employees will be
entitled to receive the following each month during the
Severance Period (30 months for the CEO and 24 months
for the other named executive officers):
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severance in an amount equal to one-twelfth the sum of:
(i) the participants annual base salary in the year
of termination, (ii) any supplemental or quarterly cash
bonus payable to such participant in respect of the year of
termination, and (iii) the average of the
participants annual cash bonus awards earned and paid with
respect to the three most recently completed fiscal years;
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continued vesting of restricted stock units, earned but unvested
performance restricted stock units and options as though there
had been no termination of employment;
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continued participation in Transatlantics health plan at
active employee rates and continued service credit for
eligibility and company contribution levels for purposes of the
retiree health plan;
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continued vesting and accrual of additional non-qualified
pension credits; and
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continued life insurance and retiree health plan coverage at
active employee rates including continued service credit for
eligibility and company contribution levels in such plans.
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Prior to receiving any severance payments, eligible employees
will be required to execute a general release of claims that
also contains the following restrictions that, except as noted,
apply at all times following termination:
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Each participant is generally prohibited from (i) engaging
in, being employed by, rendering services to or acquiring
financial interests in any business that is competitive with
Transatlantic, (ii) interfering with Transatlantics
business relationships with customers, suppliers, or
consultants, or (iii) soliciting or
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hiring certain key employees of Transatlantic. These
restrictions apply for the earlier of one year after termination
or the length of the Severance Period.
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Each participant must not disclose Transatlantics
confidential information.
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Board of
Directors and Management Following the Merger
Immediately following the effective time of the merger, assuming
the receipt of the resignation letters of all current directors
of Allied World and of shareholder approval for the election of
directors as described herein, the board of directors of the
combined company will consist of 11 members including
(i) four independent Transatlantic directors: Stephen P.
Bradley, Ian H. Chippendale, John G. Foos and
John L. McCarthy; (ii) Richard S. Press (the
current non-executive chairman of the Transatlantic board of
directors); (iii) Michael C. Sapnar (the current
Executive Vice President and Chief Operating Officer of
Transatlantic); (iv) four of the following current
independent Allied World directors, who will be identified to
shareholders at or prior to the Allied World Special Shareholder
Meeting: Barbara T. Alexander, James F. Duffy, Bart Friedman,
Scott Hunter, Mark R. Patterson, Patrick de Saint-Aignan and
Samuel J. Weinhoff; and (v) Scott A. Carmilani (the current
President and Chief Executive Officer of Allied World). The 11
members of the board of directors of the combined company will
be divided into three classes of directors, as follows:
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Class II (to hold office commencing upon the completion of
the merger and ending upon TransAllieds Annual Shareholder
Meeting in 2012 or until their successors are duly elected and
qualified or their offices are otherwise vacated): Ian H.
Chippendale, John L. McCarthy and one former independent Allied
World director;
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Class III (to hold office commencing upon the completion of
the merger and ending upon TransAllieds Annual Shareholder
Meeting in 2013 or until their successors are duly elected and
qualified or their offices are otherwise vacated): Stephen P.
Bradley, John G. Foos and two former independent Allied World
directors; and
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Class I (to hold office commencing upon the completion of
the merger and ending upon TransAllieds Annual Shareholder
Meeting in 2014 or until their successors are duly elected and
qualified or their offices are otherwise vacated): Scott A.
Carmilani, Richard S. Press, Michael C. Sapnar, and one former
independent Allied World director.
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Immediately following the effective time of the merger,
Mr. Carmilani will serve as the President and Chief
Executive Officer of the combined company. Mr. Press will
be elected as non-executive chairman of the TransAllied board.
Effective the first anniversary of the closing date of the
merger, Mr. Press will cease to serve as non-executive
chairman and shall remain on the TransAllied board as a director
until the second anniversary of the closing date of the merger,
at which time he has agreed to retire from the TransAllied board
(subject to his earlier resignation or retirement).
Mr. Sapnar will be appointed to serve as President and
Chief Executive Officer of Global Reinsurance of the combined
company.
In connection with the completion of the merger, the current
directors of Allied World resign effective as of the effective
time of the merger and the director nominees presented for
election at the Allied World Special Shareholder Meeting, if
elected by the shareholders, will serve on the board of
directors of Allied World following the effective time of the
merger. The foregoing director elections and officer
appointments are conditioned upon completion of the merger. In
the event that the merger is not completed, the foregoing
director elections and officer appointments will not take effect.
Pursuant to the terms of the merger agreement and conditioned
upon completion of the merger, (i) in connection with
TransAllieds Annual Shareholder Meeting in 2012, the
TransAllied board shall propose to increase the size of the
TransAllied board by one member and shall nominate for election
at such meeting, a new director to fill the resulting vacancy,
who shall become the non-executive chairman of the TransAllied
board effective as of the first anniversary of the closing of
the merger; (ii) such person nominated for election at such
meeting shall (A) have been approved by the TransAllied
board, (B) have been recommended by the nominating and
corporate governance committee of the TransAllied board,
(C) have substantial insurance industry expertise, and
(D) not have been a member of the Transatlantic board of
directors or the Allied World
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board of directors immediately prior to the date of the merger
agreement; and (iii) TransAllied shall duly call, give
notice of, convene and hold its Annual Shareholder Meeting in
2012 no later than June 30, 2012.
Upon completion of the merger, the TransAllied board will have
six board committees: the Audit Committee, the Compensation
Committee, the Enterprise Risk Committee, the Executive
Committee, the Investment Committee and the
Nominating & Corporate Governance Committee.
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For a period of one year from the closing date of the merger,
the Executive Committee is to be comprised of
Mr. Carmilani, one former independent Allied World director
and two former independent Transatlantic directors, and to be
chaired by Mr. Carmilani;
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For a period of one year from the closing date of the merger,
each of the Investment Committee and Nominating &
Corporate Governance Committee are to be comprised of two former
independent Allied World directors and two former independent
Transatlantic directors, and to be chaired by one of the former
independent Allied World directors; and
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For a period of one year from the closing date of the merger,
each of the Audit Committee, Compensation Committee and
Enterprise Risk Committee are to be comprised of two former
independent Allied World directors and two former independent
Transatlantic directors, and chaired by one of the former
independent Transatlantic directors.
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Upon completion of the merger, the combined companys
corporate headquarters and related corporate functions will be
located in Zug, Switzerland.
The appointments of Messrs. Carmilani, Press and Sapnar,
the provisions regarding the selection of a replacement
non-executive chairman, and the board committee composition,
will be reflected in the TransAllied organizational regulations,
which will only become effective at the completion of the
merger, and, for a period of one year following the closing
date, any resolution to revise, modify or delete such provisions
will require a majority of at least eight of the votes cast.
Executive
Officers Following the Merger
The following sets forth the name, age and position of the
executive officers of TransAllied upon the completion of the
merger.
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Name
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Age
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Position at TransAllied
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Scott A. Carmilani
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Director, President and Chief Executive Officer
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Michael C. Sapnar
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Director, President and Chief Executive Officer, Global
Reinsurance
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Kenneth Apfel
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Executive Vice President, Chief Actuary and Chief Actuary
Reinsurance
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David A. Bell
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Executive Vice President, Chief Operating Officer
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Wesley D. Dupont
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Executive Vice President, General Counsel and Corporate Secretary
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John J. Gauthier
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Executive Vice President, Chief Investment Officer
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Steven S. Skalicky
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Executive Vice President and Chief Financial Officer
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Thomas V. Cholnoky
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Senior Vice President, Investor Relations/Rating Agencies
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Julian H. Spence
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Senior Vice President, Chief Risk Officer
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Scott A. Carmilani was elected Allied Worlds President and
Chief Executive Officer in January 2004, became a director in
September 2003 and was appointed Chairman of the Board in
January 2008. Mr. Carmilani was, prior to joining Allied
World as Executive Vice President in February 2002, the
President of the Mergers & Acquisition Insurance
Division of subsidiaries of American International Group,
Inc. 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
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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 Allied World, he
held a succession of underwriting and management positions with
subsidiaries of AIG since 1987.
Michael C. Sapnar was appointed Transatlantics Executive
Vice President and Chief Operating Officer on May 19, 2011.
On May 20, 2011, at a meeting of the Transatlantic board of
directors following the annual meeting of stockholders, the
board of directors elected Mr. Sapnar to the Transatlantic
board of directors. From May 2006 until May 2011,
Mr. Sapnar served as Executive Vice President and Chief
Underwriting Officer, Domestic Operations of Transatlantic, TRC
and Putnam by election of the Transatlantic board of directors
in May 2006. From December 2005 to May 2006, Mr. Sapnar was
Senior Vice President and Chief Underwriting Officer, Domestic
Operations of Transatlantic. From December 2004 to the present,
Mr. Sapnar has served as a Director of TRC and Putnam. From
March 2002 to May 2006, Mr. Sapnar was Senior Vice
President and Chief Underwriting Officer, Domestic Operations of
TRC and Putnam.
Kenneth Apfel was named Executive Vice President and Chief
Actuary of Transatlantic, TRC and Putnam by election of the
Board of Directors in September 2008. From May 2005 to the
present, Mr. Apfel served as a Director of TRC and Putnam,
but not of Transatlantic. From August 2004 to September 2008,
Mr. Apfel was Senior Vice President and Chief Actuary of
Transatlantic, TRC and Putnam. From September 1981 to
August 2004, Mr. Apfel held various positions at AIG,
including having served as a Senior Vice President of AIG
Reinsurance Advisors.
David A. Bell has been Allied Worlds Chief Operating
Officer since December 1, 2010 and is responsible for
Allied Worlds global
day-to-day
operating activities and directing the implementation of its
strategic processes, procedures, controls and projects. He had
served as the Chief Operating Officer of Allied World Assurance
Company, Ltd, a subsidiary of Allied World, from September 2009
through November 2010. He had previously served as Chief
Administrative and Operating Officer of Allied World Assurance
Company, Ltd from September 2008 to September 2009. Prior to
that, Mr. Bell served as the Senior Vice President,
Professional Liability, from September 2004 to September 2008.
Mr. Bell joined Allied World in February 2002 as a Vice
President and started Allied Worlds professional lines
business. Prior to joining Allied World, Mr. Bell held
various positions at affiliates of The Chubb Corporation in
underwriting and legislative affairs from 1996 to January 2002.
Wesley D. Dupont has been Allied Worlds Executive Vice
President, General Counsel and Corporate Secretary since
September 2009. From December 2005 to September 2009, he served
as Senior Vice President, General Counsel and Secretary. In
November 2003, Mr. Dupont began working for American
International Company Limited (now known as Chartis Bermuda
Limited), a subsidiary of AIG, and began providing legal
services to Allied World pursuant to a former administrative
services contract with American International Company Limited.
Through that contract, Mr. Dupont served as Allied
Worlds 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
Allied World. 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.
John J. Gauthier, CFA, has been the Executive Vice President and
Chief Investment Officer of AWAC Services Company (formerly
known as Newmarket Administrative Services, Inc.), a subsidiary
of Allied World, since March 2010 and oversees the management of
Allied Worlds investment portfolio. From October 2008
through February 2010, he served as Senior Vice President and
Chief Investment Officer of Newmarket Administrative Services,
Inc. Previous to joining Allied World, Mr. Gauthier was
Global Head of Insurance Fixed Income Portfolio Management at
Goldman Sachs Asset Management from February 2005 to September
2008. Prior to that position, from 1997 to January 2005 he was
Managing Director and Portfolio Manager at
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Conning Asset Management where he oversaw investment strategy
for all property and casualty insurance company clients.
Mr. Gauthier also served as Vice President at General
Reinsurance/New England Asset Management, as well as a Portfolio
Manager at General Reinsurance.
Steven S. Skalicky serves as the Chief Financial Officer and
Executive Vice President of Transatlantic Reinsurance Company
Inc. and Transatlantic. Mr. Skalicky has been an Officer of
Transatlantic, since 1995 when he became Senior Vice President
and Controller. He serves as Executive Vice President and Chief
Financial Officer of Putnam. He serves as Chief Accounting
Officer of Transatlantic Holdings Inc. He serves as a Director
of Transatlantic Reinsurance Company Inc., Putnam Reinsurance
Co., and TransRe Zurich. From January 1986 to February 1995,
Mr. Skalicky held various positions at AIG, including
having served as Assistant Controller.
Thomas V. Cholnoky has been Transatlantics Senior Vice
President of Investor Relations since August 2009. Prior to
joining Transatlantic, from April 2009 to August 2009,
Mr. Cholnoky was a principal at Sinjon Advisors consulting
firm. From July 1986 to November 2008, Mr. Cholnoky was a
Managing Director at Goldman, Sachs & Co. in the
Global Investment Research Department.
Julian H. Spence was named Chief Risk Officer of Transatlantic
in 2008. From 2001 until 2008, Mr. Spence was Senior Vice
President in Transatlantics London office with
responsibility for the Specialty Lines Division which
encompassed the Financial Risks, Professional Liability and
Marine underwriting departments. Prior to joining Transatlantic,
from 1988 to 2001, Mr. Spence was a Lloyds underwriter,
first with Merrett Underwriting and then with Janson
Green/Limit, specializing in political risks and professional
liability.
Regulatory
Clearances Required for the Merger
Under the HSR Act, Allied World and Transatlantic must file
notifications with the FTC and the Antitrust Division and
observe a mandatory pre-merger waiting period before completing
the merger. The parties filed the required notifications with
the FTC and Antitrust Division on July 1, 2011 and
early termination of the waiting period was granted effective
July 11, 2011.
Premerger notifications must also be filed by Allied World and
Transatlantic with the appropriate competition regulators in the
United Kingdom, Germany, Italy and Turkey pursuant to their
respective laws which are designed or intended to regulate
actions having the purpose or effect of monopolization or
restraint of trade or lessening of competition through merger or
acquisition. They must also observe mandatory waiting periods
and/or
obtain the necessary approvals, clearances or consents, in
certain of these jurisdictions, before completing the merger.
The Italian notification was made on July 1, 2011 and the
German notification was made on July 26, 2011.
Notifications in the United Kingdom and Turkey will be made as
promptly as practicable.
In addition to those filings required by the HSR Act and other
antitrust laws, the parties are also required to make filings
with and/or
obtain approvals from certain U.S. and
non-U.S. insurance
regulatory authorities (the Insurance Authorities).
As a condition to the consummation of the merger, the parties
are required to make filings with and obtain the approvals of
the Insurance Authorities in New York, Bermuda and Switzerland.
The U.S. insurance company subsidiaries of Transatlantic
are domiciled in the State of New York. As such, the merger
requires a filing with, and approval of, the New York
Superintendent of Insurance (the New York
Superintendent). Generally, a person seeking to acquire
voting securities, such as common stock, in an amount that would
result in such person controlling, directly or indirectly, a New
York domestic insurer must, together with any person ultimately
controlling such person, file an Application for Approval of
Acquisition of Control of a domestic insurer (a
Form A), with the New York Insurance Department
and send a copy of such Form A to the domestic insurer.
Allied World will make a Form A filing with the New York
Insurance Department.
Although a public hearing is not mandatorily required for the
approval of a Form A in the State of New York, the New
York Superintendent does have the discretion to hold such a
public hearing. The New
101
York Insurance Code requires the New York Superintendent to
approve a Form A unless it determines that such application
should be disapproved on one or more prescribed regulatory
grounds. There is no statutorily prescribed period in which the
New York Superintendent must render a decision with respect to a
Form A, and the New York Insurance Department may not
consider the Form A or begin its review until it has deemed
the Form A filing complete. The New York Insurance
Department has discretion to request that Allied World furnish
additional information before it deems the Form A filing
complete.
As Transatlantic is merging into a newly-formed wholly owned
subsidiary of Allied World, there will be no change of control
of Allied Worlds insurance company subsidiaries. Because
no change in control of such insurance company subsidiaries will
occur, no Form A filings should be required to be filed
with the Insurance Authorities of the U.S. domiciliary
states of Allied Worlds insurance company subsidiaries. In
that regard, Allied World has made informational filings in each
such U.S. domiciliary state, expressing its position that
no Form A filing is required in such state. However, it is
possible that the Insurance Authorities of such
U.S. domiciliary states may disagree with the position
taken by Allied World and may require that a Form A be
filed by Allied World with respect to the merger in such
jurisdictions.
Allied World Assurance Company, Ltd, a subsidiary of Allied
World, is a Bermuda incorporated Class 4 Insurer and prior
notice of the merger must be provided to the Bermuda Monetary
Authority (BMA), which will have 14 days to
object or give a no objection to the merger, or to
request additional information. Trans Re Zurich Reinsurance
Company, Ltd., a subsidiary of Transatlantic, is a Swiss
regulated reinsurer and prior notification of its indirect
change of control as a result of the merger is required to be
provided to the Swiss Financial Market Supervisory Authority
(FINMA). FINMA may prohibit the merger, impose
conditions on the merger or provide a statement of non-objection
in regard to the merger. Prior to the closing of the merger, the
parties will make the required filings with, and seek to obtain
the necessary approval from, the BMA and FINMA.
In addition to Switzerland and Bermuda, Transatlantics and
Allied Worlds subsidiaries conduct operations in a number
of other
non-U.S. jurisdictions
where insurance regulatory filings or approvals are required in
connection with the consummation of the merger. In that regard,
Transatlantic and Allied World have made or expect to make
formal filings with, or have sought or expect to seek approvals
from, the Insurance Authorities in certain other
non-U.S. jurisdictions,
including, without limitation, Argentina, Australia, Brazil,
Germany, Gibraltar and Hong Kong. Moreover it is possible that
Insurance Authorities in other
non-U.S. jurisdictions
may require additional filings or information or require the
parties to obtain their approval of the merger. No insurance
regulatory authority has indicated to Allied World or
Transatlantic that a hearing will be required in connection with
the aforementioned regulatory filings and approvals; however,
pursuant to their regulatory authority, one or more Insurance
Authorities may hold a hearing as part of their consideration of
the filings.
Allied World and Transatlantic cannot assure you that the
Antitrust Division, FTC or other government agencies, including
state attorneys general or private parties, will not initiate
actions to challenge the merger before or after it is completed.
Any such challenge to the merger could result in a court order
enjoining the merger or in restrictions or conditions that would
have a material adverse effect on the combined company if the
merger is completed. Such restrictions and conditions could
include requiring the divestiture or spin-off of assets or
businesses. Under the terms of the merger agreement, each of
Allied World and Transatlantic is required to commit to any
divestitures or similar arrangements with respect to its assets
or conduct of business arrangements if that divestiture or
arrangement is a condition to obtain any clearance or approval
from any governmental entity in order to complete the merger. No
additional shareholder approval is expected to be required or
sought for any decision by Allied World and Transatlantic after
the Allied World Special Shareholder Meeting and the
Transatlantic Special Shareholder Meeting to agree to any terms
and conditions necessary to resolve any regulatory objections to
the merger.
Exchange
of Shares in the Merger
Prior to the effective time of the merger, Allied World and
Transatlantic will appoint an exchange agent to handle the
exchange of shares of Transatlantic common stock for Allied
World shares. At the effective time
102
of the merger, shares of Transatlantic common stock will be
converted into the right to receive 0.88 Allied World shares,
together with cash in lieu of fractional Allied World shares
(the merger consideration) without the need for any
action by the holders of Transatlantic common stock.
As soon as reasonably practicable after the effective time of
the merger, Allied World will cause the exchange agent to mail
each holder of Transatlantic certificates or book-entry shares a
letter of transmittal specifying, among other things, that
delivery will be effected, and risk of loss and title in respect
of the certificates or book-entry shares will pass, only upon
proper delivery of such certificates to the exchange agent, or
in the case of book-entry shares, upon adherence to the
procedures set forth in the letter of transmittal. The letter of
transmittal will also include instructions explaining the
procedure for surrendering Transatlantic stock certificates in
exchange for the applicable merger consideration and any
dividends or other distributions.
After the effective time of the merger, shares of Transatlantic
common stock will no longer be outstanding, will be
automatically canceled and will cease to exist and each
certificate and book-entry share that previously represented
shares of Transatlantic common stock will represent only the
right to receive the merger consideration as described above.
With respect to such Allied World shares deliverable upon the
surrender of Transatlantic certificates and book-entry shares,
until holders of such Transatlantic certificates and book-entry
shares have surrendered such certificates and book-entry shares
to the exchange agent for exchange, those holders will not
receive dividends or distributions with respect to such Allied
World shares with a record date after the effective time of the
merger.
Transatlantic stockholders will not receive any fractional
Allied World shares pursuant to the merger. Instead, each
Transatlantic stockholder who otherwise would have been entitled
to receive a fraction of an Allied World share will receive, in
lieu thereof and, upon surrender of his or her shares of
Transatlantic common stock, an amount in cash for such fraction
calculated by multiplying the fractional share interest to which
such holder would otherwise be entitled by the last reported
sale price of the Allied World shares listed on the NYSE (as
reported in The Wall Street Journal (Northeast edition) or if
not reported there, in another authoritative source mutually
selected by Allied World and Transatlantic) at the effective
time of the merger, on the first trading day immediately
following the date on which the effective time of the merger
occurs.
Allied World shareholders need not take any action with respect
to their stock certificates.
Treatment
of Transatlantic Stock Options and Other Long-Term Incentive
Awards
Prior to the effective time of the merger, the board of
directors of Allied World (or, if appropriate, the committee
thereof administering the Allied World stock plans) will adopt
resolutions or take other actions as may be required to effect
the below actions with respect to the Transatlantic stock
options and stock-based awards.
Stock Options. Upon completion of the merger,
each outstanding option to purchase shares of Transatlantic
common stock will be converted pursuant to the merger agreement
into a stock option to purchase shares of Allied World shares on
the same terms and conditions as were in effect immediately
prior to the completion of the merger based on the exchange
ratio.
Stock-Based Awards. Upon completion of the
merger, each outstanding stock-based award of Transatlantic will
be converted into Allied World shares or other compensatory
awards denominated in Allied World shares subject to a risk of
forfeiture to, or the right to repurchase by, Allied World, with
the same terms and conditions as were applicable under such
Transatlantic stock-based awards, and each holder of
Transatlantic stock-based awards shall be entitled to receive a
number of converted Transatlantic stock-based awards equal to
the product of the number of Transatlantic stock-based awards
held by such holder and the exchange ratio.
Each of Allied World and Transatlantic will use the existing
performance goals to determine performance awards through the
fiscal year 2011. Thereafter, following the closing of the
merger, TransAllieds Compensation Committee will make a
decision regarding the performance awards for the fiscal year
2012 and thereafter.
103
Dividend
Policy
Under Swiss law, dividends may be paid out only if Allied World
has sufficient distributable profits from previous fiscal years
or if Allied World has freely distributable reserves, each as
will be presented on Allied Worlds audited statutory
financial statements prepared in accordance with Swiss law.
Payments out of the share and participation capital (in other
words, the aggregate par value of Allied Worlds share and
participation capital) in the form of dividends are not allowed;
however, payments out of share and participation capital may be
made by way of a capital reduction to achieve a similar result
as the payment of dividends. The affirmative vote of
shareholders holding a majority of the votes cast at a
shareholder meeting where two or more persons are present at the
meeting representing in person or by proxy more than 50% of
Allied Worlds total outstanding registered shares
throughout the meeting, must approve reserve reclassifications
and distributions of dividends. Allied Worlds board of
directors may propose to shareholders that a dividend be paid
but cannot itself authorize the dividend. In addition, Allied
Worlds shareholders may propose dividends without any
dividend proposal by the board of directors. Under Swiss law,
upon satisfaction of all legal requirements (including
shareholder approval of a par value reduction), Allied World is
required to submit an application to the Swiss Commercial
Register to register each applicable par value reduction.
Without effective registration of the applicable par value
reduction with the Swiss Commercial Register, Allied World will
not be able to proceed with the payment of any installment of
any dividend. Allied World cannot assure you that the Swiss
Commercial Register will approve the registration of any
applicable par value reduction.
Under Swiss law, if the Allied World general capital reserves
amount to less than 20% of the share and participation capital
recorded in the Swiss Commercial Register (i.e., 20% of the
aggregate par value of Allied Worlds capital), then at
least 5% of Allied Worlds annual profit must be retained
as general reserves. Swiss law permits Allied World to accrue
additional general reserves. In addition, Allied World is
required to create a special reserve on its audited statutory
financial statements in the amount of the purchase price of
voting shares and Allied World non-voting shares Allied World or
any of its subsidiaries repurchases, which amount may not be
used for dividends.
Swiss companies generally must maintain separate audited
statutory financial statements for the purpose of, among other
things, determining the amounts available for the return of
capital to shareholders, including by way of a distribution of
dividends. Amounts available for the return of capital as
indicated on Allied Worlds audited statutory financial
statements may be materially different from amounts reflected in
Allied Worlds consolidated GAAP financial statements.
Allied Worlds auditor must confirm that a dividend
proposal made to shareholders complies with Swiss law and the
Allied World Articles.
Allied World is required under Swiss law to declare any
dividends and other capital distributions in Swiss francs.
Allied World makes dividend payments to holders of its shares in
U.S. dollars. Continental Stock Transfer &
Trust Company, Allied Worlds transfer agent, will be
responsible for paying the U.S. dollars to registered
holders of Allied World shares and Allied World non-voting
shares, less amounts subject to withholding for taxes. As a
result, shareholders may be exposed to fluctuations in the
U.S. dollar Swiss franc exchange rate between
the date used for purposes of calculating the Swiss franc amount
of any proposed dividend or par value reduction and the relevant
payment date.
Listing
of Allied World Shares
It is a condition to the completion of the merger that the
shares of Allied World shares to be issued to Transatlantic
stockholders pursuant to the merger be authorized for listing on
the NYSE at the effective time of the merger.
De-Listing
and Deregistration of Transatlantic Common Stock
Upon completion of the merger, shares of Transatlantic common
stock currently listed on the NYSE will cease to be listed on
the NYSE and will subsequently be deregistered under the
Exchange Act.
104
No
Appraisal Rights
Holders of Transatlantic common stock who dissent to the merger
will not have rights to an appraisal of the fair value of their
shares. Under the General Corporation Law of the State of
Delaware (the DGCL), appraisal rights are not
available for the shares of any class or series if the shares of
the class or series are listed on a national securities exchange
or held of record by more than 2,000 holders on the record date,
unless the stockholders receive in exchange for their shares
anything other than shares of stock of the surviving or
resulting corporation or of any other corporation that is
publicly listed or held by more than 2,000 holders of record,
cash in lieu of fractional shares or fractional depositary
receipts or any combination of the foregoing.
Transatlantics common stock is listed on the NYSE, and
Transatlantic stockholders will receive Allied World shares,
which are listed on the NYSE, and cash in lieu of fractional
shares. Holders of Allied World shares have no appraisal rights
under Swiss law because the merger does not qualify as a
statutory merger pursuant to the provisions of the Federal Act
on Mergers, Demergers, Transformations and the Transfer of
Assets (the Merger Act).
Litigation
Related to the Merger
In connection with the merger, five putative stockholder class
action lawsuits have been filed against Transatlantic, Allied
World, and the members of the Transatlantic board of directors
challenging the merger: Ivers v. Transatlantic Holdings,
Inc., et al. (filed June 17, 2011 in the Court of
Chancery of the State of Delaware), Clark v.
Transatlantic Holdings, Inc., et al. (filed June 17,
2011 in the Supreme Court of the State of New York, County of
New York and amended on June 22, 2011), Sutton v.
Transatlantic Holdings, Inc., et al. (filed June 17,
2011 in the Supreme Court of the State of New York, County of
New York), Jaroslawicz v. Transatlantic Holdings, Inc.,
et al. (filed June 21, 2011 in the Supreme Court of the
State of New York, County of New York) and Kramer v.
Transatlantic Holdings, Inc., et al. (filed June 30,
2011 in the Court of Chancery of the State of Delaware)
(collectively, the Lawsuits). Each of the Lawsuits
has been filed against Transatlantic, the members of the
Transatlantic board of directors, and Allied World. In addition,
other than the Jaroslawicz action, each of the Lawsuits
names as a defendant GO Sub, LLC. Further, the Sutton
action also names Thomas R. Tizzio, a former director of
Transatlantic, as a defendant. Plaintiffs in each Lawsuit assert
that the members of the Transatlantic board of directors
breached their fiduciary duties and that Allied World
and/or its
subsidiaries aided and abetted the alleged breaches of fiduciary
duties. In addition, in the Clark action, plaintiffs
allege that Transatlantic aided and abetted its directors
alleged breaches of fiduciary duty. The Lawsuits seek, among
other relief, to enjoin the merger.
On
June 29-30,
2011, the defendants moved to dismiss or stay the three actions
pending in New York the Clark, Sutton,
and Jaroslawicz actions on the grounds that
the Ivers and Kramer actions are parallel
proceedings pending in the Delaware Court of Chancery seeking
the same relief as the three New York actions. On July 25,
2011, the plaintiffs in the three New York actions moved to
consolidate those actions into a single action. The court has
not ruled on either of these motions.
On July 21, 2011, Vice Chancellor Parsons of the Delaware
Court of Chancery of the State of Delaware entered an order
consolidating the two Delaware actions and requiring the
Delaware plaintiffs to file a consolidated amended complaint.
The Delaware plaintiffs filed the Verified Consolidated Amended
Class Action Complaint, a Motion for Preliminary Injunction
and a Motion for Expedited Proceedings on August 1, 2011.
On August 8, 2011 the defendants moved to dismiss the
Verified Consolidated Amended Class Action Complaint and to
oppose the Delaware plaintiffs Motion for Expedited
Proceedings. The motions are currently pending before the court.
Transatlantic, Allied World and their respective directors
believe these lawsuits are without merit and intend to defend
them vigorously.
On July 28, 2011, Transatlantic filed a lawsuit in the
United States District Court for the District of Delaware,
styled Transatlantic Holdings, Inc. v. Validus Holdings
Ltd., Case
No. 1:11-cv-00661
(U.S. District Court for the District of Delaware), against
Validus alleging that Validus violated Sections 14(a) and
(e) of the
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Securities Exchange Act of 1934 and Section 11 of the
Securities Act of 1933 by making materially false
and/or
misleading statements in its proxy and exchange offer materials
filed with the SEC. The lawsuit seeks, among other relief an
order: (i) compelling Validus to correct the material false
and/or
misleading statements it has made in connection with both its
proxy and exchange offer materials; and (ii) prohibiting
Validus from acquiring or attempting to acquire shares of
Transatlantic until its misstatements have been corrected.
The
Combined Companys Share Repurchase Program
Post-Merger
In May 2010, the Allied World board of directors authorized
Allied World to repurchase up to $500 million of its shares
through a share repurchase program. Prior to Allied Worlds
redomestication to Switzerland, Allied World Assurance Company
Holdings, Ltd, as Allied Worlds then sole shareholder,
approved the repurchase of Allied World shares in an amount not
to exceed $160 million, which represented a portion of the
remaining capacity available under the original May
2010 share repurchase authorization. At Allied Worlds
Annual Shareholder Meeting in 2011, Allied World shareholders
approved the $122.5 million of remaining capacity available
under such authorization. As of June 30, 2011, Allied World
had an aggregate of $200.8 million of capacity available
under its share repurchase program.
Following the completion of the merger, the combined company
intends to reevaluate its share repurchase program as part of
its year-end review and in preparation for its Annual
Shareholder Meeting in 2012.
106
THE
MERGER AGREEMENT
The following section summarizes material provisions of the
merger agreement, which is included in this joint proxy
statement/prospectus as Annex A and is incorporated herein
by reference in its entirety. The rights and obligations of
Allied World and Transatlantic are governed by the express terms
and conditions of the merger agreement and not by this summary
or any other information contained in this joint proxy
statement/prospectus.
Allied World shareholders and Transatlantic stockholders are
urged to read the merger agreement carefully and in its entirety
as well as this joint proxy statement/prospectus before making
any decisions regarding the merger, including with respect to
the approval of the share capital increase proposals, the NYSE
share issuance proposal, the name change proposal, the election
of directors proposal and the adoption of the merger agreement
proposal, as applicable.
The merger agreement is included in this joint proxy
statement/prospectus only to provide public disclosure regarding
its terms and conditions as required by U.S. federal securities
laws, and is not intended to provide any factual information
about Allied World or Transatlantic. The merger agreement
contains representations and warranties by each of the parties
to the merger agreement. These representations and warranties:
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were made only for purposes of the merger agreement and as of
specific dates and may be subject to more recent developments;
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may not be intended as statements of fact, but rather as a way
of allocating the risk between the parties in the event the
statements therein prove to be inaccurate;
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have been qualified by certain disclosures that were made
between the parties in connection with the negotiation of the
merger agreement, which disclosures are not reflected in the
merger agreement itself; and
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may apply standards of materiality in a way that is different
from what may be viewed as material by you or other investors.
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Accordingly, the representations and warranties and other
provisions of the merger agreement should not be read alone, but
instead should be read together with the information provided
elsewhere in this joint proxy statement/prospectus and in the
documents incorporated by reference into this joint
proxy statement/prospectus.
See Where You Can Find More Information beginning on
page 184.
This summary is qualified in its entirety by reference to the
merger agreement.
Terms of
the Merger; Merger Consideration
The merger agreement provides that, on the terms and subject to
the conditions set forth in the merger agreement and in
accordance with the DGCL, at the effective time of the merger,
Merger Sub, a Delaware limited liability company and
wholly-owned subsidiary of Allied World, will merge with and
into Transatlantic. Transatlantic will be the surviving
corporation in the merger and will become a wholly-owned
subsidiary of Allied World. At the effective time of the merger,
each outstanding share of Transatlantic common stock (other than
shares owned by Transatlantic, Allied World or Merger Sub, which
will be canceled and cease to exist) will be converted into the
right to receive 0.88 (the ratio of such number to one, referred
to herein as the exchange ratio) Allied World shares.
Allied World will not issue fractional Allied World shares
pursuant to the merger agreement. Instead, each Transatlantic
stockholder that otherwise would have been entitled to receive a
fraction of an Allied World share will receive, in lieu thereof
and, upon surrender of his or her shares of Transatlantic common
stock, an amount in cash for such fraction calculated by
multiplying the fractional share interest to which such holder
would otherwise be entitled by the last reported sale price of
the Allied World shares listed on the NYSE (as reported in The
Wall Street Journal (Northeast edition) or if not reported
there, in another authoritative source mutually selected by
Allied World and Transatlantic) at the effective time of the
merger, on the first trading day immediately following the date
on which the merger is effective.
The merger consideration will be adjusted appropriately and
proportionately to fully reflect the effect of any stock
dividend, subdivision, reorganization, reclassification,
recapitalization, stock split, reverse stock split,
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combination, exchange of shares or other similar event with
respect to Allied World shares or Transatlantic common stock
prior to the effective time of the merger.
Completion
of the Merger
Unless the parties agree otherwise, the closing of the merger
will take place no later than the second business day after all
conditions to the completion of the merger have been satisfied
or waived. The merger will be effective when the parties duly
file (i) the certificate of merger with the Secretary of
State of the State of Delaware and (ii) the TransAllied
Articles with the appropriate Swiss governmental entity. The
TransAllied Articles will be filed immediately prior to the
filing of the certificate of merger, at which time the merger
will become effective.
Allied World and Transatlantic currently expect the closing of
the merger to occur in the fourth quarter of 2011. However, as
the merger is subject to various regulatory clearances and the
satisfaction or waiver of other conditions described in the
merger agreement, it is possible that factors outside the
control of Allied World and Transatlantic could result in the
merger being completed at an earlier time, a later time or not
at all.
Exchange
of Shares in the Merger
Prior to the effective time of the merger, Allied World and
Transatlantic will appoint an exchange agent to handle the
exchange of shares of Transatlantic common stock for Allied
World shares. At the effective time of the merger, shares of
Transatlantic common stock will be converted into the right to
receive 0.88 Allied World shares, together with cash in lieu of
fractional Allied World shares, without the need for any action
by the holders of Transatlantic common stock.
As soon as reasonably practicable after the effective time of
the merger, Allied World will cause the exchange agent to mail
each holder of certificates or book-entry shares a letter of
transmittal specifying, among other things, that delivery will
be effected, and risk of loss and title in respect of the
certificates or book-entry shares will pass, only upon proper
delivery of such certificates to the exchange agent, or in the
case of book-entry shares, upon adherence to the procedures set
forth in the letter of transmittal. The letter will also include
instructions explaining the procedure for surrendering
Transatlantic certificates and book-entry shares in exchange for
the applicable merger consideration and any dividends or other
distributions. Upon proper surrender of a certificate or
book-entry share to the exchange agent, together with the letter
of transmittal, the holder of such certificate or book-entry
share will be entitled to receive in exchange therefor Allied
World shares representing that number of whole Allied World
shares that such holder has the right to receive and a check
representing cash in lieu of fractional shares.
After the effective time of the merger, shares of Transatlantic
common stock will no longer be outstanding, will be
automatically canceled and will cease to exist, and each
certificate and book-entry share that previously represented
shares of Transatlantic common stock will represent only the
right to receive the merger consideration as described above,
any cash in lieu of fractional Allied World shares and any
dividends or other distributions to which the holders of the
certificates become entitled upon surrender of such certificates
and book-entry shares. With respect to such Allied World shares
deliverable upon the surrender of Transatlantic stock
certificates, until holders of such Transatlantic certificates
and book-entry shares have surrendered such certificates and
book-entry shares to the exchange agent for exchange, those
holders will not receive dividends or distributions with respect
to such Allied World shares with a record date after the
effective time of the merger.
Representations
and Warranties
The merger agreement contains reciprocal representations and
warranties. Each of Allied World and Transatlantic has made
representations and warranties regarding, among other things:
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organization and corporate power;
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ownership of subsidiaries;
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capital structure;
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authority with respect to the execution and delivery of the
merger agreement, and the due and valid execution and delivery
and enforceability of the merger agreement;
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required regulatory filings and consents and approvals of
governmental entities;
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absence of conflicts with, or violations of, organizational
documents, other contracts and applicable laws;
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SEC documents and financial statements;
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accuracy of information supplied, or to be supplied, for use in
this joint proxy statement/prospectus;
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absence of certain changes and events from December 31,
2010 to the date of execution of the merger agreement;
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absence of undisclosed material liabilities;
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compliance with applicable laws and permits;
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absence of certain litigation;
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title to properties and the absence of liens;
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opinions of financial advisors;
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tax matters;
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benefits matters and ERISA compliance;
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collective bargaining agreements and other labor matters;
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environmental matters;
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intellectual property;
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material contracts;
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brokers and finders fees payable in connection with the
merger;
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inapplicability of takeover statutes;
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absence of transactions, contracts or arrangements with
affiliates requiring disclosure under the securities laws;
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licensing and authorization of insurance subsidiaries;
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statutory statements and examination reports of any insurance
regulatory authorities;
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absence of certain agreements with regulators;
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reinsurance and retrocession treaties or agreements;
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rating agency actions;
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insurance policy reserves;
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risk-based capital reports;
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insurance issued by its respective subsidiaries; and
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absence of performance of duties of insurance producer or
reinsurance intermediary.
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The merger agreement also contains certain representations and
warranties of Allied World with respect to (i) its
compliance with applicable laws in its redomestication from
Bermuda to Switzerland in November 2010 and (ii) its
wholly-owned subsidiary, Merger Sub, including, without
limitation, corporate organization,
109
lack of prior business activities, capitalization, absence of
material assets or liabilities and authority with respect to the
execution and delivery of the merger agreement.
Many of the representations and warranties in the merger
agreement are qualified by a materiality or
material adverse effect standard (that is, they will
not be deemed to be untrue or incorrect unless their failure to
be true or correct, individually or in the aggregate, would, as
the case may be, be material or have a material adverse effect).
For purposes of the merger agreement, a material adverse
effect means, with respect to a party, any change, state
of facts, circumstance, event or effect that, individually or in
the aggregate, is materially adverse to either (i) the
ability of such party to perform its obligations under the
merger agreement, or (ii) the financial condition,
properties, assets, liabilities, obligations, business or
results of operations of such party and its subsidiaries, taken
as a whole, except that clause (ii) of the definition of
material adverse effect excludes any effect that
results from or arises in connection with:
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entering into or complying with the merger agreement or the
public announcement or pendency of the merger or any of the
other transactions contemplated by the merger agreement,
including the impact of so entering into the merger agreement on
the relationships of such party or any of its subsidiaries with
employees, customers, brokers, agents, financing sources,
suppliers or partners, and regulators;
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changes in law following the date of the merger agreement;
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changes in GAAP or SAP following the date of the merger
agreement (or local equivalents in the applicable jurisdiction)
prescribed by the applicable insurance regulatory authority,
including accounting and financial reporting pronouncements by
the SEC, the National Association of Insurance Commissioners and
the Financial Accounting Standards Board;
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any change or announcement of a potential change in such
partys or such partys subsidiaries credit or
claims paying rating or A.M. Best Company rating or the
ratings of such party or such partys subsidiaries
businesses or securities (however, the facts or occurrences
giving rise to such a change may be deemed to constitute or be
taken into account in determining whether there has been or will
be a material adverse effect);
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a suspension of trading or a change in the trading prices of
such partys common stock (however, the facts or
occurrences giving rise to such failure may be deemed to
constitute or be taken into account in determining whether there
has been or will be a material adverse effect);
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the failure to meet any revenue, earnings or other projections,
forecasts or predictions for any period ending after the date of
the merger agreement (however, the facts or occurrences giving
rise to such failure may be deemed to constitute or be taken
into account in determining whether there has been or will be a
material adverse effect);
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any action or failure to act expressly required to be taken by a
party pursuant to the terms of the merger agreement;
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to the extent the following changes, state of facts,
circumstances, events or effects do not have a materially
disproportionate effect on such party and its subsidiaries,
taken as a whole, relative to other companies of similar size
operating in the property and casualty insurance
and/or
reinsurance industry, as applicable:
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changes in economic, market, business regulatory or political
conditions generally in the United States or any other
jurisdiction in which such party or its subsidiaries operate or
in the United States or global financial markets;
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changes, circumstances or events generally affecting the
property and casualty insurance
and/or
reinsurance industry in the geographic areas in which such party
and its subsidiaries operate;
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changes, circumstances or events resulting in liabilities under
property catastrophe insurance
and/or
reinsurance agreements, including any effects resulting from any
hurricane, tornado, flood, earthquake, windstorm, terrorist act,
act of war or other natural or man-made disaster; or
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the commencement, occurrence or continuation of any war or armed
hostilities.
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Conduct
of Business
Each of Allied World and Transatlantic has agreed to certain
covenants in the merger agreement restricting the conduct of its
business between the date of the merger agreement and the
effective time of the merger. In general, each of Allied World,
Transatlantic and each of their respective subsidiaries has
agreed to (i) conduct its business in the ordinary course
consistent with past practice in all material respects,
(ii) use commercially reasonable efforts to maintain and
preserve intact its business organization and advantageous
business relationships and retain the services of its officers
and key employees and (iii) take no action that would
prohibit or materially impair or delay the ability of either
party to obtain any necessary regulatory or other governmental
approvals or consummate the transactions contemplated by the
merger agreement.
In addition, each of Allied World and Transatlantic has agreed
that (subject to exceptions specified below and in the merger
agreement or previously disclosed in writing to the other party
as provided in the merger agreement), between the date of the
merger agreement and the effective time of the merger, it will
not, and will not permit any of its subsidiaries to:
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amend its organizational documents;
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(i) split, combine or reclassify any of its capital stock,
(ii) declare, set aside or pay dividends or other
distributions on any of its capital stock (other than Allied
World and Transatlantic dividends declared and paid in the
ordinary course of business), or (iii) redeem, repurchase
or otherwise acquire its own capital stock or other voting
securities or equity interests;
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issue, deliver, pledge or sell, or authorize the issuance,
delivery or sale of, any of its or its subsidiaries
shares, equity equivalents or capital stock, other than the
issuance of any shares upon the exercise of stock-based awards
that were outstanding on the date of the merger agreement and
the issuance of any capital stock of its subsidiary to any other
subsidiary;
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incur any unbudgeted capital expenditure in excess of $1,000,000
individually or $2,500,000 in the aggregate;
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acquire any assets, securities, properties, interests or
businesses, other than (i) arms-length acquisitions
of supplies, equipment, investment securities or other assets in
the ordinary course of business consistent with past practice or
(ii) acquisitions with a net purchase price not in excess
of $5,000,000 individually or $10,000,000 in the aggregate;
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sell, lease, sublease, exchange or otherwise transfer or create
a lien on any of its assets, securities, properties, interests
or businesses or grant an option to do any of the foregoing,
other than in the ordinary course of business consistent with
past practice or other sales with a value that does not exceed
$5,000,000 individually or $10,000,000 in the aggregate;
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make any loans, advances or capital contributions to, or
investments in, any person or entity, other than in the ordinary
course of business or to a wholly-owned subsidiary;
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create, incur, assume, suffer to exist or otherwise be liable
with respect to any indebtedness for borrowed money or
guarantees thereof (including reimbursement obligations with
respect to letters of credit), other than (i) in
replacement of existing or maturing debt, (ii) guarantees
relating to business written by any wholly-owned subsidiary
(whether directly or indirectly) in the ordinary course of its
insurance or reinsurance business consistent with past practice
and (iii) draw-downs pursuant to existing credit facilities
and letters of credit in support of its insurance or reinsurance
business consistent with past practice;
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make material changes to its benefit plans or increase
compensation and benefits paid to employees;
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make any change in financial or tax accounting methods, except
as required by a change in GAAP or SAP;
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settle any litigation, actions or proceedings, except
settlements in the ordinary course of business and settlements
subject to (and not materially in excess of) reserves;
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make any material change with respect to taxes, tax returns or
the accounting thereof;
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amend or modify in any material respect or terminate any
material contract or waive, release or assign any material
rights, claims or benefits of it or its subsidiaries under any
material contract or enter into any material contract except in
the ordinary course of business consistent with past practice;
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adopt a plan of complete or partial liquidation, dissolution,
merger, consolidation, restructuring, recapitalization or other
reorganization; and
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agree, resolve or commit to doing any of the foregoing.
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No
Solicitation of Alternative Proposals
Each of Allied World and Transatlantic has agreed that, from the
time of the execution of the merger agreement until the earlier
of the termination of the merger agreement or the completion of
the merger, it will not and it will cause its subsidiaries and
its and their directors and officers, and will use its
reasonable best efforts to cause its controlled affiliates,
employees, agents, consultants and representatives, not to,
directly or indirectly, (i) solicit, initiate or knowingly
encourage or facilitate (including by way of furnishing
information) or take any other action designed to facilitate any
inquiries or proposals regarding, or that would reasonably be
expected to lead to, any merger, share exchange, amalgamation,
consolidation, sale of assets, sale of shares of capital stock
(including by way of a tender offer or exchange offer) or
similar transactions that, if consummated, would constitute a
competing proposal (as defined below), (ii) solicit,
initiate, knowingly encourage or participate in any discussions
or negotiations regarding, or furnish to any person any
information in connection with, or otherwise cooperate in any
way with, or knowingly facilitate in any way any effort by any
person in connection with any acquisition proposal (as defined
below) or (iii) enter into any letter of intent, memorandum
of understanding, agreement in principle, acquisition agreement,
merger agreement, option agreement, joint venture agreement,
partnership agreement or other agreement regarding, or that is
intended to result in, or would be reasonably expected to lead
to, an acquisition proposal.
An acquisition proposal with respect to a party
means any inquiry or proposal regarding, or that would
reasonably be expected to lead to, any merger, share exchange,
amalgamation, consolidation, sale of assets, sale of shares of
capital stock (including by way of a tender offer or exchange
offer) or similar transaction involving such party or any of its
subsidiaries that, if consummated, would constitute a competing
transaction. A competing transaction with respect to
a party means (i) any transaction, including a tender
offer, exchange offer or share exchange, pursuant to which any
third-party or group, directly or indirectly, acquires or would
acquire beneficial ownership of 10% or more of the outstanding
shares of such partys common stock or outstanding voting
power (or options, rights or warrants to purchase, or securities
convertible into or exchangeable for, such common stock or
ordinary shares or other securities representing such voting
power), (ii) a merger, amalgamation, consolidation or
business combination pursuant to which any third-party or group
would beneficially own 10% or more of such partys
outstanding common stock or outstanding voting power or
(iii) a recapitalization or any other transaction pursuant
to which a third-party or group beneficially owns or would
beneficially own 10% or more of such partys outstanding
common stock or outstanding voting power or (iv) any
transaction pursuant to which any third-party or group, directly
or indirectly, acquires or would acquire control of assets of
such party or its subsidiaries representing 10% or more of
consolidated revenues, net income, EBITDA for the last
12 months or the fair market value of all of such
partys assets and its subsidiaries, taken as a whole.
Notwithstanding the restrictions described above, prior to
obtaining the relevant stockholder approvals, the board of
directors of each of Allied World and Transatlantic is permitted
to furnish information with respect to Allied World or
Transatlantic, as applicable, and enter into discussions with,
and only with, a person who has made an unsolicited bona fide
written acquisition proposal if the board of directors of such
party (i) determines in good faith (after consultation with
its outside legal counsel and financial advisors) that such
acquisition proposal constitutes or is reasonably likely to lead
to a superior proposal (as defined below) and the failure to
enter into discussions regarding such proposal would result in a
breach of such boards fiduciary duties, (ii) provides
at least three business days notice to the other party of
its intent to furnish information to, or enter into discussions
with, such person and (iii) obtains from such person an
executed confidentiality
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agreement. A superior proposal with respect to a
party means a bona fide written acquisition proposal made by a
third-party or group (and not obtained in breach of the merger
agreement) for a merger, amalgamation, consolidation, business
combination or other similar transaction involving such party
pursuant to which the Allied World shareholders or Transatlantic
stockholders, as applicable, immediately preceding the
transaction would hold less than 50% of the outstanding common
stock or voting power of such party or the surviving or parent
entity following the consummation of such transaction that the
board of directors of such party (after consultation with its
outside legal counsel and financial advisors) determines in good
faith to be more favorable to such partys stockholders
than the merger. In making such determination, the board of
directors of such party will take into account all relevant
factors, including value and other financial considerations,
legal and regulatory considerations, and any conditions to, and
expected timing and risks of, completion, as well as any changes
to the terms of the merger proposed by the other party in
response to such superior proposal.
The merger agreement requires that the parties notify each other
within 24 hours of, among other things, the receipt of any
acquisition proposal or inquiry or request for non-public
information that is reasonably likely to lead to an acquisition
proposal. Any such notification will include the identity of the
person making the inquiry and the material terms and conditions
of any acquisition proposal. In addition, the merger agreement
requires the parties to continue to update each other of
material changes to any acquisition proposal and provide to each
other, within 24 hours of receipt, all correspondence and
other written material received from any third party in
connection with an acquisition proposal. The merger agreement
also requires both Allied World and Transatlantic to cease, and
cause to be terminated, all discussions or negotiations with any
person conducted prior to the execution of the merger agreement
with respect to any acquisition proposal and request the prompt
return or destruction of all confidential information previously
furnished in connection therewith.
Changes
in Board Recommendations
The board of directors of each of Allied World and Transatlantic
has agreed that it will not (A) (i) withdraw (or modify in
a manner adverse to the other party) the approval,
recommendation or declaration of advisability by such board of
the merger agreement or the transactions contemplated by the
merger agreement, (ii) adopt, approve, recommend, endorse
or otherwise declare advisable the adoption of any acquisition
proposal or (iii) resolve, agree or publicly propose to
take any such actions (any such action set forth in clause (A),
an adverse recommendation change) or (B) cause
or permit such party to enter into, or resolve, agree or propose
publicly to do so with respect to, any agreement regarding an
acquisition proposal.
Notwithstanding the restrictions described above, at any time
prior to obtaining the relevant stockholder approvals, the board
of directors of Allied World or Transatlantic, as applicable,
may make an adverse recommendation change if such board
determines in good faith that the failure to do so would result
in a breach of the boards fiduciary duties under
applicable law, taking into account all adjustments to the terms
of the merger agreement that may be offered by the other party.
Prior to taking any such action, such board of directors must
(x) inform the other party in writing of its decision at
least three business days prior to changing its recommendation
and specify the reasons therefor, including the terms and
conditions of, and the identity of any person making, any
acquisition proposal and (y) in the event the other party
adjusts the terms of the merger agreement, the board of
directors must determine that the adverse recommendation change
is still required in the exercise of its fiduciary duties after
giving effect to all relevant factors, including the payment of
any applicable termination fees.
If the board of directors of Allied World or Transatlantic
withdraws or modifies its recommendation, such board of
directors will nonetheless continue to be obligated to hold its
stockholders meeting and submit the proposals described in this
joint proxy statement/prospectus to its stockholders for their
vote, as applicable.
Efforts
to Obtain Required Stockholder Votes
Allied World has agreed to hold the Allied World Special
Shareholder Meeting and to use its reasonable best efforts to
obtain shareholder approval for the share capital increase
proposals, the NYSE share issuance proposal, the name change
proposal and the election of directors proposal. The merger
agreement requires
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Allied World to submit these proposals to a shareholder vote
even if its board of directors no longer recommends the
proposals. The Allied World board of directors has approved the
issuance of Allied World shares to Transatlantic stockholders
pursuant to the merger and the amendment to the Allied World
Articles and has adopted resolutions directing that the
proposals herein be submitted to Allied World shareholders for
their consideration.
Transatlantic has also agreed to hold the Transatlantic Special
Shareholder Meeting and to use its reasonable best efforts to
obtain stockholder approval for the adoption of the merger
agreement proposal. The merger agreement requires Transatlantic
to submit the merger agreement to a stockholder vote even if its
board of directors no longer recommends the adoption of the
merger agreement proposal. The board of directors of
Transatlantic has approved the merger agreement and declared the
merger agreement and the transactions contemplated thereby,
including the merger, advisable and in the best interests of
Transatlantic and its stockholders and adopted resolutions
directing that the merger agreement be submitted to the
Transatlantic stockholders for their consideration.
Efforts
to Complete the Merger
Allied World and Transatlantic have each agreed to:
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take, or cause to be taken, all actions, and do, or cause to be
done, and assist and cooperate with the other parties in doing,
all things necessary to consummate and make effective, as soon
as reasonably possible, the merger and the other transactions
contemplated by the merger agreement; and
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take, or cause to be taken, all actions, to file, or cause to be
filed, all documents and to do, or cause to be done, all things
necessary, proper or advisable to consummate the transactions
contemplated by the merger agreement, including preparing and
filing as promptly as practicable all documentation to effect
all necessary filings, consents, waivers, approvals,
authorizations, permits or orders from all third parties and
governmental entities, so as to enable the completion of the
merger as soon as reasonably practicable.
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Additionally, Allied World and Transatlantic have each agreed to:
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make and cause to be made all necessary registrations, filings
and notices relating to the merger with governmental entities
under certain applicable antitrust laws;
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respond, as promptly as practicable under the circumstances, to
any inquiries received from any governmental entity for
additional information or documentation in connection with
antitrust, competition, trade regulation or similar matters;
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use reasonable best efforts to achieve substantial compliance as
promptly as practicable with any second request received by the
Antitrust Division or FTC;
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certify substantial compliance with any second request as
promptly as practicable after the date of such second request
(but no later than December 15, 2011) and take all
actions necessary to assert, defend and support such
certification; and
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not extend any waiting period under any antitrust law or enter
into any agreement with a governmental entity or other authority
to delay, or otherwise not consummate as soon as practicable,
any of the transactions contemplated by the merger agreement.
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In furtherance of these obligations, if necessary and sufficient
to consummate the merger, Allied World and Transatlantic have
agreed to jointly propose, negotiate, commit to and effect the
holding separate, sale divestiture or other disposition of, or
prohibition or limitation on, (i) the ownership or
operation by either party of any of their respective
subsidiaries, (ii) the ability of Allied World to acquire
or hold, or exercise full right of ownership of, any shares of
capital stock of any of its subsidiaries, Transatlantic, or
Transatlantics subsidiaries, or (iii) Allied World or
any of its subsidiaries effectively controlling the business and
operations of Allied World and its subsidiaries or Transatlantic
and its subsidiaries.
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Governance
Matters After the Merger
Immediately following the effective time of the merger, assuming
the receipt of the resignation letters of all current directors
of Allied World and of shareholder approval for the election of
directors as described herein, the board of directors of the
combined company will consist of 11 members including
(i) four independent Transatlantic directors: Stephen P.
Bradley, Ian H. Chippendale, John G. Foos and John L. McCarthy;
(ii) Richard S. Press (the current non-executive chairman
of the Transatlantic board of directors); (iii) Michael C.
Sapnar (the current Executive Vice President and Chief Operating
Officer of Transatlantic); (iv) four of the current
independent Allied World directors, who will be identified to
shareholders at or prior to the Allied World Special Shareholder
Meeting: Barbara T. Alexander, James F. Duffy, Bart Friedman,
Scott Hunter, Mark R. Patterson, Patrick de Saint-Aignan and
Samuel J. Weinhoff; and (v) Scott A. Carmilani (the current
President and Chief Executive Officer of Allied World). The 11
members of the board of directors of the combined company will
be divided into three classes of directors, as follows:
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Class II (to hold office commencing upon the completion of
the merger and ending upon TransAllieds Annual Shareholder
Meeting in 2012 or until their successors are duly elected and
qualified or their offices are otherwise vacated):Ian H.
Chippendale, John L. McCarthy and one former independent Allied
World director;
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Class III (to hold office commencing upon the completion of
the merger and ending upon TransAllieds Annual Shareholder
Meeting in 2013 or until their successors are duly elected and
qualified or their offices are otherwise vacated): Stephen P.
Bradley, John G. Foos and two former independent Allied World
directors; and
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Class I (to hold office commencing upon the completion of
the merger and ending upon TransAllieds Annual Shareholder
Meeting in 2014 or until their successors are duly elected and
qualified or their offices are otherwise vacated): Scott A.
Carmilani, Richard S. Press, Michael C. Sapnar, and one former
independent Allied World director.
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Immediately following the effective time of the merger,
Mr. Carmilani will serve as President and Chief Executive
Officer of the combined company. Mr. Press will be elected
as non-executive chairman of the TransAllied board. Effective
the first anniversary of the closing date of the merger,
Mr. Press will cease to serve as non-executive chairman and
shall remain on the TransAllied board as a director until the
second anniversary of the closing date of the merger, at which
time he has agreed to retire from the TransAllied board (subject
to his earlier resignation or retirement). Mr. Sapnar will
be appointed to serve as President and Chief Executive Officer
of Global Reinsurance of the combined company.
The foregoing director elections and officer appointments are
conditioned upon completion of the merger. In the event that the
merger is not completed, the foregoing director elections and
officer appointments will not take effect.
Pursuant to the terms of the merger agreement, (i) in
connection with TransAllieds Annual Shareholder Meeting in
2012, the TransAllied board will propose to increase the size of
the TransAllied board by one member and will nominate for
election at such meeting, a new director to fill the resulting
vacancy, who will become the non-executive chairman of the
TransAllied board effective as of the first anniversary of the
closing of the merger; (ii) such person nominated for
election at such meeting shall (A) have been approved by
the TransAllied board, (B) have been recommended by the
nominating and corporate governance committee of the TransAllied
board, (C) have substantial insurance industry expertise,
and (D) not have been a member of the Transatlantic board
of directors or the Allied World board of directors immediately
prior to the date of the merger agreement; and
(iii) TransAllied shall duly call, give notice of, convene
and hold its Annual Shareholder Meeting in 2012 no later than
June 30, 2012.
Upon completion of the merger, the TransAllied board will have
six board committees: the Audit Committee, the Compensation
Committee, the Enterprise Risk Committee, the Executive
Committee, the Investment Committee and the
Nominating & Corporate Governance Committee.
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For a period of one year from the closing date of the merger,
the Executive Committee is to be comprised of
Mr. Carmilani, one former independent Allied World director
and two former independent Transatlantic directors, and to be
chaired by Mr. Carmilani;
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For a period of one year from the closing date of the merger,
each of the Investment Committee and Nominating &
Corporate Governance Committee are to be comprised of two former
independent Allied World directors and two former independent
Transatlantic directors, and to be chaired by one of the former
independent Allied World directors;
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For a period of one year from the closing date of the merger,
each of the Audit Committee, Compensation Committee and
Enterprise Risk Committee are to be comprised of two former
independent Allied World directors and two former independent
Transatlantic directors, and to be chaired by one of the former
independent Transatlantic directors.
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Upon completion of the merger, TransAllieds corporate
headquarters and related corporate functions will be located in
Zug, Switzerland.
The appointments of Messrs. Carmilani, Press and Sapnar,
the provisions regarding the selection of a replacement
non-executive chairman, and the board committee composition,
will be reflected in the amended and restated organizational
regulations of TransAllied, which will only become effective at
the completion of the merger, and, for a period of one year
following the closing date, any resolution to revise, modify or
delete such provisions will require a majority of at least eight
of the votes cast.
Transatlantic
Common Stock Purchase
Pursuant to the merger agreement, Allied World entered into a
binding contract with a third-party broker, Deutsche Bank, on
June 24, 2011, to purchase a total of 45,000 shares of
Transatlantic common stock in the open market for Allied
Worlds account. This stock purchase will begin following
the receipt of the approvals required in connection with the
merger of both the Allied World shareholders and the
Transatlantic stockholders (as described herein).
Cantonal
Tax Ruling
On June 14, 2011, Allied World obtained a tax ruling from
the Cantonal Tax Administration of the Canton of Zug, providing
that the merger does not result in income taxes for Allied World
(and, in particular, the recording of the newly issued Allied
World shares in the merger is not subject to income taxes).
Swiss
Commercial Register Ruling
On June 20, 2011, Allied World obtained a ruling from the
Swiss Commercial Register of the Canton of Zug confirming that
the Swiss Commercial Register will register a capital increase
of Allied World.
Retention
Program and Employee Waivers
Prior to the merger becoming effective, Allied World will use
its reasonable best efforts to deliver to Transatlantic,
agreements executed by certain persons, provided that
(i) any change in status or reduction of duties directly
resulting from the merger will not constitute good
reason for purposes of determining such persons
entitlement to severance benefits or the acceleration of any
vesting or other rights and (ii) the merger, standing
alone, will not result in the acceleration of any vesting or
other rights for such person.
Treatment
of Transatlantic Stock Options and Other Stock-Based Awards and
Programs
Prior to the effective time of the merger, the board of
directors of Allied World (or, if appropriate, the committee
thereof administering the Allied World stock plans) will adopt
resolutions or take other actions as may be required to effect
the below actions with respect to the Transatlantic stock
options and stock-based awards.
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Stock Options. Upon completion of the merger,
each outstanding option to purchase shares of Transatlantic
common stock will be converted pursuant to the merger agreement
into a stock option to acquire Allied World shares on the same
terms and conditions as were in effect immediately prior to the
completion of the merger. The number of Allied World shares
underlying each converted Transatlantic stock option will be
determined by multiplying the number of shares of Transatlantic
common stock subject to such stock option immediately prior to
the completion of the merger by the exchange ratio, and rounding
down to the nearest whole share. The exercise price per share of
each converted Transatlantic stock option will be determined by
dividing the per share exercise price of such stock option by
the exchange ratio, and rounding up to the nearest whole cent.
Stock-Based Awards. Transatlantic stock-based
awards outstanding immediately prior to the effective time of
the merger will be converted into Allied World shares or other
compensatory awards denominated in Allied World shares subject
to a risk of forfeiture to, or the right to repurchase by Allied
World, with the same terms and conditions as were applicable
under such Transatlantic stock-based awards (including any
vesting or forfeiture provisions or repurchase rights, but
taking into account any acceleration thereof provided for in the
relevant Transatlantic stock plan or in the related award
document by reason of the transactions contemplated in the
merger agreement), and each holder of Transatlantic stock-based
awards will be entitled to receive a number of converted
Transatlantic stock-based awards equal to the product of the
number of Transatlantic stock-based awards held by such holder
immediately prior to the effective time of the merger and the
exchange ratio.
Any Transatlantic stock-based awards that vest based on the
achievement of performance criteria will be adjusted (subject to
the approval of Allied World) to appropriately reflect the
merger with respect to performance periods that have not ended
prior to the effective time of the merger. Each of Allied World
and Transatlantic will use the existing performance goals to
determine performance awards through fiscal year 2011.
Thereafter, following the closing of the merger,
TransAllieds Compensation Committee will make a decision
regarding the performance awards for the 2012 fiscal year and
thereafter.
Other
Covenants and Agreements
The merger agreement contains certain other covenants and
agreements, including covenants relating to:
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cooperation between Allied World and Transatlantic in the
preparation of this joint proxy
statement/prospectus;
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confidentiality and access by each party to certain information
about the other party during the period prior to the effective
time of the merger;
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cooperation between Allied World and Transatlantic in the
defense or settlement of any shareholder litigation relating to
the merger;
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causing any dispositions of Transatlantic common stock resulting
from the merger and any acquisitions of Allied World shares
resulting from the merger by each individual who may become
subject to reporting requirements under the securities laws to
be exempt from Section 16(b) of the Exchange Act;
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on or before the effective date of the merger, either
(i) the termination of the Allied World secured credit
facility and the Allied World unsecured credit facility or
(ii) the use of Allied Worlds reasonable best efforts
to obtain the necessary consents of lenders party to the Allied
World secured credit facility and the Allied World unsecured
credit facility, in each case, to allow the credit facilities to
remain in effect after the completion of the merger with no
default or event of default thereunder resulting from the merger
or the consummation of other transactions contemplated thereby;
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cooperation between Allied World and Transatlantic to enter into
a supplemental indenture with respect to Transatlantics
outstanding unsecured notes; and
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cooperation between Allied World and Transatlantic in connection
with public announcements.
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In addition, Allied World has agreed to assume all rights to
indemnification, advancement of expenses and exculpation from
liabilities for acts or omissions occurring at or prior to the
effective time of the merger existing in favor of the current or
former directors and officers of Transatlantic. Allied World has
also agreed
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to purchase a tail directors and
officers liability insurance policy for Transatlantic and
its current and former directors and officers and employees who
are currently covered by the liability insurance coverage
currently maintained by Transatlantic.
Conditions
to Completion of the Merger
The obligations of Allied World and Transatlantic to complete
the merger are subject to the satisfaction of the following
conditions:
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approval by the Allied World shareholders of (i) the share
capital increase proposals, (ii) the NYSE share
issuance proposal and (iii) the name change proposal;
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approval by the Transatlantic stockholders of the adoption of
the merger agreement proposal;
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authorization of the listing of the Allied World shares to be
issued in the merger on the NYSE, subject to official notice of
issuance;
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the waiting period (and any extension thereof) applicable to the
merger under the HSR Act having expired or been earlier
terminated;
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obtain any necessary approvals of the applicable insurance
regulatory authorities in New York, Bermuda and Switzerland;
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receipt of other requisite regulatory approvals;
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all consents and approvals of, and filings with, governmental
entities having been made, obtained and in full force other than
those that would not reasonably be expected to have a material
adverse effect on Allied World or Transatlantic after giving
effect to the merger;
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effectiveness of the registration statement of which this joint
proxy statement/prospectus forms a part and the absence of a
stop order or proceedings threatened or initiated by the SEC for
that purpose;
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absence of any order, injunction, decree, statute, rule or
regulation by a court or other governmental entity that makes
illegal or prohibits the consummation of the merger or the other
transactions contemplated by the merger agreement;
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approval by the Allied World shareholders of the election of
directors proposal and execution of a written consent of the
TransAllied board approving certain committee and officer
appointments;
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a ruling from the Swiss Commercial Register having been
obtained; and
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the purchase by Allied World, following receipt of the requisite
Allied World and Transatlantic shareholder approvals discussed
herein, of 45,000 shares of Transatlantic common stock
having been completed.
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In addition, each of Allied Worlds and
Transatlantics obligations to effect the merger is subject
to the satisfaction or waiver of the following additional
conditions:
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the representations and warranties of each party, other than the
representations related to the shares issued and outstanding or
reserved for issuance, the necessary corporate power and
authority to execute and deliver the merger agreement, and the
brokers and finders fees, will be true and correct
(without giving effect to any materiality qualifications
contained in such representations and warranties) as of the date
of the merger agreement and as of the closing date (other than
those representations and warranties that were made only as of a
specified date, which need only be true and correct as of such
specified date), except where the failure of such
representations and warranties to be so true and correct
(without giving effect to any limitation as to
materiality or to material adverse effect set forth
therein), individually or in the aggregate, has not had, and
would not reasonably be expected to have, a material adverse
effect on such party;
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the representations and warranties of each party relating to the
shares issued and outstanding or reserved for issuance, the
necessary corporate power and authority to execute and deliver
the merger
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agreement, and the brokers and finders fees, will be
true and correct in all material respects as of the date of the
merger agreement and as of the closing date (except to the
extent such representations or warranties were made as of an
earlier date, in which case, as of such earlier date);
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each party having performed or complied with, in all material
respects, all its obligations under the merger agreement at or
prior to the effective time of the merger; and
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receipt of a certificate executed by each partys chief
executive officer or chief financial officer as to the
satisfaction of the conditions described in the preceding three
bullet points.
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Termination
of the Merger Agreement
The merger agreement may be terminated at any time prior to the
effective time of the merger, even after the receipt of the
required shareholder approvals, under the following
circumstances:
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by mutual written consent of Allied World and Transatlantic;
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by either the Allied World or Transatlantic board of directors:
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if any governmental entity issues a final and nonappealable
order permanently enjoining or otherwise prohibiting the
completion of the merger, except that no party may terminate the
merger agreement if such partys breach of its obligations
proximately contributed to the issuance of such order;
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if the Allied World shareholders fail to approve any of the
share capital increase proposals, the NYSE share issuance
approval or the name change proposal at the Allied World Special
Shareholder Meeting;
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if the Transatlantic stockholders fail to approve the adoption
of the merger agreement proposal at the Transatlantic Special
Shareholder Meeting; or
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if the merger is not consummated by January 31, 2012,
subject to extension by mutual agreement of the parties,
provided that no party may terminate the merger agreement if
such partys breach of its obligations proximately
contributed to the failure to close by the merger end date;
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by the Allied World board of directors upon a breach of any
covenant or agreement on the part of Transatlantic, or if any
representation or warranty of Transatlantic fails to be true, in
either case such that the conditions to Allied Worlds
obligations to complete the merger would not then be satisfied
and such failure is not reasonably capable of being cured or
Transatlantic is not using its reasonable best efforts to cure
such failure;
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by the Transatlantic board of directors upon a breach of any
covenant or agreement on the part of Allied World, or if any
representation or warranty of Allied World fails to be true, in
either case such that the conditions to Transatlantics
obligations to complete the merger would not then be satisfied
and such failure is not reasonably capable of being cured or
Allied World is not using its reasonable best efforts to cure
such failure;
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by the Allied World board of directors if, prior to obtaining
the approval of the Transatlantic stockholders, the
Transatlantic board of directors makes an adverse recommendation
change; or
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by the Transatlantic board of directors if, prior to obtaining
the approval of the Allied World shareholders, the Allied World
board of directors makes an adverse recommendation change.
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Expenses
and Termination Fees; Liability for Breach
Each party will pay all fees and expenses incurred by it in
connection with the merger and the other transactions
contemplated by the merger agreement, provided, however, that
Allied World and Transatlantic will share equally all fees and
expenses in relation to the printing, filing and distribution of
this joint proxy statement/prospectus and any filing fees in
connection with the merger pursuant to any antitrust or
competition law except, in each case for attorneys and
accountants fees and expenses.
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If the merger agreement is validly terminated, the merger
agreement will become void and have no effect, without any
liability or obligation on the part of any party, except as
expressly set forth therein, provided that the parties will
remain liable for any willful breaches of their representations,
warranties or covenants.
Except as set forth below, if the merger agreement is terminated
by Allied World or Transatlantic pursuant to a breach by the
other party of any of the covenants or agreements or any
inaccuracy of any of the representations or warranties set forth
in the merger agreement, then the non-terminating party will
reimburse the terminating party for all of their reasonable
out-of-pocket
fees and expenses incurred in connection with or related to the
authorization, preparation, investigation, negotiation,
execution and performance of the merger agreement or any of the
transactions contemplated thereby, up to a maximum amount of
$35 million (the expense reimbursement),
provided that if the breach is of either partys covenant
not to solicit alternative offers or to hold its special
stockholder meeting, the non-terminating party will also pay the
alternate termination fee (defined below).
Except as set forth below, if the merger agreement is terminated
as a result of the stockholders of either Allied World or
Transatlantic failing to approve the transaction, Allied World
will pay to Transatlantic, or Transatlantic will pay to Allied
World, a termination fee of $35 million (the
alternate termination fee), plus the expense
reimbursement.
Allied World will be obligated to pay a termination fee equal to
$115 million (less any previously paid alternate
termination fee
and/or
expense reimbursement) to Transatlantic if:
(1) Transatlantic terminates the merger agreement because,
prior to obtaining the approval of the Allied World
shareholders, the Allied World board of directors makes an
adverse recommendation change;
(2) the merger agreement is terminated due to the failure
of the Allied World shareholders to approve the share capital
increase proposals, the NYSE share issuance proposal or the name
change proposal and (x) after the date of the merger
agreement and prior to the Allied World Special Shareholder
Meeting, a third party makes a proposal to Allied World or
publicly announces its intent to make a proposal to Allied World
for a competing transaction, and (y) within 12 months
after such termination Allied World or any of its subsidiaries
enters into an agreement providing for a competing transaction
or recommends or submits a competing transaction to its
shareholders for adoption, or a transaction in respect of a
competing transaction is consummated, whether or not such
competing transaction was made, publicly announced or publicly
made known prior to termination of the merger agreement;
provided, however, unless the competing transaction referred to
in clauses (x) and (y) above were made and consummated
by the same person, any reference to 10% in the definition of
competing transaction will be deemed to be a reference to 50%;
(3) the merger agreement is terminated following the
failure to consummate the merger on or before January 31,
2012 and (x) after the date of the merger agreement and
prior to the Allied World Special Shareholder Meeting, a third
party makes a proposal to Allied World or publicly announces its
intent to make a proposal to Allied World for a competing
transaction, (y) the Allied World Special Shareholder
Meeting does not occur at least five business days prior to
January 31, 2012, and (z) within 12 months after
such termination Allied World or any of its subsidiaries enters
into an agreement providing for a competing transaction or
recommends or submits a competing transaction to its
shareholders for adoption, or a transaction in respect of a
competing transaction is consummated, whether or not such
competing transaction was made, publicly announced or publicly
made known prior to termination of the merger agreement;
provided, however, any reference to 10% in the definition of
competing transaction will be deemed to be a reference to
50%; or
(4) Transatlantic terminates the merger agreement following
the breach by Allied World of any covenant or agreement or any
inaccuracy of any of the representations or warranties set forth
in the merger agreement and (x) after the date of the
merger agreement and prior to the termination of the merger
agreement, a third party makes a proposal for a competing
transaction to Allied World or an intention to make such a
proposal has been publicly announced or otherwise become
publicly known
120
(except in the case of a breach of Allied Worlds covenant
not to solicit alternative acquisition proposals or to hold its
shareholder meeting, in which case a proposal for a competing
transaction may be made or the intention to make such a proposal
may be publicly announced or otherwise publicly known before or
after termination of the merger agreement), and (y) within
12 months after such termination Allied World or any of its
subsidiaries enters into an agreement providing for a competing
transaction or recommends or submits a competing transaction to
its shareholders for adoption, or a transaction in respect of a
competing transaction is consummated, whether or not such
competing transaction was made, publicly announced or publicly
made known prior to termination of the merger agreement;
provided, however, any reference to 10% in the definition of
competing transaction will be deemed to be a reference to 50%.
Transatlantic will be obligated to pay a termination fee equal
to $115 million (less any previously paid alternate
termination fee
and/or
expense reimbursement) to Allied World if:
(1) Allied World terminates the merger agreement because,
prior to obtaining the approval of the Transatlantic
stockholders, the Transatlantic board of directors makes an
adverse recommendation change;
(2) the merger agreement is terminated due to the failure
of the Transatlantic stockholders to approve the adoption of the
merger agreement proposal and (x) after the date of the
merger agreement and prior to the Transatlantic Special
Shareholder Meeting, a third party makes a proposal to
Transatlantic or publicly announces its intent to make a
proposal to Transatlantic for a competing transaction, and
(y) within 12 months after such termination
Transatlantic or any of its subsidiaries enters into an
agreement providing for a competing transaction or recommends or
submits a competing transaction to its shareholders for
adoption, or a transaction in respect of a competing transaction
is consummated, whether or not such competing transaction was
made, publicly announced or publicly made known prior to
termination of the merger agreement; provided, however, unless
the competing transaction referred to in clauses (x) and
(y) above were made and consummated by the same person, any
reference to 10% in the definition of competing transaction will
be deemed to be a reference to 50%;
(3) the merger agreement is terminated following the
failure to consummate the merger on or before January 31,
2012 and (x) after the date of the merger agreement and
prior to the Transatlantic Special Shareholder Meeting, a third
party makes a proposal to Transatlantic or publicly announces
its intent to make a proposal to Transatlantic for a competing
transaction, (y) the Transatlantic Special Shareholder
Meeting does not occur at least five business days prior to
January 31, 2012, and (z) within 12 months after
such termination Transatlantic or any of its subsidiaries enters
into an agreement providing for a competing transaction or
recommends or submits a competing transaction to its
shareholders for adoption, or a transaction in respect of a
competing transaction is consummated, whether or not such
competing transaction was made, publicly announced or publicly
made known prior to termination of the merger agreement;
provided, however, any reference to 10% in the definition of
competing transaction will be deemed to be a reference to
50%; or
(4) Allied World terminates the merger agreement following
the breach by Transatlantic of any covenant or agreement or any
inaccuracy of any of the representations or warranties set forth
in the merger agreement and (x) after the date of the
merger agreement and prior to the termination of the merger
agreement, a third party makes a proposal for a competing
transaction to Transatlantic or an intention to make such a
proposal has been publicly announced or otherwise become
publicly known (except in the case of a breach of
Transatlantics covenant not to solicit alternative
acquisition proposals or to hold its shareholder meeting, in
which case a proposal for a competing transaction may be made or
the intention to make such a proposal may be publicly announced
or otherwise publicly known before or after termination of the
merger agreement), and (y) within 12 months after such
termination Transatlantic or any of its subsidiaries enters into
an agreement providing for a competing transaction or recommends
or submits a competing transaction to its shareholders for
adoption, or a transaction in respect of a competing transaction
is consummated, whether or not such competing transaction was
made, publicly announced or publicly made known prior to
termination of the merger agreement; provided, however, any
reference to 10% in the definition of competing transaction will
be deemed to be a reference to 50%.
121
Amendments,
Extensions and Waivers
The merger agreement may be amended by the parties at any time
before or after the receipt of the approvals of the Allied World
shareholders or Transatlantic stockholders required to
consummate the merger. However, after any such stockholder
approval, there may not be, without further approval of Allied
World shareholders and Transatlantic stockholders, any amendment
of the merger agreement that changes the amount or form of the
consideration to be delivered or for which applicable law
requires further stockholder approval.
At any time prior to the effective time of the merger, any party
may (i) extend the time for performance of any obligations
or other acts of the other party, (ii) waive any
inaccuracies in the representations and warranties of the other
party contained in the merger agreement and (iii) waive
compliance by the other party with any of the agreements or
conditions contained in the merger agreement.
No Third
Party Beneficiaries
The merger agreement is not intended to, and does not, confer
upon you or any person other than Allied World, Transatlantic
and Merger Sub any rights or remedies, except that
Transatlantics directors and officers will have the right
to enforce Allied Worlds covenant to continue to provide
indemnification and liability insurance coverage after the
completion of the merger.
Specific
Performance
The parties are entitled to an injunction, specific performance
and other equitable relief to prevent breaches of the merger
agreement and to enforce specifically the terms of the merger
agreement in addition to any other remedy to which they are
entitled at law or in equity.
122
CAPITAL
INCREASES
The Allied World board of directors proposes approval of an
increase of the ordinary share capital as set forth in
Article 3 (Share Capital) of the Allied World Articles
where the contributions for the new registered shares are paid
by converting existing reserves (Kapitaleinlagen) into
share capital, an increase of the conditional share capital as
set forth in Article 5(a) (Conditional Share Capital for
Employee Benefit Plans) and an increase of the authorized share
capital as set forth in Article 6(a) (Authorized Share Capital
for General Purposes) allowing for the grant to employees,
consultants, directors or other person providing services to
Allied World or a subsidiary of Allied World and to authorize
the board of directors to increase Allied Worlds share
capital to issue common shares for general matters.
The proposal to increase the ordinary share capital, also
referred to herein as the article 3 share capital
increase proposal, would provide for a new amount of ordinary
share capital of
CHF ,
divided
into
registered shares with a par value of
CHF
per share. The increase of the ordinary share capital will occur
by converting existing reserves (Kapitaleinalgen) and the
new shares will be fully paid-in. Upon resolution of the general
meeting of shareholders in accordance with the Allied World
Articles, registered shares may be converted into bearer shares
and bearer shares may be converted into registered shares, at
any time. In connection therewith, the proposal would limit or
withdraw the shareholders pre-emptive rights.
The proposal to increase the conditional share capital, also
referred to herein as the article 5 share capital
increase proposal, would provide for a conditional share capital
increase in an amount not exceeding
CHF
through the issue from time to time of a maximum
of registered
shares, payable in full, each with a par value of
CHF ,
in connection with the exercise of option rights granted to any
employee of Allied World or any subsidiary thereof, and any
consultant, director or other person providing services to
Allied World or any subsidiary, thereof. These shares will be
issued on account of the Transatlantic stock options that will
be converted to Allied World options pursuant to the merger
agreement. With regard to the issuance of the shares under
article 5, shareholders pre-emptive rights will be
excluded. The new registered shares may be issued at a price
below the current market price. The Allied World board of
directors will specify the precise conditions of issue,
including the issuance price of the shares.
The proposal to increase the authorized share capital, also
referred to herein as the article 6 share capital
increase proposal, would allow the board of directors to
increase the share capital from time to time and at any time
until [two years from Special Shareholder Meeting date] by an
amount not exceeding
CHF
through the issue of up
to
fully paid up registered shares with a par value of CHF 15.00
each (as may be adjusted in connection with the payment of
dividends by virtue of a par value reduction as approved by
Allied Worlds shareholders at Allied Worlds Annual
Shareholder Meeting in 2011). Allied World proposes to increase
the number of shares authorized to permit more ability to effect
somewhat larger, or multiple, transactions more efficiently, and
under timeframes that might not be possible were additional
shareholder approvals required to be obtained. The
article 6 share capital increase will also provide for
share increase under Transatlantic stock-based awards (other
than Transatlantic stock options) that are converted to Allied
World stock-based awards pursuant to the merger agreement. The
Allied World board of directors is authorized to exclude the
preemptive rights of shareholders and to allocate them to third
parties in the event of the use of shares.
The authorized share capital approved pursuant to the
article 6 share capital increase, or which has
otherwise been approved by shareholders, will be available for
issuance at such times and for such purposes as the Allied World
board of directors may deem advisable without further action by
Allied Worlds shareholders, except as may be required by
applicable laws or regulations. For example, the additional
authorized share capital pursuant to the
article 6 share capital increase will be available for
issuance by the Allied World board of directors in connection
with mergers, acquisitions of enterprises or participants,
financing
and/or
refinancing of such mergers and acquisitions and of other
investment projects, improving the regulatory capital position
of Allied World or its subsidiaries, broadening the shareholder
constituency, the participation of employees or an exchange of
participation certificates, as well as a buy back of
participation certificates in exchange of registered shares.
Allied World believes this is an important step to help ensure
that the Allied World board of directors can adapt and react to
a changing economic climate, business challenges including
increased catastrophes and opportunities in capital and other
relevant markets. Allied World does not intend to issue any
123
stock except on terms or for reasons which the Allied World
board of directors deems to be in the best interests of Allied
World.
Approval of the share capital increase proposals, as discussed
above, are a condition to the completion of the merger and will
be effected only immediately prior to the closing of the merger.
In addition, the share capital increases are necessary to effect
the merger. If such proposals are not approved, the merger will
not be completed even if the NYSE share issuance proposal
approving the issuance of Allied World shares in the merger is
approved by Allied World shareholders and the proposal to
approve the merger agreement is approved by Transatlantic
stockholders. In addition, if the issuance of Allied World
shares in the merger is not approved by Allied World
shareholders, or the proposal to approve the merger agreement is
not approved by Transatlantic stockholders, but any of the share
capital increase proposals are approved, such capital increases
will not be effected.
Approval of each of the share capital increase proposal requires
the affirmative vote of at least
662/3%
of the votes represented at the Allied World Special Shareholder
Meeting and a majority of the nominal value of the Allied World
shares, as represented at the Allied World Special Shareholder
Meeting, where holders of at least 50% of the total outstanding
Allied World shares are represented and voting and who are
entitled to vote on such proposal. Abstentions and broker
non-votes will not be considered votes cast and will have no
effect on these proposals, assuming a quorum is present.
The Allied World board of directors unanimously recommends a
vote FOR the ordinary share capital increase,
including the limitation of the pre-emptive rights of the Allied
World shareholders, the article 5 share capital increase
proposal and the article 6 share capital increase proposal,
as described above.
124
NYSE
SHARE ISSUANCE
The Allied World board of directors proposes the Allied World
shareholders approve the issuance of the Allied World shares to
Transatlantic stockholders pursuant to the merger and as
contemplated by the merger agreement as required by NYSE rules,
also referred to herein as the NYSE share issuance proposal. The
merger agreement provides that as a condition to the closing of
the merger that the Allied World shares to be issued to
Transatlantic stockholders are authorized for listing on the
NYSE, subject to official notice of issuance. NYSE listing
policies require prior stockholder approval of issuances of
common stock which would constitute more than 20% of the
outstanding shares of common stock on a post transaction basis.
Former Transatlantic stockholders are expected to hold
approximately 58% of the outstanding Allied World shares, on a
fully diluted basis, after giving effect to the merger. In order
to issue the Allied World shares pursuant to the merger, the
share capital increase proposals will each need to be approved
at the Allied World Special Shareholder Meeting. In addition, in
the event that the Allied World shareholders approve the NYSE
share issuance proposal, but any of the election of directors
proposal, the share capital increase proposals or the name
change proposal are not approved by Allied World shareholders
(and are not otherwise waived by each of Allied World and
Transatlantic), or the proposal to approve the merger agreement
is not approved by Transatlantic stockholders, the shares will
not be issued.
The approval of the NYSE share issuance proposal requires the
affirmative vote of the holders of a majority of shares entitled
to vote on the proposal and present in person or represented by
proxy at the Allied World Special Shareholder Meeting, provided
that the total votes cast on this proposal represent over 50% of
the outstanding Allied World shares entitled to vote on this
proposal. Votes for, votes against and
abstentions count as votes cast, while broker non-votes do not
count as votes cast for this purpose. All outstanding Allied
World shares count as shares entitled to vote. Thus, the total
sum of votes for, plus votes against,
plus abstentions, which we refer to as the NYSE votes
cast, must be greater than 50% of the total outstanding
Allied World shares. The number of votes for the
proposal must be greater than 50% of the NYSE votes cast.
The Allied World board of directors unanimously recommends a
vote FOR the proposal to issue the Allied World
shares to Transatlantic stockholders pursuant to the merger and
as contemplated by the merger agreement as required by NYSE
rules.
125
AMENDED
AND RESTATED ARTICLES OF ASSOCIATION OF ALLIED
WORLD
The Allied World board of directors proposes to the Allied World
shareholders, subject to completion of the merger, to amend the
Allied World Articles to change Allied Worlds name to
TransAllied Group Holdings, AG. The form of the
amended Articles of Association, which is also referred to as
the TransAllied Articles herein, is included in this joint proxy
statement/prospectus as Annex D. The adoption of the
amended Articles of Association is a condition to completion of
the merger. In the event this proposal is approved by Allied
World shareholders but the merger is not completed, the
TransAllied Articles will not become effective.
Approval of the amendment to the articles to change Allied
Worlds name to TransAllied Group Holdings, AG
requires a majority of the votes cast voting in favor of such
proposal at the Allied World Special Shareholder Meeting where
holders of at least 50% of the total outstanding Allied World
shares are represented and voting, and who are entitled to vote
on such proposal. Abstentions and broker non-votes will not be
considered votes cast and will have no effect on these
proposals, assuming a quorum is present.
The Allied World board of directors unanimously recommends a
vote FOR the proposal to approve the amendment to
the Allied World Articles to change Allied Worlds name to
TransAllied Group Holdings, AG.
126
CAPITAL
REDUCTION
Allied World seeks approval of a proposal to effect a capital
reduction to allow for the payment of a dividend to the combined
companys shareholders. Swiss law requires that dividends
and distributions through a reduction in par value be approved
by shareholders. At Allied Worlds Annual Shareholder
Meeting on May 5, 2011, Allied Worlds shareholders
approved the proposal that, in lieu of an ordinary dividend, a
distribution in the aggregate amount of $1.50 per Allied World
Share be paid through a reduction in par value because payments
of amounts in reduction of share capital are not subject to the
normal Swiss withholding tax on dividends. Swiss law also
requires par value reductions to be in CHF, and accordingly the
par value of Allied World shares and Allied World non-voting
shares are expressed in CHF in the Allied World Articles.
Further, the Allied World Articles and Swiss law require that a
reduction in capital is approved by the shareholders holding a
majority of the votes cast at the Allied World Special
Shareholder Meeting.
General
Explanation of the Dividend/Capital Reduction
At Allied Worlds Annual Shareholder Meeting on May 5,
2011, the Allied World shareholders approved a proposal to pay
dividends in the form of a distribution by way of par value
reductions. The aggregate reduction amount will be paid to
Allied World shareholders in four quarterly installments of
$0.375 per share (the May 2011 Resolutions). Prior
to the closing of the merger, which the parties expect to occur
in the fourth quarter of 2011, it is anticipated that Allied
World will distribute the first of these dividends on
August 5, 2011 to shareholders of record on July 27,
2011 and expects to pay the second of these quarterly dividends
in October 2011 prior to the closing of the merger.
Under Swiss law, a corporation is under the duty to treat all
shareholders equally. Hence, following the expected closing of
the merger, Allied World (re-named TransAllied following the
closing of the merger) will seek to pay the third and fourth
installments of its quarterly dividend to the combined
companys shareholders. Because the merger will result in
the issuance of a significant number of new shares to the former
shareholders of Transatlantic, the aggregate reduction amount
necessary to pay a $0.375 per share quarterly dividend will
increase significantly. The purpose of this proposal is to
approve an aggregate reduction amount such that TransAllied will
be able to pay the remaining two installments of a $0.375 per
share dividend to the combined companys shareholders.
TransAllied would expect to make these payments in January 2012
and April 2012.
Any declaration and payment of dividends by Allied World (or
TransAllied following the merger) will depend upon Allied
Worlds (or TransAllieds) results of operations,
financial condition and cash requirements, and will be subject
to Swiss law and other related factors described in Allied
Worlds proxy statement for its Annual Shareholder Meeting
in 2011.
For purposes of Swiss corporate law, the May 2011 Resolutions
regarding the capital reduction need to be cancelled after the
payment of the second installment scheduled for October 2011 and
replaced by new resolutions that will ensure that the combined
companys shareholders are treated equally with respect to
the payment of the dividend through a reduction in par value.
Under the assumption that the combined companys
shareholders will be entitled to receive the third and the
fourth installment of the quarterly dividend, the agenda item
below calls for a par value reduction in an aggregate amount of
CHF
(the Base Dividend), payable in two installments of
CHF
each. If at the time of the Allied World Special Shareholder
Meeting more or less than two partial par value reductions based
on the May 2011 Resolutions have already been effected, the
resolutions described below will be amended in order to take
into account these changed circumstances.
Agenda
Item
It is proposed that the May 2011 Resolutions be cancelled
insofar as they have not already been completed as of the day
immediately following the payment of the second installment
provided therein.
Based on a report in accordance with Article 732
paragraph 2 of the Swiss Code of Obligations to be provided
by Deloitte AG, as an auditor supervised by the Swiss
authorities, it is proposed that the Allied World shareholders
voting (in person or by proxy) at the Allied World Special
Shareholder Meeting approve
127
the following dividend in the form of a distribution by way of a
par value reduction. Such resolutions shall become effective on
the day immediately following the payment of the second
installment provided in the May 2011 Resolutions. Pursuant to
Swiss law, Allied World is required to submit to the Allied
World shareholders for approval both the English and the
(authoritative) German versions of the proposed amendments to
the Allied World Articles:
1. The capital of Allied World (to be renamed TransAllied
following the closing of the merger) in the aggregate amount of
[CHF ]
(after the first and second partial par value reductions
pursuant to the May 2011 Resolutions) shall be reduced by an
amount of CHF [ (numbers of Total
Shares) × (Aggregate Reduction Amount as determined
in paragraph 3(i)) ] (the Aggregate Distribution
Amount) to CHF [ completed at the
date of the Shareholder Meeting (the Shareholder
Meeting Date)] (i.e., the share capital of
[CHF ]
(after the first and second partial par value reductions
pursuant to the May 2011 Resolutions) shall be reduced by an
amount of CHF [ completed on
Shareholder Meeting Date] to CHF
[ completed on Shareholder Meeting Date]
and the participation capital of
CHF
(after the first and second partial par value reductions
pursuant to the May 2011 Resolutions) shall be reduced by the
amount of CHF [ completed on
Shareholder Meeting Date] to
CHF [ completed on Shareholder Meeting
Date]).
2. Based on the report of the auditor
dated , 2011, it
is recorded that the claims of the creditors of the Allied World
(TransAllied following the merger) are fully covered even after
taking into account the Partial Par Value Reductions (as defined
below).
3. The capital reduction shall be executed as follows:
i. The capital reduction shall occur by reducing the par
value per Allied World share and Allied World non-voting share
from
CHF [ ]
(i.e., after the first and second partial par value reductions
pursuant to the May 2011 Resolutions) by CHF (USD 0.75
× the Foreign Exchange Rate) (Aggregate Reduction
Amount) to
CHF
in two steps (each, a Partial Par Value Reduction):
(1) for the first partial par value reduction from CHF
[ completed on Shareholder Meeting Date]
by CHF [ Aggregate Reduction Amount
divided by two] to CHF [ completed on
Shareholder Meeting Date] by the end of December 2011
(first Partial Par Value Reduction); and
(2) for the second partial par value reduction from CHF
[ completed on Shareholder Meeting Date]
by CHF [ Aggregate Reduction Amount divided
by two] to CHF [ completed on
Shareholder Meeting Date] by the end of April 2012
(second Partial Par Value Reduction).
ii. The Aggregate Reduction Amount shall be repaid to the
Allied World shareholders (TransAllied following the merger) in
installments of CHF [ (completed on
Shareholder Meeting Date)] in January 2012 and
CHF [ (completed on Shareholder Meeting
Date)] in April 2012 per Allied World share and Allied World
non-voting shares.
iii. At each Partial Par Value Reduction an updated report
in accordance with Article 732 paragraph 2 of the
Swiss Code of Obligations by Deloitte AG, an audit company under
oversight of the Swiss authorities shall be prepared (an
Updated Report).
iv. The Allied World board of directors is only authorized
to repay a Partial Par Value Reduction amount in the event the
Updated Report confirms that the claims of creditors are fully
covered in spite of the Partial Par Value Reduction.
v. In addition, under Swiss law, upon satisfaction of all
legal requirements (including shareholder approval of a par
value reduction as described in this proposal), Allied World
will be required to submit an application to the Commercial
Register in the Canton of Zug to register each applicable par
value reduction. Without effective registration of the
applicable par value reduction with the Commercial Register in
the Canton of Zug, Allied World will not be able to proceed with
the payment of any installment of the dividend as described in
this proposal. Allied World cannot assure you that the
Commercial Register in the Canton of Zug will approve the
registration of any applicable par value reduction.
128
4. The Partial Par Value Reduction amount of CHF
[ completed on Shareholder Meeting Date]
per Allied World share and Allied World non-voting share (the
Distribution Amount) pursuant to paragraph 3(i)
and (ii) equals USD 0.375 (the U.S. Dollar
Amount) based on a USD/CHF exchange ratio of
CHF [ completed on Shareholder Meeting
Date] (rounded down to the next whole cent) per $1 (being
the Foreign Exchange Rate). The Distribution Amount and the
Aggregate Distribution Amount pursuant to paragraph 1 are
subject to the following adjustments as a result of
USD/CHF
currency fluctuations:
i. The Distribution Amount is to be adjusted as a result of
currency fluctuations such that each Allied World share and
Allied World non-voting share Partial Par Value Reduction amount
shall equal an amount calculated as follows (rounded down to the
next whole cent):
Distribution Amount = U.S. Dollar Amount x USD/CHF currency
exchange ratio as published in The Wall Street Journal on
December 19, 2011 for the first Partial Par Value Reduction
and on March 19, 2012, for the second Partial Par Value
Reduction.
If as a result of one or several adjustments the Aggregate
Distribution Amount would otherwise be increased by more than
CHF [ (number of Total Shares)
multiplied by the Aggregate Reduction Amount divided by two]
(corresponding to 50% of the Aggregate Distribution Amount set
forth in paragraph 1, rounded to the nearest cent), the
adjustment is limited such that the aggregate increase to the
Aggregate Distribution Amount rounded to the nearest cent equals
CHF [ completed on Shareholder Meeting
Date] (being CHF [ (50% of the
Aggregate Distribution Amount) divided by the number of Total
Shares, rounded up or down to the next cent] per Allied
World voting share and Allied World non-voting share.
ii. The Aggregate Distribution Amount pursuant to
paragraph 1 shall be adjusted as follows:
Sum of the two Distribution Amounts (adjusted pursuant to
Section 4(i)) x number of Allied World shares and Allied
World non-voting shares registered in the Commercial Register of
the Canton of Zug as issued and outstanding on the date of the
registration of the respective Partial Par Value Reduction).
5. The Aggregate Distribution Amount pursuant to
paragraph 1 (as adjusted pursuant to paragraph 4 (ii))
shall be increased by par value reductions on Allied World
shares that are issued (i) in the course of ordinary
capital increases, particularly in relation to the merger,
(ii) from authorized share capital and (iii) from
conditional share capital after the Allied World Special
Shareholder Meeting but before the date of the registration in
the Commercial Register of the respective Partial Par Value
Reductions (this applies also to shares issued from conditional
share capital that have not been registered in the Commercial
Register of the Canton of Zug at such date). In the case of such
capital increases the maximum amount set forth in
paragraph 4 (i) shall also be increased so that it
corresponds to 50% of the increased Aggregate Distribution
Amount but shall not be higher than
CHF .
6. The general meeting acknowledges that the report of the
auditor
dated ,
has been prepared on the basis of (i) the maximum possible
increase provided under paragraphs 4 and 5, particularly
taking into account the maximum possible increase due to the
increase of the ordinary share capital pursuant to
article 3a(a) of the Allied World Articles in relation to
the merger, and that (ii) all Allied World shares and
Allied World non-voting shares have been issued out of
conditional share capital and the authorized share capital post
merger and therefore refers to a maximum amount of
CHF .
7. The Allied World board of directors is instructed to
determine the procedure for the payment of the Distribution
Amounts.
129
8. Effective with the registrations of the respective
Partial Par Value Reductions in the Commercial Register, the
following amendments are resolved to Article 3a
subparagraph a), of the Allied World Articles:
|
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Artikel 3a
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Aktienkapital
|
|
Article 3a
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|
Share Capital
|
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a)
|
|
Das Aktienkapital der Gesellschaft beträgt CHF
[ l ]
*/
[ l ]
** und ist eingeteilt in
[ l ]
auf den Namen lautende Aktien im Nennwert von CHF
[ l ]
*/
[ l ]
** je Aktie. Das Aktienkapital ist vollständig
liberiert.
|
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a)
|
|
The share capital of the Company amounts to CHF
[ l ]
*/
[ l ]
** and is divided into
[ l ]
registered shares with a par value of CHF
[ l ]
*/
[ l ]
** per share. The share capital is fully paid-in.
|
*
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|
nach der ersten Teilnennwertherabsetzung gemäss Ziffer 3
bis Ende Januar 2012 mit konkreter Zahl aufgrund Anpassung
gemäss Ziffer 4 und 5 und mit Statutendatum [Allied
World Special Shareholder Meeting Date]
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*
|
|
Upon completion of the first Partial Par Value Reduction until
the end of January 2012 with specific numbers based on
adjustments pursuant to paragraph 4 and 5 above and the Articles
of Association being dated [Allied World Special Shareholder
Meeting Date]
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**
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nach der zweiten Teilnennwertherabsetzung gemäss Ziffer 3
bis Ende April 2012 mit konkreter Zahl aufgrund Anpassung
gemäss Ziffer 4 und 5 und mit Statutendatum [Allied
World Special Shareholder Meeting Date]
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**
|
|
Upon completion of the second Partial Par Value Reduction until
the end of April 2012 with specific numbers based on adjustments
pursuant to paragraph 4 and 5 above and the Articles of
Association being dated [Allied World Special Shareholder
Meeting Date]
|
Please note that the asterisks above also apply to
Articles 3b, 4, 5, 5a and 6 below.
9. Effective with the registrations of the respective
quarterly Partial Par Value Reductions in the Commercial
Register, the following amendments are resolved to
Article 3b subparagraph a), of the Allied World Articles:
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Artikel 3b
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Partizipationskapital
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Article 3b
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Participation Capital
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a)
|
|
Das Partizipationskapital der Gesellschaft beträgt CHF
[ l ]
*/
[ l ]
** und ist eingeteilt in
[ l ]
Partizipationsscheine lautend auf den Namen im Nennwert von CHF
[ l ]
*/
[ l ]
** je Partizipationsschein. Das Partizipationskapital ist
vollständig liberiert.
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a)
|
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The participation capital of the Company amounts to CHF
[ l ]
*/
[ l ]
** and is divided into
[ l ]
registered participation certificates with a par value of CHF
[ l ]
*/
[ l ]
** / per participation certificate. The participation capital is
fully paid-in.
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130
10. Effective with the registrations of the respective
quarterly Partial Par Value Reductions in the Commercial
Register, the following amendments are resolved to
Article 4 subparagraph a), 5 subparagraph a), 5a
subparagraph a) and 6 subparagraph a) of the Allied
World Articles:
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Bedingtes Aktienkapital
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Conditional Share Capital
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für Anleihensobligationen und
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for Bonds and Similar Debt
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Artikel 4
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ähnliche Instrumente der Fremdfinanzierung
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Article 4
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Instruments
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a)
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Das Aktienkapital der Gesellschaft wird im Maximalbetrag von
CHF[ l ]*/[ l ]
** durch Ausgabe von höchstens 1,000,000 vollständig
zu liberierenden Namenaktien mit einem Nennwert von CHF
[ l ]
*/
[ l ]
** je Aktie erhöht, bei und im Umfang der Ausübung von
Wandel- und/oder Optionsrechten, welche im Zusammenhang mit von
der Gesellschaft oder ihren Tochtergesellschaften emittierten
oder noch zu emittierenden Anleihensobligationen, Notes oder
ähnlichen Obligationen oder Schuldverpflichtungen
eingeräumt wurden/werden, einschliesslich
Wandelanleihen.
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a)
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The share capital of the Company shall be increased by an amount
not exceeding
CHF [ l ]
*/
[ l ]
** through the issue of a maximum of 1,000,000 registered
shares, payable in full, each with a par value of CHF
[ l ]
*/
[ l ]**
through the exercise of conversion and/or option or warrant
rights granted in connection with bonds, notes or similar
instruments, issued or to be issued by the Company or by
subsidiaries of the Company, including convertible debt
instruments.
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Bedingtes Aktienkapital für
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Conditional Share Capital
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Artikel 5
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Mitarbeiterbeteiligungen
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Article 5
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for Employee Benefit Plans
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a)
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Das Aktienkapital der Gesellschaft wird im Maximalbetrag von CHF
[ l ]*/[ l ]**
durch Ausgabe von höchstens
[ l ]
vollständig zu liberierenden Namenaktien mit einem Nennwert
von CHF
[ l ]*/[ l ]**
je Aktie erhöht bei und im Umfang der Ausübung von
Optionen, welche Mitarbeitern der Gesellschaft oder
Tochtergesellschaften sowie Beratern, Direktoren oder anderen
Personen, welche Dienstleistungen für die Gesellschaft oder
ihre Tochtergesellschaften erbringen, eingeräumt
wurden/werden.
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a)
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The share capital of the Company shall be increased by an amount
not exceeding CHF
[ l ]*/[ l ]**
through the issue from time to time of a maximum of
[ l ]
registered shares, payable in full, each with a par value of CHF
[ l ]*/[ l ]**,
in connection with the exercise of option rights granted to any
employee of the Company or a subsidiary, and any consultant,
director or other person providing services to the Company or a
subsidiary.
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Bedingtes Kapital für
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Conditional Capital for
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Artikel 5a
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bestehende Aktionärsoptionen
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Article 5a
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Existing Shareholder Warrants
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a)
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Das Aktienkapital der Gesellschaft wird im Maximalbetrag von CHF
[ l ]
*/
[ l ]
** durch Ausgabe von höchstens 2,000,000 vollständig
zu liberierenden Namenaktien mit einem Nennwert von CHF
[ l ]*/[ l ]
** je Aktie erhöht bei und im Umfang der Ausübung von
Optionen, welche American International Group, Inc.
eingeräumt wurden.
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a)
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The share capital of the Company shall be increased by an amount
not exceeding CHF
[ l ]
*/
[ l ]
**, through the issue from time to time of a maximum of
2,000,000 registered shares payable in full, each with a par
value of CHF
[ l ]
*/
[ l ]
**, in connection with the exercise of shareholder warrants
granted to American International Group, Inc.
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131
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Genehmigtes Kapital zu
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Authorized Share Capital
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Artikel 6
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allgemeinen Zwecken
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Article 6
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for General Purposes
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a)
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Der Verwaltungsrat ist ermächtigt, das Aktienkapital
jederzeit bis (zwei Jahre nach dem Datum der
Generalversammlung) im Maximalbetrag von CHF
[ l ]
*/
[ l ]
** durch Ausgabe von höchstens
[ l ]
vollständig zu liberierenden Namenaktien mit einem Nennwert
von CHF
[ l ]
*/
[ l ]**
je Aktie zu erhöhen.
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a)
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The Board of Directors is authorized to increase the share
capital from time to time and at any time (two years after
the Allied World Special Shareholder Meeting) by an amount
not exceeding CHF
[ l ]
*/
[ l ]**
through the issue of up to
[ l ]
fully paid up registered shares with a par value of CHF
[ l ]
*/
[ l ]
** each.
|
The Allied World board of directors unanimously recommends a
vote FOR the proposal to increase the aggregate
reduction amount, in connection with the previously-approved
Allied World dividend, to allow for the payment of the dividend
to all TransAllieds shareholders after the effective time
of the merger.
132
ELECTION
OF DIRECTORS
The Allied World board of directors is divided into three
classes of directors, Class I, Class II and
Class III, each of approximately equal size. Three director
nominees, Ian H. Chippendale, John L. McCarthy, and one former
independent Allied World director, are being presented for
election at the Allied World Special Shareholder Meeting to
serve as Class II directors, with a term commencing upon
the completion of the merger and ending upon TransAllieds
Annual Shareholder Meeting in 2012. Four director nominees
Stephen P. Bradley, John G. Foos and two former independent
Allied World directors, are being presented for election at the
Allied World Special Shareholder Meeting to serve as
Class III directors, with a term commencing upon the
completion of the merger and ending upon TransAllieds
Annual Shareholder Meeting in 2013. Four director nominees Scott
A. Carmilani, Richard S. Press, Michael C. Sapnar, and one
former independent Allied World director, are being presented
for election at the Allied World Special Shareholder Meeting to
serve as Class I directors, with a term commencing upon the
completion of the merger and ending upon TransAllieds
Annual Shareholder Meeting in 2014. The foregoing director
elections are conditioned upon completion of the merger. In the
event that the merger is not completed, the foregoing director
elections will not take effect. The following sets forth the
age, position and class of the director nominees who are being
presented for election the Allied World Special Shareholder
Meeting:
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Name
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Age
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Class
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Position at TransAllied
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Scott A. Carmilani
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46
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I
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Director, President and Chief Executive Officer
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Richard S. Press
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72
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I
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Director and Non-Executive Chairman
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Michael C. Sapnar
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45
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I
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Director, President and Chief Executive Officer, Global
Reinsurance
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Ian H. Chippendale
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62
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II
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Independent Director
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John L. McCarthy
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63
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II
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Independent Director
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Stephen P. Bradley
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70
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III
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Independent Director
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John G. Foos
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61
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III
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Independent Director
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In addition, the Allied World director nominees will consist of
four of the following current Allied World directors listed
below. The identity of the Allied World director nominees, and
the class in which they will serve, will be identified to
shareholders at or prior to the Allied World Special Shareholder
Meeting.
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Name
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Age
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Current Position at Allied World
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Barbara T. Alexander
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62
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Independent Director
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James F. Duffy
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67
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Independent Director
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Bart Friedman
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66
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Independent Director
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Scott Hunter
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59
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Independent Director
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Mark R. Patterson
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59
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Independent Director
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Patrick de Saint-Aignan
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62
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Independent Director
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Samuel J. Weinhoff
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60
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Independent Director
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The biography of each nominee below contains information
regarding the persons service as a director on either the
Allied World board or Transatlantic board, his or her business
experience, director positions at other companies held currently
or at any time during the last five years, and their applicable
experiences, qualifications, attributes and skills.
Scott A. Carmilani was elected Allied Worlds President and
Chief Executive Officer in January 2004, became a director in
September 2003 and was appointed Chairman of the Board in
January 2008. Mr. Carmilani was, prior to joining Allied
World as Executive Vice President in February 2002, the
President of the Mergers & Acquisition Insurance
Division of subsidiaries of American International Group, Inc.
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
133
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
Allied World, he held a succession of underwriting and
management positions with subsidiaries of AIG since 1987. Among
other qualifications, Mr. Carmilanis extensive
expertise and experience in the insurance and reinsurance
industry give him the skills to serve as a director.
Richard S. Press has served as director of Transatlantic since
2006 and as non-executive chairman of the Transatlantic board of
directors since 2009. Mr. Press has also served as a
director of TRC and of Putnam since 2006. Mr. Press is the
retired Senior Vice President and Director of Insurance Asset
Management Group Wellington Management Company, LLP, where he
worked from 1994 to 2006. From 1982 to 1984, Mr. Press
served as Senior Vice President and Director, Insurance Asset
Management at Stein, Roe & Farnham where he managed
equity and fixed income securities. From 1964 to 1982,
Mr. Press served as Vice President-Investments at Scudder
Stevens & Clark where he managed equity and taxable
and tax exempt fixed income investments for insurance companies,
institutional clients, eleemosynary funds, retirement plans, and
individual clients. Mr. Press is also the current Vice
Chairman of the Equity Securities Bankruptcy Committee for
HearUSA. Among other qualifications, Mr. Press
significant experience in asset management, which includes
service as the Senior Vice President and Director of the
Insurance Asset Management Group of Wellington Management
Company, as well as his extensive board service and experience
with both public and non-public entities give him the skills to
serve as director.
Michael C. Sapnar was appointed Transatlantics Executive
Vice President and Chief Operating Officer on May 19, 2011.
On May 20, 2011, at a meeting of the Transatlantic board of
directors following the annual meeting of shareholders, the
board of directors elected Mr. Sapnar to the Transatlantic
board of directors. From May 2006 until May 2011, Mr.
Sapnar served as Executive Vice President and Chief Underwriting
Officer, Domestic Operations of Transatlantic, TRC and Putnam by
election of the Transatlantic board of directors in May 2006.
From December 2005 to May 2006, Mr. Sapnar was Senior Vice
President and Chief Underwriting Officer, Domestic Operations of
Transatlantic. From December 2004 to the present,
Mr. Sapnar has served as a Director of TRC and Putnam, but
not of Transatlantic. From March 2002 to May 2006,
Mr. Sapnar was Senior Vice President and Chief Underwriting
Officer, Domestic Operations of TRC and Putnam. Among other
qualifications, Mr. Sapnars broad experience in the
industry as well as his understanding of the business give him
the skills to serve as director.
Ian H. Chippendale has served as a director of Transatlantic
since 2007. Mr. Chippendale has also served as a director
of TRC and of Putnam since 2007. Mr. Chippendale is a
retired Chairman of RBS Insurance Group, Ltd. (Insurance), where
he worked from February 1993 to December 2006. From September
1971 to January 1993, Mr. Chippendale held various
positions at Provident Financial PLC, including, most recently,
executive director. Mr. Chippendale also serves a Director
of HomeServe plc. Among other qualifications,
Mr. Chippendales insurance industry knowledge and his
international experience, including his service as the Chairman
of RBS Insurance Group, Ltd. give him the skills to serve as
director.
John L. McCarthy has served as a director of Transatlantic since
2008. Mr. McCarthy has also served as a director of TRC and
of Putnam since 2008. Mr. McCarthy is the President of the
Risk Management Foundation of the Harvard Medical Institutions,
Inc. (risk management), which insures 12,000 physicians and 23
hospitals for professional liability and insures over 100,000
nurses, physician assistants, and clinical support staff.
Mr. McCarthy is also the current chair of the Hospital
Insurance Forum, a group of 20 professional liability insurance
programs in the U.S. and Canada. Among other
qualifications, Mr. McCarthys expertise in risk
management as well as his experience as a Chief Executive
Officer of an insurance industry-related company give him the
skills to serve as director.
Stephen P. Bradley has served as a director of Transatlantic
since 2010. Mr. Bradley has also served as a director of
TRC and of Putnam since 2010. Mr. Bradley is the William
Ziegler Professor of Business Administration, Emeritus at
Harvard Business School, where he served as Senior Associate
Dean for Faculty Development, Associate Director of Research,
Unit Chair of Managerial Economics, and Unit Chair of
Competition and Strategy. Mr. Bradley also serves as a
Director of CIENA Corp. and as a Director of the Risk Management
Foundation of the Harvard Medical Institutions, Inc.
Mr. Bradley previously served as a Director
134
of i2 Technologies, Inc., XcelleNet, Inc., and Roadmaster
Industries, Inc. Among other qualifications,
Mr. Bradleys academic experience at the Harvard
Business School relating to his work as a professor of
competitive and corporate strategy and his considerable
experience as a director of public companies give him the skills
to serve as director.
John G. Foos has served as director of Transatlantic since 2007.
Mr. Foos has also served as a director of TRC and of Putnam
since 2007. Mr. Foos is a retired Chief Financial Officer,
Independence Blue Cross (health insurance), where he worked from
June 1989 to November 2008. From July 1971 to June 1989,
Mr. Foos was a partner at KPMG Peat Marwick, an
internationally recognized accounting firm. Mr. Foos also
serves as a Director of Blue Cross Blue Shield of South Carolina
and as a Director and Chairman of the Board of the Plan
Investment Fund. Among other qualifications, Mr. Foos
extensive experience in and knowledge of accounting and finance,
which includes service as the Chief Financial Officer of
Independence Blue Cross in addition to his experience as a
Partner with KPMG give him the skills to serve as director.
The biographies of the current independent Allied World
directors are included below. Four of the following individuals
will be named as director nominees, at or prior to the Allied
World Special Shareholder Meeting.
Barbara T. Alexander was appointed to the Allied World board of
directors in August 2009. Ms. Alexander has been an
independent consultant since January 2004. Prior to that, she
was a Senior Advisor to UBS Warburg LLC and predecessor firms
from October 1999 to January 2004, and Managing Director of the
North American Construction and Furnishings Group in the
Corporate Finance Department of UBS from 1992 to October 1999.
From 1987 to 1992, Ms. Alexander was a Managing Director in
the Corporate Finance Department of Salomon Brothers Inc. From
1972 to 1987, she held various positions at Salomon Brothers,
Smith Barney, Investors Diversified Services, and Wachovia Bank
and Trust Company. Ms. Alexander is currently a member
of the Board of Directors of QUALCOMM Incorporated, where she is
a member of both the Audit Committee and Compensation Committee,
and KB Home, where she is a member of the Audit and Compliance
Committee. Ms. Alexander previously served on the board of
directors of Federal Home Loan Mortgage Corporation (Freddie
Mac) from November 2004 to March 2010, Centex Corporation from
July 1999 to August 2009, Burlington Resources Inc. from January
2004 to March 2006 and Harrahs Entertainment Inc. from
February 2002 to April 2007. Ms. Alexander was selected as
one of seven Outstanding Directors in Corporate America in 2003
by Board Alert magazine and was one of five Director of the Year
honorees in 2008 by the Forum for Corporate Directors. She has
also served on the board of directors of HomeAid America,
Habitat for Humanity International and Covenant House. Having
been a member of numerous public company boards of directors,
Ms. Alexander is familiar with a full range of corporate
and board functions. She also has extensive experience in
corporate finance, investment and strategic planning matters.
Among other qualifications, Ms. Alexanders extensive
experience in corporate finance, investment and strategic
planning matters give her the skills to serve as a director.
James F. Duffy was appointed to the Allied World board of
directors 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. Among other qualifications,
Mr. Duffys extensive expertise and experience in the
insurance and reinsurance industry give him the skills to serve
as a director.
Bart Friedman was appointed to the Allied World board of
directors in March 2006, was elected Deputy Chairman of the
Board in July 2006 and was appointed Lead Independent Director
of the Board in January 2008. 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 chairman of the
135
Nominating and Governance Committee. He is also the chairman of
the Public Responsibility and Ethics Committee of The Brookings
Institution. Among other qualifications,
Mr. Friedmans extensive expertise and experience in
corporate finance and corporate governance matters give him the
skills to serve as a director.
Scott Hunter was appointed to the Allied World board of
directors 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. Among other
qualifications, Mr. Hunters broad insurance and
reinsurance industry experience and expertise specifically with
regard to insurance and reinsurance corporate finance and
accounting matters give him the skills to serve as a director.
Mark R. Patterson was appointed to the Allied World board of
directors 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 35 years prior
experience in commercial and investment banking at Bankers
Trust, Salomon Brothers and Scully Brothers & Foss.
Mr. Patterson currently serves on behalf of
MatlinPattersons funds as a member of the board of
directors of Gleacher & Company, Inc. (formerly known
as Broadpoint Securities Group, Inc.) and Flagstar Bancorp, Inc.
Mr. Patterson has served on behalf of
MatlinPattersons funds as a member of the board of
directors of Polymer Group, Inc. from May 2008 to December 2010
and Thornburg Mortgage Inc. from April 2008 to March 2009.
Having been a member of numerous company boards of directors,
Mr. Patterson is familiar with a full range of corporate
and board functions. Among other qualifications,
Mr. Pattersons extensive experience in corporate
finance, risk management, investment and strategic planning
matters give him the skills to serve as a director.
Patrick de Saint-Aignan was appointed to the Allied World board
of directors in August 2008. Mr. de Saint-Aignan has held
multiple positions at Morgan Stanley internationally from 1974
to 2007, where he was a Managing Director and, most recently, an
Advisory Director. He held responsibilities in corporate finance
and capital markets and headed successively Morgan
Stanleys global fixed income derivatives and debt capital
markets activities, its office in Paris, France, and the
firm-wide risk management function. He was also a Founder,
Director and Chairman of the International Swaps and Derivatives
Association
(1985-1992),
Censeur on the Supervisory Board of IXIS Corporate and
Investment Bank
(2005-2007)
and a member of the board of directors of Bank of China Limited
(2006-2008),
where he was Chairman of the Audit Committee and a member of the
Risk Policy Committee and the Personnel and Remuneration
Committee. Mr. de Saint-Aignan is currently a member of the
board of directors of State Street Corporation, where he is a
member of its Risk and Capital Committee. Among other
qualifications, Mr. de Saint-Aignans broad experience and
expertise in corporate finance, risk management and investment
matters as well as his international business background give
him the skills to serve as a director.
Samuel J. Weinhoff was appointed to the Allied World board of
directors 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 the
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 the Executive
Committee, the Nominating and Governance Committee and the Audit
Committee. Mr. Weinhoff served on the board of directors of
Inter-Atlantic Financial, Inc. from July 2007 to October 2009.
Among other qualifications, Mr. Weinhoffs extensive
insurance and reinsurance industry experience as well as
expertise in corporate finance, investment and strategic
planning matters give him the skills to serve as a director.
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 the Allied World board of directors
shall recommend.
136
Allied World requires that a majority of its directors meet the
criteria for independence under applicable law and the rules of
the NYSE. The Allied World board of directors 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 the
NYSE as well as standards published by institutional investor
groups and other corporate governance experts. A copy of the
Allied World board policy on director independence was attached
as an appendix to Allied Worlds Proxy Statement filed with
the SEC on March 20, 2009.
Approval of the proposal to elect each of the directors requires
a majority of the votes cast voting in favor of such proposal at
the Allied World Special Shareholder Meeting where holders of at
least 50% of the total outstanding Allied World shares are
represented and voting and who are entitled to vote on such
proposal. Abstentions and broker non-votes will not be
considered votes cast and will have no effect on these
proposals, assuming a quorum is present.
Shareholders are being asked to vote for,
against or to abstain from voting on,
each of the seven Allied World director nominees who are former
Allied World independent directors: Barbara T. Alexander, James
F. Duffy, Bart Friedman, Scott Hunter, Mark R. Patterson,
Patrick de Saint-Aignan and Samuel J. Weinhoff. At or prior to
the Allied World Special Shareholder Meeting, three of these
seven director nominees will withdraw as nominees and the four
remaining director nominees will be identified to shareholders.
If any such remaining director nominee receives a majority of
the votes cast voting in favor of their election, where holders
of at least 50% of the total outstanding Allied World shares are
represented and voting and who are entitled to vote on such
proposal, such director nominee will be elected to serve as a
member of the TransAllied board to serve in the Class as
designated by the Allied World board.
The Allied World board of directors unanimously recommends a
vote FOR the election of Ian H. Chippendale, John L.
McCarthy, and one former independent Allied World director to
serve as Class II directors to hold office commencing upon
the completion of the merger and ending upon TransAllieds
Annual Shareholder Meeting in 2012; Stephen P. Bradley, John G.
Foos, and two former independent Allied World directors to serve
as Class III directors to hold office commencing upon the
completion of the merger and ending upon TransAllieds
Annual Shareholder Meeting in 2013; and Scott A. Carmilani,
Richard S. Press, Michael C. Sapnar, and one former independent
Allied World director to serve as Class I directors to hold
office commencing upon the completion of the merger and ending
upon TransAllieds Annual Shareholder Meeting in 2014.
137
TRANSALLIED
GROUP HOLDINGS, AG
FOURTH AMENDED AND RESTATED 2004 STOCK INCENTIVE PLAN
The Allied World board of directors proposes approval of a
fourth amendment to and restatement of the Allied World
Assurance Company Holdings, AG Third Amended and Restated 2004
Stock Incentive Plan. Allied Worlds board of directors
unanimously approved the Fourth Amended and Restated 2004 Stock
Incentive Plan (which is referred to as the Amended
Plan for purposes of this proposal only) on June 30,
2011, and recommends that Allied Worlds shareholders
approve and adopt the Amended Plan. If approved by the Allied
Worlds shareholders, the Amended Plan will become
effective upon, and subject to, the closing of the merger.
On December 1, 2010, in connection with and pursuant to
Allied Worlds redomestication, Allied World assumed the
Allied World Assurance Company Holdings, Ltd Second Amended and
Restated 2004 Stock Incentive Plan from Allied World Assurance
Company Holdings, Ltd, the former publicly-traded Bermuda
holding company, and amended and restated the Second Amended and
Restated 2004 Stock Incentive Plan and renamed it the Allied
World Assurance Company Holdings, AG Third Amended and Restated
2004 Stock Incentive Plan (which is referred to as the
Current Plan for purposes of this proposal only) to
reflect such assumption.
Allied Worlds board of directors recommends approval of
the Amended Plan to:
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|
Increase by 2,000,000 shares (from 2,000,000 to 4,000,000)
the total number of registered shares that may be issued under
the Current Plan;
|
|
|
|
Extend the termination date from May 8, 2018 to
June 30, 2021, after which date no awards may be granted;
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|
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|
Replace references to Allied World Assurance Company Holdings,
AG with references to TransAllied Group Holdings, AG and
references to Allied World registered shares with references to
TransAllied Group Holdings, AG registered shares; and
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|
Permit the grant of performance-based awards that qualify as
qualified performance-based compensation within the
meaning of Section 162(m) of the Internal Revenue Code of
1986, as amended (Section 162(m)).
Section 162(m) generally disallows a tax deduction to
public companies for compensation in excess of $1,000,000 paid
to the chief executive officer and to certain other executive
officers whose compensation is required to be reported to
pursuant to the Exchange Act by reason of being among the four
most highly paid executive officers. The Amended Plan is
designed to qualify performance-based awards as qualified
performance-based compensation to ensure that the tax
deduction is available to the combined company and its
subsidiaries.
|
The Allied World board of directors adopted this amendment in
order to ensure that the combined company can continue to grant
equity-based awards following the completion of the proposed
merger at levels determined appropriate by the combined
companys board of directors or a committee thereof (the
committee). As of July 31, 2011, awards covering an
aggregate of 699,787 registered shares were outstanding under
the Current Plan, and only 280,183 Allied World shares remained
available for grant under the Current Plan. Subject to Allied
Worlds shareholders approving this proposal, an aggregate
of 2,979,970 Allied World shares will be reserved for issuance
under the Amended Plan.
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 Annex E to this joint proxy
statement/prospectus. For more information about Allied
Worlds Current Plan, please see Item 15 of Allied
Worlds Annual Report on
Form 10-K
for the fiscal year ended December 31, 2010 and
Note 12 to Allied Worlds Consolidated Financial
Statements included in Allied Worlds Annual Report on
Form 10-K
for the fiscal year ended December 31, 2010.
The changes discussed above are the only changes being proposed
to the Current Plan.
138
General
The purposes of the Amended Plan are to attract, retain, and
motivate officers, directors, employees (including prospective
employees), consultants, and others who may perform services for
the combined company, to compensate them for their contributions
to the long-term growth and profits of the combined company and
to encourage them to acquire a proprietary interest in the
success of the combined company. Allied Worlds board of
directors believes that the Amended Plan furthers these purposes
by making available sufficient shares to permit future awards by
the committee as a part of the combined companys
compensation program and believes that the Amended Plan is
important to the success of the combined company.
As of July 31, 2011, approximately 690 individuals would be
eligible to participate in the Amended Plan. The closing price
of Allied Worlds shares on the NYSE on the last trading
day prior to July 31, 2011, was $54.45 per share.
Administration
As with the Current Plan, the Amended Plan will be administered
by the committee, which, pursuant to the proposed amendment,
will be composed of not less than two outside
directors (within the meaning of Section 162(m)) and
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 the terms,
conditions, restrictions, and performance goals relating to any
award; 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 Allied World shares or cash or
other property; to determine performance goals no later than
such time as is required to ensure that an underlying award
which is intended to comply with the requirements of
Section 162(m), so complies, and to determine whether
amounts payable under an award may be deferred. The
determination of the committee on all matters relating to the
Amended Plan will be final and binding.
Awards;
Adjustments
As with the Current Plan, the Amended Plan provides for the
grant of restricted registered shares, restricted share units,
dividend equivalent rights, and other equity-based or
equity-related awards. The terms and conditions of any such
awards granted under the Amended Plan are set out in award
agreements between the combined company and the individuals
receiving such awards. No options to purchase Allied World
shares may be granted under the Amended Plan.
Restricted Allied World Shares. The committee
may grant or offer for sale restricted registered shares, which
shall be subject to a minimum vesting period of one year from
the date of grant or purchase, except in the case of an earlier
termination of employment due to death, disability, retirement
at or after age 65, or a change in control of the combined
company, or, pursuant to the proposed amendment, with respect to
an award that the committee determines is performance-based.
Restricted Share Units. A restricted share
unit entitles the holder to one Allied World share (or cash or
other property having the same value as one Allied World share)
on the applicable date of settlement, subject to a minimum
vesting period of one year from the date of grant or purchase,
except in the case of an earlier termination of employment due
to death, disability, or retirement at or after age 65, or
a change in control of the combined company, or, pursuant to the
proposed amendment, with respect to an award that the committee
determines is performance-based. Holders of restricted share
units are general unsecured creditors of the combined company
until settlement of such units.
Dividend Equivalent Rights. The committee may
include with any award under the Amended Plan a dividend
equivalent right entitling the grantee to receive amounts equal
to all or a portion of the dividends that would be paid on the
Allied World shares covered by such award if such shares had
been held by the award-holder at the time of such dividend.
Dividend equivalents may be paid to a grantee in cash,
registered shares, or such other form as determined by the
committee at the time of grant. Holders of dividend equivalent
units are general unsecured creditors of the combined company
until settlement of such units.
139
Performance Awards. Pursuant to the proposed
amendment, the committee may determine that the grant, vesting,
or settlement of an award granted under the Amended Plan may be
subject to the attainment of one or more performance goals. The
performance metrics that may be applied to an award intended to
qualify as performance-based compensation for
purposes of Section 162(m) granted under the Amended Plan
include: (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.
Other Equity-Based Awards. The committee may
grant other types of equity-based or equity-related awards
(including the grant or offer for sale of unrestricted Allied
World shares), subject to the terms and conditions as the
committee shall determine.
As with the Current Plan, under the Amended Plan, the committee
will have the authority to make appropriate adjustments to the
number of Allied World shares authorized for issuance under the
Amended Plan, the number of Allied World shares covered by each
outstanding award and the type of property to which an award is
subject, and, pursuant to the proposed amendment, the committee
will also have the authority to adjust any applicable
performance measures under any award, 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 Allied World 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 combined companys securities, the
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. The Amended Plan
provides that adjustments to awards that qualify as
qualified performance-based compensation under
Section 162(m) may not be made in a manner that would cause
the modified award to result in a loss of deduction under
Section 162(m), unless the committee specifically
determines otherwise.
Shares Subject
to the Amended Plan
Subject to Allied Worlds shareholders approving this
proposal, the total number of registered shares reserved for
issuance under the Amended Plan will be 4,000,000. During any
time that the combined company is subject to Section 162(m)
of the Code, the maximum number of Allied World shares with
respect to which awards may be granted to any individual in any
one year shall not exceed the maximum number of registered
shares available for issue under the Amended Plan. Allied World
shares granted pursuant to the Amended Plan may be authorized
but unissued Allied World shares or authorized and issued Allied
World shares acquired by the combined company for the purposes
of the Amended Plan.
Amendment
and Termination
Except as otherwise provided in an award agreement, the combined
companys board of directors retains the right to suspend,
discontinue, revise, or amend the Amended Plan without any
grantees consent, including in any manner that may
adversely affect a grantees rights with respect to an
outstanding award. While the combined companys board of
directors retains the right to terminate the Amended Plan at any
time as described above, in any case, the Amended Plan will,
subject to Allied Worlds shareholders approving this
proposal, terminate on June 30, 2021.
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 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 Plan shall be null and void, and any
award that is hedged in any manner shall immediately be
forfeited.
140
New Plan
Benefits
The grant of awards under the Amended Plan is entirely within
the discretion of the committee, and Allied World cannot
forecast the extent to which such grants will be made in the
future. Therefore, Allied World has omitted the tabular
disclosure of the benefits or amounts allocated under the
Amended Plan.
Allied
World Equity Compensation Plan Information
The following table presents information concerning Allied
Worlds equity compensation plans as of December 31,
2010.
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|
|
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|
|
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Number of Securities
|
|
|
|
Number of Securities
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|
|
|
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Remaining Available
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|
|
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to be Issued
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|
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Weighted-Average
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for Future Issuance
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|
|
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Upon Exercise of
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Exercise Price of
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Under Equity Compensation
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|
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Outstanding Options,
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|
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Outstanding Options,
|
|
|
Plans (Excluding Securities
|
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Plan Category
|
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Warrants and Rights
|
|
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Warrants and Rights
|
|
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Reflected in the First Column)
|
|
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Equity compensation plans approved by Shareholders
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2,123,817
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(1)
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$
|
38.77
|
|
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3,196,202
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(3)
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Equity compensation plans not approved by Shareholders
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773,411
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(2)
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0
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(4)
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Total
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2,897,228
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$
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38.77
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3,196,202
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(1) |
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Represents 1,272,739 stock options granted under Allied
Worlds Third Amended and Restated 2001 Employee Stock
Option Plan, which have a weighted average remaining contractual
life of 6.8 years and 851,078 Allied World shares granted
pursuant to restricted share units awarded under the Current
Plan. The weighted average exercise price reported in column
(b) does not take the restricted share units into account. |
|
(2) |
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Represents 773,411 performance shares granted under Allied
Worlds Third Amended and Restated Long-Term Incentive Plan
(the LTIP). The LTIP provides for performance-based
equity awards representing the right to receive a number of
Allied World shares in the future, based upon the achievement of
established performance criteria during the applicable
three-year performance period. The performance-based equity
awards granted under the LTIP do not have an exercise price. |
|
(3) |
|
Represents 1,810,557 Allied World shares available for future
grants in the form of options under Allied Worlds Third
Amended and Restated 2001 Employee Stock Option Plan, 443,644
Allied World shares available for future grants in the form of
restricted share units under the Current Plan and 942,001 Allied
World shares available for future purchases under Allied
Worlds Amended and Restated 2008 Employee Share Purchase
Plan. |
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(4) |
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As of December 31, 2010, there were no Allied World shares
remaining for issuance under the LTIP. For more information
about the LTIP, please see Note 12 to Allied Worlds
Consolidated Financial Statements included in Allied
Worlds Annual Report on
Form 10-K
for the fiscal year ended December 31, 2010. |
Allied
World and Transatlantic Equity Compensation Plan
Information
The following table presents information concerning Allied
Worlds plans, as reflected in the prior table, and
Transatlantics equity compensation plans as of
July 31, 2011.
The information in the following table assumes that the merger
was consummated on July 31, 2011 and immediately prior to
the population of the table, such that (x) the number of
Transatlantic securities underlying outstanding awards,
(y) the number of Transatlantic securities available for
future issuance, and (z) the weighted average exercise
prices of outstanding Transatlantic awards, have been adjusted
or converted in
141
accordance with the merger agreement (as described in more
detail under the caption The Merger Treatment
of Transatlantic Stock Options and Other Long-Term Incentive
Awards).
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|
|
|
|
|
|
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Number of Securities
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|
|
|
Number of Securities
|
|
|
|
|
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Remaining Available
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|
|
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to be Issued
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|
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Weighted-Average
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|
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for Future Issuance
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|
|
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Upon Exercise of
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|
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Exercise Price of
|
|
|
Under Equity Compensation
|
|
|
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Outstanding Options,
|
|
|
Outstanding Options,
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|
|
Plans (Excluding Securities
|
|
Plan Category
|
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Warrants and Rights
|
|
|
Warrants and Rights
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|
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Reflected in the First Column)
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|
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Equity compensation plans approved by Allied World Shareholders
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2,298,217
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(1)
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$
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45.65
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2,560,782
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(3)
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Equity compensation plans not approved by Allied World
Shareholders
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4,582,840
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(2)
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$
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71.58
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1,287,621
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(4)
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Total
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6,881,057
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$
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59.32
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3,848,403
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(1) |
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Represents 1,598,430 stock options granted under Allied
Worlds Third Amended and Restated 2001 Employee Stock
Option Plan, which have a weighted average remaining contractual
life of 7.28 years and 699,787 Allied World shares granted
pursuant to restricted share units awarded under Allied
Worlds Current Plan. The weighted average exercise price
reported in column (b) does not take the restricted share
units into account. |
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(2) |
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Represents 462,015 performance shares granted under the LTIP,
1,781,872 stock options granted under the Transatlantic
Holdings, Inc. 2000 Stock Option Plan, which have a weighted
average remaining contractual life of 3.09 years, and
2,338,953 service and performance restricted stock units granted
under the Transatlantic Holdings, Inc. 2003 Stock Incentive
Plan, Transatlantic Holdings, Inc. 2008 Non-Employee
Directors Stock Plan, and the Transatlantic Holdings, Inc.
2009 Long Term Equity Incentive Plan. Transatlantics 2000
Stock Option Plan, 2003 Stock Incentive Plan, 2008 Non-Employee
Directors Stock Plan, and 2009 Long Term Equity Incentive
Plan were previously approved by Transatlantics
shareholders, and future grants under these plans will only be
made to persons who were employees of Transatlantic prior to the
merger. The LTIP provides for performance-based equity awards
representing the right to receive a number of Allied World
shares in the future, based upon the achievement of established
performance criteria during the applicable three-year
performance period. The weighted average exercise price reported
in column (b) does not take the performance-based equity
awards granted under the LTIP, the Transatlantic service
restricted stock units, or the Transatlantic performance
restricted stock units into account. |
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(3) |
|
Represents 1,351,168 registered shares available for future
grants in the form of options under Allied Worlds Third
Amended and Restated 2001 Employee Stock Option Plan, 280,183
Allied World shares available for future grants in the form of
restricted share units under the Current Plan and 929,431 Allied
World shares available for future purchases under Allied
Worlds Amended and Restated 2008 Employee Share Purchase
Plan. |
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(4) |
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Represents 56,818 shares available for future grants in the
form of stock options, stock appreciation rights, restricted
stock, restricted stock units, performance awards and share
awards under the Transatlantic Holdings, Inc. 2009 Long Term
Equity Incentive Plan, 39,541 shares available for future
grants in the form of equity-based or equity-related awards
granted to non-employee directors under the Transatlantic
Holdings, Inc. 2008 Non-Employee Directors Stock Plan,
1,103,262 shares available for future purchases under the
Transatlantic Holdings, Inc. 1990 Employee Stock Purchase Plan,
as amended (to which there were 23,476 shares subject to
purchase as of July 31, 2011), and 88,000 shares
available for future purchases under the Transatlantic Holdings,
Inc. 2010 U.K. Sharesave Plan (to which there were
3,960 shares subject to purchase as of July 31, 2011).
As of July 31, 2011, there were no shares remaining for
issuance under the LTIP. Transatlantics 1990 Employee
Stock Purchase Plan and 2010 U.K. Sharesave Plan were previously
approved by Transatlantics shareholders, and future grants
under these plans will only be made to persons who were
employees of Transatlantic prior to the merger. For more
information about the LTIP, please see Note 12 to Allied
Worlds Consolidated Financial Statements included in
Allied Worlds Annual Report on
Form 10-K
for the fiscal year ended December 31, 2010. |
142
Pursuant to NYSE guidelines, the approval of the Stock Incentive
Plan proposal, specifically the increase of the shares reserved
for issuance thereunder, requires the affirmative vote of the
holders of a majority of shares entitled to vote on the proposal
and present in person or represented by proxy at the Allied
World Special Shareholder Meeting, provided that the total votes
cast on this proposal represent over 50% of the outstanding
Allied World shares entitled to vote on this proposal. Votes
for, votes against and abstentions count
as votes cast, while broker non-votes do not count as votes cast
for this purpose. All outstanding Allied World shares, including
broker non-votes, count as shares entitled to vote. Thus, the
total sum of votes for, plus votes
against, plus abstentions, which we refer to as the
NYSE votes cast, must be greater than 50% of the
total outstanding Allied World shares. The number of votes
for the proposal must be greater than 50% of the
NYSE votes cast.
The Allied World board of directors unanimously recommends a
vote FOR the proposal to approve the adoption of the
Amended Plan effective upon completion of the merger.
143
MATERIAL
U.S. FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of the material U.S. federal
income tax consequences of the merger. This discussion is based
upon the Internal Revenue Code of 1986, as amended (the
Code), Treasury regulations, judicial authorities,
published positions of the Internal Revenue Service (the
IRS), and other applicable authorities, all as
currently in effect and all of which are subject to change or
differing interpretations, possibly with retroactive effect.
This discussion is limited to U.S. holders (as defined
below) that hold their shares of Transatlantic common stock as
capital assets within the meaning of Section 1221 of the
Code (generally, assets held for investment). This discussion
does not address the tax consequences applicable to
Transatlantic stockholders that are not U.S. holders, nor
does it address all of the tax consequences that may be relevant
to any particular U.S. holder or U.S. holders that are
subject to special treatment under U.S. federal income tax
laws, including, without limitation:
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banks, insurance companies or other financial institutions;
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broker-dealers;
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traders;
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certain U.S. expatriates;
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tax-exempt organizations;
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pass-through entities and persons that are investors in a
pass-through entity;
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persons that are subject to alternative minimum tax;
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persons that hold their shares of common stock as a position in
a straddle or as part of a hedging or
conversion transaction;
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persons deemed to sell their shares of Transatlantic common
stock under the constructive sale provisions of the Code;
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persons that have a functional currency other than the
U.S. dollar; or
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persons that acquired their shares of Transatlantic common stock
upon the exercise of stock options or otherwise as compensation.
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If a partnership or other entity or arrangement treated as a
partnership for U.S. federal income tax purposes holds
shares of Transatlantic common stock, the tax treatment of a
partner in the partnership generally will depend upon the status
of the partner and the activities of the partnership.
Partnerships holding shares of Transatlantic common stock and
partners in such partnerships should consult their tax advisors
about the tax consequences of the merger to them.
This discussion does not address the tax consequences of the
merger under state, local or foreign tax laws. This discussion
also does not address the tax consequences of any transaction
other than the merger, nor does it address the tax consequences
of the ownership or disposition of Allied World shares acquired
in the merger.
TRANSATLANTIC STOCKHOLDERS ARE URGED TO CONSULT WITH THEIR OWN
TAX ADVISORS AS TO THE TAX CONSEQUENCES OF THE MERGER IN THEIR
PARTICULAR CIRCUMSTANCES, INCLUDING THE APPLICABILITY AND EFFECT
OF U.S. FEDERAL (INCLUDING THE ALTERNATIVE MINIMUM TAX),
STATE, LOCAL OR FOREIGN AND OTHER TAX LAWS AND OF CHANGES IN
THOSE LAWS.
For purposes of this discussion, a U.S. holder
means a holder of Transatlantic common stock that is, for
U.S. federal income tax purposes:
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an individual that is a citizen or resident of the United States;
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a corporation or an entity treated as a corporation created or
organized in, or under the laws of, the United States, any state
thereof or the District of Columbia;
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144
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an estate, the income of which is subject to U.S. federal
income taxation regardless of its source; or
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a trust (i) the administration over which a United States
court can exercise primary supervision and the substantial
decisions of which one or more United States persons have the
authority to control or (ii) that has a valid election in
effect to be treated as a United States person.
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Consequences
of the Merger
The receipt of Allied World shares in exchange for shares of
Transatlantic common stock pursuant to the merger will be a
taxable transaction for U.S. federal income tax purposes.
In general, a U.S. holder that receives Allied World shares
in exchange for shares of Transatlantic common stock pursuant to
the merger will recognize capital gain or loss for
U.S. federal income tax purposes equal to the difference,
if any, between (i) the sum of the fair market value of the
Allied World shares received as of the effective time of the
merger and the amount of cash, if any, received in lieu of
fractional shares and (ii) the holders adjusted tax
basis in the shares of Transatlantic common stock exchanged for
the Allied World shares pursuant to the merger. Any gain or loss
would be long-term capital gain or loss if the holders
holding period in the shares of Transatlantic common stock
exceeds one year at the effective time of the merger. Long-term
capital gains of noncorporate U.S. holders (including
individuals) generally are eligible for preferential rates of
U.S. federal income tax. There are limitations on the
deductibility of capital losses under the Code. No gain or loss
will be recognized by Allied World shareholders as a consequence
of the merger.
A U.S. holders tax basis in Allied World shares
received in the merger will equal the fair market value of the
shares as of the effective time of the merger. A
U.S. holders holding period in the Allied World
shares received in the merger will begin on the day after the
completion of the merger.
Backup
Withholding
Backup withholding, currently at a rate of 28%, may apply to
payments made in connection with the merger. Backup withholding
will not apply, however, to a holder of Transatlantic common
stock that (1) furnishes a correct taxpayer identification
number and certifies that it is not subject to backup
withholding on the substitute IRS
Form W-9
included in the letter of transmittal to be delivered to holders
of Transatlantic common stock prior to completion of the merger,
(2) provides a certification of
non-U.S. status
on the applicable IRS
Form W-8
(typically IRS
Form W-8BEN)
or appropriate successor form or (3) is otherwise exempt
from backup withholding. Any amounts withheld under the backup
withholding rules may be allowed as a credit against the
holders U.S. federal income tax liability and may
entitle such holder to a refund, provided the required
information is timely furnished to the IRS. Please consult your
own tax advisor to see if you qualify for exemption from backup
withholding and, if so, to understand the procedure for
obtaining that exemption.
THE FOREGOING DOES NOT PURPORT TO BE A COMPLETE ANALYSIS OF THE
POTENTIAL TAX CONSIDERATIONS RELATING TO THE MERGER, AND IS NOT
TAX ADVICE. THEREFORE, TRANSATLANTIC STOCKHOLDERS ARE URGED TO
CONSULT WITH THEIR OWN TAX ADVISORS AS TO THE SPECIFIC TAX
CONSEQUENCES OF THE MERGER IN THEIR PARTICULAR SITUATION,
INCLUDING THE APPLICABILITY OF U.S. FEDERAL (INCLUDING THE
ALTERNATIVE MINIMUM TAX), STATE, OR LOCAL, FOREIGN AND OTHER TAX
LAWS AND OF CHANGES IN THOSE LAWS.
145
ACCOUNTING
TREATMENT
Each of Transatlantic and Allied World prepares its financial
statements in accordance with GAAP. The merger will be accounted
for using the acquisition method of accounting with
Transatlantic treated as the accounting acquirer of Allied
World. Accordingly, the assets, liabilities and commitments of
Allied World, the accounting acquiree, are adjusted to their
estimated fair value. Under the acquisition method of
accounting, intangible assets are amortized over their remaining
useful lives and tested for impairment at least annually.
146
UNAUDITED
PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION
The unaudited pro forma condensed consolidated financial
information (pro forma financial information) that
follows combines the historical accounts of Transatlantic and
Allied World. The Pro Forma Condensed Consolidated Balance Sheet
as of June 30, 2011 shows the consolidated financial
position of Transatlantic and Allied World as if the merger of
the two companies had occurred on that date. The Pro Forma
Condensed Consolidated Statements of Operations for the year
ended December 31, 2010 and for the six months ended
June 30, 2011 reflect the companies consolidated
results as if the merger had occurred as of January 1,
2010. The historical consolidated financial information has been
adjusted to reflect factually supportable events that are
directly attributable to the merger, and with respect to the
statement of operations only, expected to have a continuing
impact on consolidated results of operations. These pro forma
financial statements should be read in conjunction with:
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The accompanying notes to the pro forma financial statements;
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Transatlantics and Allied Worlds separate unaudited
historical condensed consolidated financial statements and notes
as of and for the three and six months ended June 30, 2011
included in their respective June 30, 2011 Quarterly
Reports on
Form 10-Q;
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|
|
Transatlantics and Allied Worlds separate unaudited
historical condensed consolidated financial statements and notes
as of and for the three months ended March 31, 2011
included in their respective March 31, 2011 Quarterly
Reports on
Form 10-Q; and
|
|
|
|
|
|
Transatlantics and Allied Worlds separate audited
historical consolidated financial statements and notes as of and
for the year ended December 31, 2010 included in their
respective 2010 Annual Reports on
Form 10-K.
|
The pro forma financial information has been prepared for
illustrative purposes only. The pro forma adjustments are based
on estimates using information available at this time. The pro
forma financial information is not necessarily indicative of
what the financial position or results of operations actually
would have been had the merger been completed at the dates
indicated, and include pro forma adjustments which are
preliminary and may be revised. There can be no assurance that
such revisions will not result in material changes. The
financial position and results of operations shown therein are
not necessarily indicative of what the past financial position
and results of operations of the combined companies would have
been nor indicative of the financial position and results of
operations of the post-merger periods. The pro forma financial
information does not give consideration to the impact of
possible revenue enhancements, expense efficiencies, synergies,
strategy modifications, asset dispositions or other actions that
may result from the merger.
The pro forma financial information has been prepared using the
acquisition method of accounting with Transatlantic treated as
the accounting acquirer. Accordingly, the assets, liabilities
and commitments of Allied World, the accounting acquiree, are
adjusted to their estimated June 30, 2011 fair values. The
estimates of fair value are preliminary and are dependent upon
certain valuations and other studies that have not progressed to
a stage where there is sufficient information to make a
definitive valuation. Accordingly, actual adjustments to the
Consolidated Balance Sheet and Statements of Operations will
differ, perhaps materially, from those reflected in the pro
forma financial information because the assets and liabilities
of Allied World will be recorded at their respective fair values
on the date the merger is consummated, and the preliminary
assumptions used to estimate these fair values may change
between now and the completion of the merger.
147
Pro Forma
Condensed Consolidated Balance Sheet
As of June 30, 2011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Historical
|
|
|
Pro Forma
|
|
|
|
|
|
|
|
|
|
Transatlantic
|
|
|
Allied World
|
|
|
Adjustments
|
|
|
Pro Forma
|
|
|
Notes
|
|
|
|
(In thousands of U.S. dollars)
|
|
|
|
(Unaudited)
|
|
|
ASSETS
|
Investments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed maturities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Held to maturity, at amortized cost
|
|
$
|
1,187,591
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
1,187,591
|
|
|
|
|
|
Available for sale, at fair value
|
|
|
11,249,395
|
|
|
|
345,551
|
|
|
|
|
|
|
|
11,594,946
|
|
|
|
|
|
Trading, at fair value
|
|
|
|
|
|
|
6,201,034
|
|
|
|
|
|
|
|
6,201,034
|
|
|
|
|
|
Equities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Available for sale, at fair value
|
|
|
608,128
|
|
|
|
|
|
|
|
|
|
|
|
608,128
|
|
|
|
|
|
Trading, at fair value
|
|
|
|
|
|
|
393,913
|
|
|
|
|
|
|
|
393,913
|
|
|
|
|
|
Other investments, trading, at fair value
|
|
|
|
|
|
|
562,267
|
|
|
|
|
|
|
|
562,267
|
|
|
|
|
|
Other invested assets
|
|
|
255,252
|
|
|
|
|
|
|
|
|
|
|
|
255,252
|
|
|
|
|
|
Short-term investments, at cost (approximates fair value)
|
|
|
210,307
|
|
|
|
|
|
|
|
|
|
|
|
210,307
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total investments
|
|
|
13,510,673
|
|
|
|
7,502,765
|
|
|
|
|
|
|
|
21,013,438
|
|
|
|
|
|
Cash and cash equivalents
|
|
|
341,673
|
|
|
|
740,804
|
|
|
|
(18,742
|
)
|
|
|
1,063,735
|
|
|
|
2(a
|
)
|
Restricted cash
|
|
|
|
|
|
|
66,853
|
|
|
|
|
|
|
|
66,853
|
|
|
|
|
|
Accrued investment income
|
|
|
152,323
|
|
|
|
39,582
|
|
|
|
|
|
|
|
191,905
|
|
|
|
|
|
Premium balances receivable, net
|
|
|
785,550
|
|
|
|
653,002
|
|
|
|
(414
|
)
|
|
|
1,438,138
|
|
|
|
2(b
|
)
|
Reinsurance recoverable on paid and unpaid losses and loss
adjustment expenses
|
|
|
956,097
|
|
|
|
1,013,951
|
|
|
|
(61,937
|
)
|
|
|
1,908,111
|
|
|
|
2(c
|
)
|
Deferred policy acquisition costs
|
|
|
276,045
|
|
|
|
112,083
|
|
|
|
(112,083
|
)
|
|
|
276,045
|
|
|
|
2(d
|
)
|
Goodwill
|
|
|
|
|
|
|
268,376
|
|
|
|
(268,376
|
)
|
|
|
|
|
|
|
2(e
|
)
|
Prepaid reinsurance premiums
|
|
|
61,990
|
|
|
|
223,269
|
|
|
|
(8,926
|
)
|
|
|
276,333
|
|
|
|
2(f
|
)
|
Deferred tax assets, net
|
|
|
400,526
|
|
|
|
19,826
|
|
|
|
9,633
|
|
|
|
429,985
|
|
|
|
2(g
|
)
|
Intangible assets
|
|
|
|
|
|
|
55,342
|
|
|
|
221,369
|
|
|
|
276,711
|
|
|
|
2(h
|
)
|
Other assets
|
|
|
221,476
|
|
|
|
54,760
|
|
|
|
(1,481
|
)
|
|
|
274,755
|
|
|
|
2(i
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
16,706,353
|
|
|
$
|
10,750,613
|
|
|
$
|
(240,957
|
)
|
|
$
|
27,216,009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND SHAREHOLDERS EQUITY
|
Unpaid losses and loss adjustment expenses
|
|
$
|
9,950,709
|
|
|
$
|
5,251,304
|
|
|
$
|
(61,937
|
)
|
|
$
|
15,140,076
|
|
|
|
2(j
|
)
|
Unearned premiums
|
|
|
1,349,101
|
|
|
|
1,184,676
|
|
|
|
(8,926
|
)
|
|
|
2,524,851
|
|
|
|
2(k
|
)
|
Balances payable on sale of investments, net
|
|
|
|
|
|
|
252,351
|
|
|
|
|
|
|
|
252,351
|
|
|
|
|
|
Senior notes
|
|
|
1,005,785
|
|
|
|
797,823
|
|
|
|
80,262
|
|
|
|
1,883,870
|
|
|
|
2(l
|
)
|
Reinsurance balance payable
|
|
|
76,252
|
|
|
|
132,661
|
|
|
|
(414
|
)
|
|
|
208,499
|
|
|
|
2(m
|
)
|
Other liabilities
|
|
|
90,574
|
|
|
|
87,381
|
|
|
|
36,400
|
|
|
|
214,355
|
|
|
|
2(n
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
12,472,421
|
|
|
|
7,706,196
|
|
|
|
45,385
|
|
|
|
20,224,002
|
|
|
|
|
|
Common stock
|
|
|
67,847
|
|
|
|
600,055
|
|
|
|
912,458
|
|
|
|
1,580,360
|
|
|
|
2(o
|
)
|
Additional paid-in capital
|
|
|
322,925
|
|
|
|
82,037
|
|
|
|
565,095
|
|
|
|
970,057
|
|
|
|
2(p
|
)
|
Treasury stock, at cost
|
|
|
(244,722
|
)
|
|
|
(124,392
|
)
|
|
|
244,722
|
|
|
|
(124,392
|
)
|
|
|
2(q
|
)
|
Retained earnings
|
|
|
3,852,898
|
|
|
|
2,463,622
|
|
|
|
(1,985,522
|
)
|
|
|
4,330,998
|
|
|
|
2(r
|
)
|
Accumulated other comprehensive income
|
|
|
234,984
|
|
|
|
23,095
|
|
|
|
(23,095
|
)
|
|
|
234,984
|
|
|
|
2(s
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total shareholders equity
|
|
|
4,233,932
|
|
|
|
3,044,417
|
|
|
|
(286,342
|
)
|
|
|
6,992,007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and shareholders equity
|
|
$
|
16,706,353
|
|
|
$
|
10,750,613
|
|
|
$
|
(240,957
|
)
|
|
$
|
27,216,009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
148
Pro Forma
Condensed Consolidated Statement of Operations
For the Six Months Ended June 30,
2011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Historical
|
|
|
Pro Forma
|
|
|
|
|
|
|
|
|
|
Transatlantic
|
|
|
Allied World
|
|
|
Adjustments
|
|
|
Pro Forma
|
|
|
Notes
|
|
|
|
(In thousands of U.S. dollars, except shares outstanding and
per share data)
|
|
|
|
(Unaudited)
|
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net premiums written
|
|
$
|
2,040,472
|
|
|
$
|
876,674
|
|
|
$
|
|
|
|
|
2,917,146
|
|
|
|
|
|
Increase in net unearned premiums
|
|
|
(128,714
|
)
|
|
|
(186,491
|
)
|
|
|
|
|
|
|
(315,205
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net premiums earned
|
|
|
1,911,758
|
|
|
|
690,183
|
|
|
|
|
|
|
|
2,601,941
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net investment income
|
|
|
226,348
|
|
|
|
102,576
|
|
|
|
(2,386
|
)
|
|
|
326,538
|
|
|
|
2(t
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Realized net capital gains:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
other-than-temporary
impairments
|
|
|
(3,139
|
)
|
|
|
|
|
|
|
|
|
|
|
(3,139
|
)
|
|
|
|
|
Less: Total
other-than-temporary
impairments recognized in other comprehensive income (loss)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other-than-temporary
impairments charged to earnings
|
|
|
(3,139
|
)
|
|
|
|
|
|
|
|
|
|
|
(3,139
|
)
|
|
|
|
|
Other realized net capital gains
|
|
|
57,785
|
|
|
|
108,512
|
|
|
|
|
|
|
|
166,297
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total realized net capital gains
|
|
|
54,646
|
|
|
|
108,512
|
|
|
|
|
|
|
|
163,158
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss on early extinguishment of debt
|
|
|
(1,179
|
)
|
|
|
|
|
|
|
|
|
|
|
(1,179
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues
|
|
|
2,191,573
|
|
|
|
901,271
|
|
|
|
(2,386
|
)
|
|
|
3,090,458
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net losses and loss adjustment expenses
|
|
|
1,850,178
|
|
|
|
540,265
|
|
|
|
|
|
|
|
2,390,443
|
|
|
|
|
|
Acquisition costs
|
|
|
437,782
|
|
|
|
81,053
|
|
|
|
|
|
|
|
518,835
|
|
|
|
|
|
Other underwriting expenses
|
|
|
77,326
|
|
|
|
135,157
|
|
|
|
(2,399
|
)
|
|
|
210,084
|
|
|
|
2(u
|
)
|
Interest on senior notes
|
|
|
33,587
|
|
|
|
27,487
|
|
|
|
(7,269
|
)
|
|
|
53,805
|
|
|
|
2(v
|
)
|
Other expenses, net
|
|
|
18,725
|
|
|
|
1,533
|
|
|
|
1,405
|
|
|
|
21,663
|
|
|
|
2(w
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total expenses
|
|
|
2,417,598
|
|
|
|
785,495
|
|
|
|
(8,263
|
)
|
|
|
3,194,830
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) income before income taxes
|
|
|
(226,025
|
)
|
|
|
115,776
|
|
|
|
5,877
|
|
|
|
(104,372
|
)
|
|
|
|
|
Income taxes (benefits)
|
|
|
(116,755
|
)
|
|
|
13,356
|
|
|
|
|
|
|
|
(103,399
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income
|
|
$
|
(109,270
|
)
|
|
$
|
102,420
|
|
|
$
|
5,877
|
|
|
$
|
(973
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income per common share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
(1.75
|
)
|
|
$
|
2.69
|
|
|
|
n/m
|
|
|
$
|
(0.01
|
)
|
|
|
|
|
Diluted
|
|
|
(1.75
|
)
|
|
|
2.57
|
|
|
|
n/m
|
|
|
|
(0.01
|
)
|
|
|
|
|
Dividends per common share
|
|
|
0.43
|
|
|
|
|
|
|
|
n/m
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
62,430,142
|
|
|
|
38,061,724
|
|
|
|
n/m
|
|
|
|
93,158,177
|
|
|
|
|
|
Diluted
|
|
|
62,430,142
|
|
|
|
39,873,418
|
|
|
|
n/m
|
|
|
|
93,158,177
|
|
|
|
3
|
|
n/m not meaningful
149
Pro Forma
Condensed Consolidated Statement of Operations
For the Twelve Months Ended December 31,
2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Historical
|
|
|
Pro Forma
|
|
|
|
|
|
|
|
|
|
Transatlantic
|
|
|
Allied World
|
|
|
Adjustments
|
|
|
Pro Forma
|
|
|
Notes
|
|
|
|
(In thousands of U.S. dollars, except shares outstanding and
per share data)
|
|
|
|
(Unaudited)
|
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net premiums written
|
|
$
|
3,881,693
|
|
|
$
|
1,392,455
|
|
|
$
|
|
|
|
$
|
5,274,148
|
|
|
|
|
|
Increase in net unearned premiums
|
|
|
(23,073
|
)
|
|
|
(32,907
|
)
|
|
|
|
|
|
|
(55,980
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net premiums earned
|
|
|
3,858,620
|
|
|
|
1,359,548
|
|
|
|
|
|
|
|
5,218,168
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net investment income
|
|
|
473,547
|
|
|
|
244,143
|
|
|
|
(4,772
|
)
|
|
|
712,918
|
|
|
|
2(t
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Realized net capital gains:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
other-than-temporary
impairments
|
|
|
(14,685
|
)
|
|
|
(168
|
)
|
|
|
|
|
|
|
(14,853
|
)
|
|
|
|
|
Less: Total
other-than-temporary
impairments recognized in other comprehensive income (loss)
|
|
|
6,713
|
|
|
|
|
|
|
|
|
|
|
|
6,713
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other-than-temporary
impairments charged to earnings
|
|
|
(7,972
|
)
|
|
|
(168
|
)
|
|
|
|
|
|
|
(8,140
|
)
|
|
|
|
|
Other realized net capital gains
|
|
|
38,073
|
|
|
|
285,168
|
|
|
|
|
|
|
|
323,241
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total realized net capital gains
|
|
|
30,101
|
|
|
|
285,000
|
|
|
|
|
|
|
|
315,101
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss on early extinguishment of debt
|
|
|
(115
|
)
|
|
|
|
|
|
|
|
|
|
|
(115
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues
|
|
|
4,362,153
|
|
|
|
1,888,691
|
|
|
|
(4,772
|
)
|
|
|
6,246,072
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net losses and loss adjustment expenses
|
|
|
2,681,774
|
|
|
|
707,883
|
|
|
|
|
|
|
|
3,389,657
|
|
|
|
|
|
Acquisition costs
|
|
|
929,922
|
|
|
|
159,489
|
|
|
|
|
|
|
|
1,089,411
|
|
|
|
|
|
Other underwriting expenses
|
|
|
177,624
|
|
|
|
286,557
|
|
|
|
(163
|
)
|
|
|
464,018
|
|
|
|
2(u
|
)
|
Interest on senior notes
|
|
|
68,272
|
|
|
|
40,242
|
|
|
|
(14,107
|
)
|
|
|
94,407
|
|
|
|
2(v
|
)
|
Other expenses, net
|
|
|
31,773
|
|
|
|
2,570
|
|
|
|
112,896
|
|
|
|
147,239
|
|
|
|
2(w
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total expenses
|
|
|
3,889,365
|
|
|
|
1,196,741
|
|
|
|
98,626
|
|
|
|
5,184,732
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes
|
|
|
472,788
|
|
|
|
691,950
|
|
|
|
(103,398
|
)
|
|
|
1,061,340
|
|
|
|
|
|
Income taxes
|
|
|
70,587
|
|
|
|
26,945
|
|
|
|
|
|
|
|
97,532
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
402,201
|
|
|
$
|
665,005
|
|
|
$
|
(103,398
|
)
|
|
$
|
963,808
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income per common share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
6.28
|
|
|
$
|
14.30
|
|
|
|
n/m
|
|
|
$
|
9.35
|
|
|
|
|
|
Diluted
|
|
|
6.19
|
|
|
|
13.32
|
|
|
|
n/m
|
|
|
|
9.00
|
|
|
|
|
|
Dividends per common share
|
|
|
0.83
|
|
|
|
1.05
|
|
|
|
n/m
|
|
|
|
1.05
|
|
|
|
|
|
Weighted average common shares outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
64,091,749
|
|
|
|
46,491,279
|
|
|
|
n/m
|
|
|
|
103,049,946
|
|
|
|
|
|
Diluted
|
|
|
64,930,185
|
|
|
|
49,913,317
|
|
|
|
n/m
|
|
|
|
107,063,364
|
|
|
|
|
|
n/m - not meaningful
150
|
|
Note 1
|
Pro Forma
Basis of Presentation
|
On June 12, 2011, Transatlantic and Allied World agreed to
a merger of equals business combination (the
merger) and have entered into an Agreement and Plan
of Merger, as further discussed herein.
The unaudited Pro Forma Condensed Consolidated Balance Sheet as
of June 30, 2011 has been prepared to illustrate the pro
forma effects of the merger as if it had occurred on
June 30, 2011. The unaudited Pro Forma Condensed
Consolidated Statements of Operations for the six months ended
June 30, 2011 and for the twelve months ended
December 31, 2010 have been prepared to illustrate the pro
forma effects of the merger as if it had occurred at
January 1, 2010.
The pro forma financial information has been prepared using the
acquisition method of accounting under accounting principles
generally accepted in the United States of America. Based on the
relative voting interests of Transatlantic stockholders and
Allied World shareholders, the composition of the combined
companys board of directors, senior management of the
merged entity, the relative size of Transatlantics and
Allied Worlds shareholders equity, revenue and
market capitalization, and other factors, it was determined that
Transatlantic is the acquiring entity for accounting purposes.
Accordingly, under acquisition method accounting, the assets,
liabilities and commitments of Allied World, the accounting
acquiree, are adjusted to their fair value. For purposes of the
pro forma financial information, preliminary consideration has
also been given to the impact of conforming Allied Worlds
accounting policies to those of Transatlantic. The pro forma
financial information does not give consideration to the impact
of possible revenue enhancements, expense efficiencies,
synergies, strategy modifications, asset dispositions or other
actions. Also, possible adjustments related to restructuring
charges are yet to be determined and are not reflected in the
pro forma financial information.
The preliminary unaudited pro forma adjustments represent
estimates based on information available at this time. Actual
adjustments to the Consolidated Balance Sheet and Statements of
Operations will differ, perhaps materially, from those reflected
in the pro forma financial information because the assets and
liabilities of Allied World will be recorded at their respective
fair values on the date the merger is consummated and the
preliminary assumptions used to estimate these fair values may
change between now and the completion of the merger.
The pro forma financial information included herein is subject
to other updates as additional information becomes available and
as additional analyses are performed. The final acquisition
accounting will be determined after the merger is consummated
and after completion of a thorough analysis to determine the
fair values of Allied Worlds tangible and identifiable
intangible assets and liabilities. Accordingly, the final
acquisition method accounting adjustments, including those
needed to conform Allied Worlds accounting policies to
those of Transatlantic, could be materially different from the
preliminary unaudited pro forma adjustments presented herein.
Any increase or decrease in the fair value of Allied
Worlds assets, liabilities, commitments, contracts and
other items as compared to the information shown herein will
change the amount of gain on bargain purchase and may impact the
consolidated statement of operations due to adjustments in yield
and/or
amortization or accretion related to the adjusted assets or
liabilities.
|
|
Note 2
|
Pro Forma
Adjustments
|
Upon completion of the merger, Transatlantic stockholders will
receive 0.88 Allied World shares for each share of Transatlantic
common stock that they own. This exchange ratio is fixed and
will not be adjusted to reflect stock price changes prior to the
closing of the merger.
The pro forma financial information is not necessarily
indicative of what the financial position or results of
operations actually would have been had the merger been
completed at the dates indicated and include adjustments which
are preliminary and may be revised. There can be no assurance
that such revisions will not result in material changes. The
financial position and results of operations shown therein are
not necessarily
151
Notes to
the Pro Forma Condensed
Consolidated Financial Information
(Continued)
indicative of what the past financial position and results of
operations of the combined companies would have been nor
indicative of the financial position and results of operations
of the post-merger periods. The pro forma financial information
does not give consideration to the impact of possible revenue
enhancements, expense efficiencies, synergies, strategy
modifications, asset dispositions or other actions that may
result from the merger.
The following pro forma adjustments result from accounting for
the merger, including the determination of fair value of the
assets, liabilities and commitments which Transatlantic, as the
acquirer for accounting purposes, acquired from Allied World.
The descriptions related to these preliminary adjustments are as
follows (in thousands of U.S. dollars):
|
|
|
|
|
|
|
|
|
Increase
|
|
|
|
(Decrease)
|
|
|
|
|
|
as of
|
|
Pro Forma Condensed Consolidated Balance Sheet Adjustments
|
|
June 30, 2011
|
|
|
Assets:
|
(a)
|
|
Adjustments to cash and cash equivalents:
|
|
|
|
|
|
|
1. Recording of estimated merger transaction expenses
that will be paid by Transatlantic prior to the closing of the
merger (also see pro forma balance sheet adjustment (n) for
additional estimated merger transaction expenses that will be
paid by TransAllied after the closing of the merger)
|
|
$
|
(8,335
|
)
|
|
|
2. Recording of estimated merger transaction expenses
that will be paid by Allied World prior to the closing of the
merger (also see pro forma balance sheet adjustment (n) for
additional estimated merger transaction expenses that will be
paid by TransAllied after the closing of the merger)
|
|
|
(3,225
|
)
|
|
|
3. Adjustment for shares of Transatlantic common
stock purchased by Allied World pursuant to the merger agreement
|
|
|
(2,259
|
)
|
|
|
4. Adjustment for cash-settled stock-based
compensation vesting on closing of the merger
|
|
|
(4,923
|
)
|
|
|
|
|
|
|
|
|
|
Total adjustments to
cash and cash equivalents
|
|
|
(18,742
|
)
|
|
|
|
|
|
|
|
(b)
|
|
Adjustment to reflect the settlement of balances related to the
cancellation of reinsurance contracts between Transatlantic and
Allied World upon closing of the merger
|
|
|
(414
|
)
|
|
|
|
|
|
|
|
(c)
|
|
Adjustment to reflect the settlement of balances related to the
cancellation of reinsurance contracts between Transatlantic and
Allied World upon closing of the merger
|
|
|
(61,937
|
)
|
|
|
|
|
|
|
|
(d)
|
|
Adjustment of Allied Worlds deferred acquisition costs to
their estimated fair value
|
|
|
(112,083
|
)
|
|
|
|
|
|
|
|
(e)
|
|
Elimination of Allied Worlds carried goodwill
|
|
|
(268,376
|
)
|
|
|
|
|
|
|
|
(f)
|
|
Adjustment to reflect the settlement of balances related to the
cancellation of reinsurance contracts between Transatlantic and
Allied World upon closing of the merger
|
|
|
(8,926
|
)
|
|
|
|
|
|
|
|
(g)
|
|
Adjustment of deferred tax assets, net, related to pro forma
adjustments
|
|
|
9,633
|
|
|
|
|
|
|
|
|
(h)
|
|
Adjustments to intangible assets:
|
|
|
|
|
|
|
1. Elimination of Allied Worlds intangible
assets
|
|
|
(55,342
|
)
|
|
|
2. Intangible asset resulting from the adjustment for
the difference between the estimated fair value and the
historical carrying value of Allied Worlds unpaid losses
and loss adjustment expenses net of related reinsurance
recoverable (net loss reserves). The estimated fair
value consists of the present value of the net loss reserves
plus a risk premium
|
|
|
(63,289
|
)
|
|
|
3. Intangible asset resulting from the adjustment of
unearned premiums to the estimated fair value of profit within
Allied Worlds unearned premiums, adjusted for a risk factor
|
|
|
250,000
|
|
152
Notes to
the Pro Forma Condensed
Consolidated Financial Information
(Continued)
|
|
|
|
|
|
|
|
|
Increase
|
|
|
|
(Decrease)
|
|
|
|
|
|
as of
|
|
Pro Forma Condensed Consolidated Balance Sheet Adjustments
|
|
June 30, 2011
|
|
|
|
|
4. Addition of the estimated fair value of
identifiable intangible assets resulting from the merger. This
amount consists primarily of renewal rights and customer
relationships, with the balance comprised of internally
developed software, licenses and trademarks
|
|
|
90,000
|
|
|
|
|
|
|
|
|
|
|
Total adjustments to
intangible assets
|
|
|
221,369
|
|
|
|
|
|
|
|
|
(i)
|
|
Adjustments to other assets:
|
|
|
|
|
|
|
1. Elimination of deferred debt issuance costs of
Allied Worlds senior notes
|
|
|
(5,251
|
)
|
|
|
2. Adjustment to record the current income tax
recoverable on pro forma adjustments
|
|
|
3,770
|
|
|
|
|
|
|
|
|
|
|
Total adjustments to
other assets
|
|
|
(1,481
|
)
|
|
|
|
|
|
|
|
|
|
Total
adjustments to assets
|
|
$
|
(240,957
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase
|
|
|
|
(Decrease)
|
|
|
|
|
|
as of
|
|
Pro Forma Condensed Consolidated Balance Sheet Adjustments
|
|
June 30, 2011
|
|
|
Liabilities:
|
(j)
|
|
Adjustment to reflect the settlement of balances related to the
cancellation of reinsurance contracts between Transatlantic and
Allied World upon closing of the merger
|
|
$
|
(61,937
|
)
|
|
|
|
|
|
|
|
(k)
|
|
Adjustment to reflect the settlement of balances related to the
cancellation of reinsurance contracts between Transatlantic and
Allied World upon closing of the merger
|
|
|
(8,926
|
)
|
|
|
|
|
|
|
|
(l)
|
|
Adjustment of Allied Worlds senior notes to their
estimated fair value
|
|
|
80,262
|
|
|
|
|
|
|
|
|
(m)
|
|
Adjustment to reflect the settlement of balances related to the
cancellation of reinsurance contracts between Transatlantic and
Allied World upon closing of the merger
|
|
|
(414
|
)
|
|
|
|
|
|
|
|
(n)
|
|
Adjustment to other liabilities to record estimated merger
transaction expenses that will be paid by TransAllied after the
closing of the merger (also see pro forma balance sheet
adjustments (a)1 and (a)2 for additional estimated merger
transaction expenses that will be paid by Transatlantic and
Allied World prior to the closing of the merger)
|
|
|
36,400
|
|
|
|
|
|
|
|
|
|
|
Total adjustments to
liabilities
|
|
|
45,385
|
|
|
|
|
|
|
|
|
Shareholders equity:
|
(o)
|
|
Adjustments to common stock:
|
|
|
|
|
|
|
1. Adjustment to reflect the elimination of
Transatlantic common stock
|
|
|
(67,847
|
)
|
|
|
2. Adjustment to reflect the issuance of Allied World
common shares
|
|
|
980,305
|
|
|
|
|
|
|
|
|
|
|
Total adjustments to
common stock
|
|
|
912,458
|
|
|
|
|
|
|
|
|
(p)
|
|
Adjustment to additional paid-in capital
|
|
|
565,095
|
|
|
|
|
|
|
|
|
(q)
|
|
Adjustment to eliminate Transatlantics treasury stock
|
|
|
244,722
|
|
|
|
|
|
|
|
|
(r)
|
|
Adjustments to retained earnings:
|
|
|
|
|
|
|
1. Adjustment to reflect the elimination of Allied
Worlds retained earnings
|
|
|
(2,463,622
|
)
|
153
Notes to
the Pro Forma Condensed
Consolidated Financial Information
(Continued)
|
|
|
|
|
|
|
|
|
Increase
|
|
|
|
(Decrease)
|
|
|
|
|
|
as of
|
|
Pro Forma Condensed Consolidated Balance Sheet Adjustments
|
|
June 30, 2011
|
|
|
|
|
2. Adjustment to record Transatlantics
estimated transaction costs resulting from the merger
|
|
|
(30,235
|
)
|
|
|
3. Adjustment to record gain on bargain purchase
|
|
|
508,335
|
|
|
|
|
|
|
|
|
|
|
Total adjustments to
retained earnings
|
|
|
(1,985,522
|
)
|
|
|
|
|
|
|
|
(s)
|
|
Adjustment to eliminate Allied Worlds accumulated other
comprehensive income
|
|
|
(23,095
|
)
|
|
|
|
|
|
|
|
|
|
Total
adjustments to shareholders equity
|
|
|
(286,342
|
)
|
|
|
|
|
|
|
|
|
|
Total
adjustments to liabilities and shareholders equity
|
|
$
|
(240,957
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase (Decrease) for the:
|
|
|
|
|
|
Six Months Ended
|
|
|
Year Ended
|
|
Pro Forma Condensed Consolidated Statement of Operations
Adjustments
|
|
June 30, 2011
|
|
|
December 31, 2010
|
|
|
(t)
|
|
Adjustment to amortization expense on Allied Worlds fixed
maturities available for sale resulting from the adjustment of
amortized cost to the acquisition date fair value
|
|
$
|
(2,386
|
)
|
|
$
|
(4,772
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
adjustments to revenues
|
|
|
(2,386
|
)
|
|
|
(4,772
|
)
|
|
|
|
|
|
|
|
|
|
|
|
(u)
|
|
Adjustment to reflect the change in stock-based compensation
expense related to the change in fair value and modifications to
Allied Worlds stock-based compensation resulting from the
merger
|
|
|
(2,399
|
)
|
|
|
(163
|
)
|
|
|
|
|
|
|
|
|
|
|
|
(v)
|
|
Net reduction of interest on senior notes related to the
amortization of the fair value adjustment on Allied Worlds
senior notes
|
|
|
(7,269
|
)
|
|
|
(14,107
|
)
|
|
|
|
|
|
|
|
|
|
|
|
(w)
|
|
Adjustments to other expenses, net:
|
|
|
|
|
|
|
|
|
|
|
1. Amortization of intangible asset from the
adjustment of Allied Worlds unpaid losses and loss
adjustment expenses for the difference between the estimated
fair value and historical carrying value
|
|
|
(4,576
|
)
|
|
|
(18,343
|
)
|
|
|
2. Amortization of intangible asset resulting from
the adjustment of Allied Worlds unearned premiums to fair
value
|
|
|
4,556
|
|
|
|
128,805
|
|
|
|
3. Change in amortization of all other intangible
assets
|
|
|
1,425
|
|
|
|
2,434
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total adjustments to other
expenses, net
|
|
|
1,405
|
|
|
|
112,896
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
adjustments to expenses
|
|
|
(8,263
|
)
|
|
|
98,626
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
adjustments to net income
|
|
$
|
5,877
|
|
|
$
|
(103,398
|
)
|
|
|
|
|
|
|
|
|
|
|
|
The tax impact of pro forma adjustments is estimated in the
aggregate on each pro forma financial statement based on the
applicable tax impact on the entity that is expected to sustain
the related pre-tax charge or benefit. The pro forma tax
adjustments, however, do not reflect the potential tax impact
that the revised legal structure or other post-merger actions
may have on taxes incurred after the merger.
Following the merger, the merging entities anticipate that the
relationship of the combined companies gross premiums
written to net premiums written and its practices related to the
purchase of reinsurance protection will more closely align with
the gross to net premiums written relationship and practices
presently
154
Notes to
the Pro Forma Condensed
Consolidated Financial Information
(Continued)
followed by Transatlantic. Such practices govern the level of
exposures retained, type and financial standing of approved
reinsurers and nature of reinsurance protection purchased. Given
the enhanced capital base of the combined companies, it is
expected that there will be a reduced need for the combined
companies to purchase ceded reinsurance coverage in the future.
In the accompanying Pro Forma Condensed Consolidated Balance
Sheet, the preliminary estimate of the purchase price has been
calculated by using the closing quoted market price per share of
Transatlantic common stock on August 9, 2011. This amount of
consideration will be adjusted subsequently to reflect the
closing quoted market price of Transatlantic common stock as of
the mergers effective date.
|
|
|
|
|
Calculation of Preliminary Estimated Purchase Price
|
|
|
|
|
Shares of Transatlantic common stock outstanding as of
June 30, 2011 (in millions)
|
|
|
62.5
|
|
Shares of Transatlantic common stock purchased by Allied World
pursuant to the merger agreement (in millions)
|
|
|
(0.1
|
)
|
|
|
|
|
|
Adjusted Transatlantic common stock outstanding as of
June 30, 2011 (in millions)
|
|
|
62.4
|
|
Exchange ratio
|
|
|
0.88
|
|
|
|
|
|
|
Exchange ratio adjusted Transatlantic (in millions)
|
|
|
55.0
|
|
|
|
|
|
|
Allied World common shares outstanding as of June 30, 2011
(in millions)
|
|
|
37.9
|
|
Allied World stock-based compensation vesting at closing of the
merger (in millions)
|
|
|
0.2
|
|
|
|
|
|
|
Adjusted Allied World shares outstanding at June 30, 2011
(in millions)
|
|
|
38.1
|
|
|
|
|
|
|
Pro forma common shares outstanding (in million)
|
|
|
93.1
|
|
|
|
|
|
|
Adjusted Allied World common shares outstanding as of
June 30, 2011 (in millions)
|
|
|
38.1
|
|
Divided by the exchange ratio
|
|
|
0.88
|
|
Multiplied by Transatlantics closing stock price on August
9, 2011
|
|
$
|
50.20
|
|
|
|
|
|
|
Estimated purchase price before adjustments for the fair value
of 45,000 shares of Transatlantic common stock purchased by
Allied World pursuant to the merger agreement and stock-based
compensation (in millions of U.S. dollars)
|
|
$
|
2,175.9
|
|
Estimated fair value of 45,000 shares of Transatlantic
common stock purchased by Allied World pursuant to the merger
agreement (in millions of U.S dollars)
|
|
|
(2.3
|
)
|
Estimated portion of the fair value of Allied World stock-based
compensation outstanding as of June 30, 2011 attributable
to pre-merger service (in millions of U.S dollars)
|
|
|
106.4
|
|
|
|
|
|
|
Estimated purchase price (in millions of U.S. dollars)
|
|
$
|
2,280.0
|
|
|
|
|
|
|
155
Notes to
the Pro Forma Condensed
Consolidated Financial Information
(Continued)
The determination of the gain on bargain purchase as of
June 30, 2011 based upon the acquisition method of
accounting is as follows (in millions of U.S. dollars):
|
|
|
|
|
Allied World shareholders equity at June 30, 2011
|
|
$
|
3,044.4
|
|
Less estimated fair value of 45,000 shares of Transatlantic
common stock purchased by Allied World pursuant to the merger
agreement
|
|
|
(2.3
|
)
|
|
|
|
|
|
Net book value of net assets acquired prior to fair value
adjustments
|
|
|
3,042.1
|
|
Preliminary adjustments for fair value:
|
|
|
|
|
Reduction of Allied Worlds deferred acquisition costs to
fair value
|
|
|
(112.1
|
)
|
Reduction of Allied Worlds goodwill to fair value
|
|
|
(268.4
|
)
|
Increase in Allied Worlds deferred tax assets, net, to
fair value
|
|
|
9.6
|
|
Reduction in intangible assets for the fair value of Allied
Worlds unpaid losses and loss adjustment expenses
|
|
|
(63.3
|
)
|
Increase in intangible assets for the fair value of Allied
Worlds unearned premiums
|
|
|
250.0
|
|
Increase in other intangible assets to fair value
|
|
|
34.7
|
|
Reduction of Allied Worlds deferred debt issuance costs to
fair value
|
|
|
(5.2
|
)
|
Increase of Allied Worlds senior notes to fair value
|
|
|
(80.3
|
)
|
Adjustment to record estimated transaction costs incurred by
Allied World from the merger
|
|
|
(17.7
|
)
|
Increase in other assets for income taxes recoverable related to
pro forma adjustments
|
|
|
3.8
|
|
Reduction in cash and cash equivalents for settlement of
cash-settled stock-based compensation vesting on closing of the
merger
|
|
|
(4.9
|
)
|
|
|
|
|
|
Fair value of net assets acquired
|
|
|
2,788.3
|
|
Estimated purchase price
|
|
|
2,280.0
|
|
|
|
|
|
|
Gain on bargain purchase
|
|
$
|
(508.3
|
)
|
|
|
|
|
|
The preliminary estimated gain on bargain purchase upon closing
of the merger is reflected as an increase in retained earnings
in the pro forma balance sheet. The preliminary gain on bargain
purchase results from the acquisition date fair value of Allied
Worlds identifiable net assets acquired exceeding the
estimated purchase price. This bargain purchase determination is
consistent with the fact that in recent periods, Allied
Worlds common shares, as well as shares of certain other
insurance and reinsurance companies, including Transatlantic,
have traded at a significant discount to book value per common
share. The preliminary gain on bargain purchase will be adjusted
based upon the final accounting as of the closing date of the
merger.
The price of Transatlantic common stock used in preparing the
pro forma financial information was $50.20, based on the closing
price of Transatlantic common stock on August 9, 2011. The
effect of an increase (decrease) of $1.00 per share of the price
of Transatlantic common stock would be to decrease (increase)
the pro forma gain on bargain purchase and to increase
(decrease) additional paid-in capital by $43 million,
reflecting the increase (decrease) in the estimated purchase
price. There would be no impact on the pro forma book value per
share and pro forma basic and diluted net (loss) income per
share.
As discussed earlier, pro forma adjustments are based on certain
estimates and assumptions made as of the date of the pro forma
financial information. The actual adjustments will depend on a
number of factors, including changes in the estimated fair value
of Allied Worlds assets, liabilities and commitments and
operating results of Allied World between June 30, 2011 and
the effective date of the merger. Transatlantic expects to make
such adjustments at the effective date of the merger. These
adjustments are likely to be different from the adjustments made
to prepare the pro forma financial information and such
differences may be material.
156
Notes to
the Pro Forma Condensed
Consolidated Financial Information
(Continued)
|
|
Note 3
|
Net
(Loss) Income per Common Share
|
Pro forma net (loss) income per common share for the six months
ended June 30, 2011 and for the year ended
December 31, 2010 have been calculated based on the
estimated weighted average number of common shares outstanding
on a pro forma basis. The pro forma weighted average number of
common shares outstanding was derived using Allied Worlds
historical weighted average common shares outstanding and
Transatlantics historical weighted average common shares
outstanding multiplied by the exchange ratio.
The following table sets forth the calculation of basic and
diluted pro forma net loss per common share for the six months
ended June 30, 2011:
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended
|
|
|
|
June 30, 2011
|
|
|
|
Basic
|
|
|
Diluted
|
|
|
Pro forma net loss (in thousands of U.S. dollars)
|
|
$
|
(973
|
)
|
|
$
|
(973
|
)
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding (in thousands):
|
|
|
|
|
|
|
|
|
Historical Transatlantic
|
|
|
62,430
|
|
|
|
62,430
|
|
Adjustment for shares of Transatlantic common stock purchased by
Allied World pursuant to the merger agreement
|
|
|
(45
|
)
|
|
|
(45
|
)
|
|
|
|
|
|
|
|
|
|
Adjusted Transatlantic weighted average common shares outstanding
|
|
|
62,385
|
|
|
|
62,385
|
|
Exchange ratio
|
|
|
0.88
|
|
|
|
0.88
|
|
|
|
|
|
|
|
|
|
|
Exchange ratio adjusted Transatlantic
|
|
|
54,899
|
|
|
|
54,899
|
|
Historical Allied World
|
|
|
38,061
|
|
|
|
39,873
|
|
Adjustment for anti-dilutive shares(1)
|
|
|
|
|
|
|
(1,812
|
)
|
Allied World stock-based compensation vesting at closing of the
merger
|
|
|
198
|
|
|
|
198
|
|
|
|
|
|
|
|
|
|
|
Pro forma(2)
|
|
|
93,158
|
|
|
|
93,158
|
|
|
|
|
|
|
|
|
|
|
Pro forma net loss per common share (in U.S. dollars)
|
|
$
|
(0.01
|
)
|
|
$
|
(0.01
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Due to the pro forma net loss, the potential shares included in
historical Allied World are excluded from the pro forma net loss
per share calculation. |
|
|
|
(2) |
|
If there had been pro forma net income for the six months ended
June 30, 2011, weighted average diluted common shares
outstanding would have been 96,103. |
157
Notes to
the Pro Forma Condensed
Consolidated Financial Information
(Continued)
The following table sets forth the calculation of basic and
diluted pro forma net income per common share for the year ended
December 31, 2010:
|
|
|
|
|
|
|
|
|
|
|
Year Ended
|
|
|
|
December 31, 2010
|
|
|
|
Basic
|
|
|
Diluted
|
|
|
Pro forma net income (in thousands of U.S. dollars)
|
|
$
|
963,808
|
|
|
$
|
963,808
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding (in thousands):
|
|
|
|
|
|
|
|
|
Historical Transatlantic
|
|
|
64,092
|
|
|
|
64,930
|
|
Adjustment for shares of Transatlantic common stock purchased by
Allied World pursuant to the merger agreement
|
|
|
(45
|
)
|
|
|
(45
|
)
|
|
|
|
|
|
|
|
|
|
Adjusted Transatlantic weighted average common shares outstanding
|
|
|
64,047
|
|
|
|
64,885
|
|
Exchange ratio
|
|
|
0.88
|
|
|
|
0.88
|
|
|
|
|
|
|
|
|
|
|
Exchange ratio adjusted Transatlantic
|
|
|
56,361
|
|
|
|
57,099
|
|
Historical Allied World
|
|
|
46,491
|
|
|
|
49,913
|
|
Allied World stock-based compensation vesting at closing of the
merger
|
|
|
198
|
|
|
|
51
|
|
|
|
|
|
|
|
|
|
|
Pro forma
|
|
|
103,050
|
|
|
|
107,063
|
|
|
|
|
|
|
|
|
|
|
Pro forma net income per common share (in U.S. dollars)
|
|
$
|
9.35
|
|
|
$
|
9.00
|
|
|
|
|
|
|
|
|
|
|
The historical and pro forma debt of Transatlantic and Allied
World is summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of June 30, 2011
|
|
|
|
Historical
|
|
|
Historical
|
|
|
|
|
|
|
Transatlantic
|
|
|
Allied World
|
|
|
Pro Forma
|
|
|
|
(In millions of U.S. Dollars)
|
|
|
5.75% Debt due December 14, 2015
|
|
$
|
665.3
|
|
|
$
|
|
|
|
$
|
665.3
|
|
8.00% Debt due November 30, 2039
|
|
|
340.5
|
|
|
|
|
|
|
|
340.4
|
|
7.50% Debt due August 1, 2016
|
|
|
|
|
|
|
499.1
|
|
|
|
575.4
|
|
5.50% Debt due November 1, 2020
|
|
|
|
|
|
|
298.7
|
|
|
|
302.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,005.8
|
|
|
$
|
797.8
|
|
|
$
|
1,883.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
158
Notes to
the Pro Forma Condensed
Consolidated Financial Information
(Continued)
|
|
Note 5
|
Book
Value per Common Share
|
The following table sets forth the calculation of book value per
share as of June 30, 2011. The pro forma number of common
shares outstanding was determined as if the shares issued,
pursuant to the merger, had been issued and outstanding as of
June 30, 2011.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of June 30, 2011
|
|
|
|
Historical
|
|
|
|
|
|
|
Transatlantic
|
|
|
Allied World
|
|
|
Pro Forma
|
|
|
Shareholders equity (in thousands of U.S. dollars)
|
|
$
|
4,233,932
|
|
|
$
|
3,044,417
|
|
|
$
|
6,992,007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common shares outstanding (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
Historical Transatlantic
|
|
|
62,484
|
|
|
|
|
|
|
|
62,484
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjustment for shares of Transatlantic common stock purchased by
Allied World pursuant to the merger agreement
|
|
|
|
|
|
|
|
|
|
|
(45
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted Transatlantic common stock outstanding
|
|
|
|
|
|
|
|
|
|
|
62,439
|
|
Exchange ratio
|
|
|
|
|
|
|
|
|
|
|
0.88
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exchange ratio adjusted Transatlantic
|
|
|
|
|
|
|
|
|
|
|
54,946
|
|
Historical Allied World
|
|
|
|
|
|
|
37,945
|
|
|
|
37,945
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allied World stock-based compensation vesting at closing of the
merger
|
|
|
|
|
|
|
|
|
|
|
198
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pro forma
|
|
|
|
|
|
|
|
|
|
|
93,089
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Book value per common share (in U.S. dollars)
|
|
$
|
67.76
|
|
|
$
|
80.23
|
|
|
$
|
75.11
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
159
COMPARATIVE
STOCK PRICE DATA AND DIVIDENDS
Stock
Prices
Allied World shares are listed for trading on the NYSE under the
symbol AWH. Shares of Transatlantic common stock are
listed for trading on the NYSE under the symbol TRH.
The following table sets forth the closing sales prices per
Allied World share and Transatlantic common stock, on an actual
and equivalent per share basis, on the NYSE, on the following
dates:
|
|
|
|
|
June 10, 2011, the last full trading day prior to the
public announcement of the merger, and
|
|
|
|
,
2011, the last trading day for which this information could be
calculated prior to the filing of this joint proxy
statement/prospectus.
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|
|
|
|
|
|
|
|
|
|
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|
|
|
|
|
|
|
|
Transatlantic
|
|
|
|
|
|
|
Transatlantic
|
|
|
Equivalent Per
|
|
|
|
Allied World shares
|
|
|
Common Stock
|
|
|
Share(1)
|
|
|
June 10, 2011
|
|
$
|
58.07
|
|
|
$
|
44.01
|
|
|
$
|
51.10
|
|
,
2011
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
|
|
(1) |
|
The equivalent per share data for Transatlantic common stock has
been determined by multiplying the market price of one Allied
World share on each of the dates by the exchange ratio of 0.88. |
The following table sets forth, for the periods indicated, the
high and low sales prices per Allied World share and share of
Transatlantic common stock on the NYSE composite transaction
reporting system, respectively. For current price information,
you should consult publicly available sources.
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Transatlantic
|
|
|
Allied World
|
|
Calendar Period
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High
|
|
|
Low
|
|
|
High
|
|
|
Low
|
|
|
Year ended December 31, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Quarter
|
|
$
|
73.76
|
|
|
$
|
62.06
|
|
|
$
|
50.24
|
|
|
$
|
38.29
|
|
Second Quarter
|
|
$
|
69.62
|
|
|
$
|
56.47
|
|
|
$
|
46.82
|
|
|
$
|
39.08
|
|
Third Quarter
|
|
$
|
66.95
|
|
|
$
|
51.90
|
|
|
$
|
42.93
|
|
|
$
|
34.67
|
|
Fourth Quarter
|
|
$
|
57.25
|
|
|
$
|
30.17
|
|
|
$
|
40.60
|
|
|
$
|
21.00
|
|
Year ended December 31, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Quarter
|
|
$
|
40.52
|
|
|
$
|
26.16
|
|
|
$
|
42.68
|
|
|
$
|
32.23
|
|
Second Quarter
|
|
$
|
46.83
|
|
|
$
|
34.92
|
|
|
$
|
41.32
|
|
|
$
|
35.43
|
|
Third Quarter
|
|
$
|
51.36
|
|
|
$
|
41.48
|
|
|
$
|
49.76
|
|
|
$
|
39.93
|
|
Fourth Quarter
|
|
$
|
56.42
|
|
|
$
|
49.01
|
|
|
$
|
49.31
|
|
|
$
|
44.32
|
|
Year ended December 31, 2010
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Quarter
|
|
$
|
54.25
|
|
|
$
|
46.67
|
|
|
$
|
47.05
|
|
|
$
|
43.77
|
|
Second Quarter
|
|
$
|
53.39
|
|
|
$
|
44.08
|
|
|
$
|
47.96
|
|
|
$
|
40.60
|
|
Third Quarter
|
|
$
|
51.50
|
|
|
$
|
46.05
|
|
|
$
|
57.25
|
|
|
$
|
44.42
|
|
Fourth Quarter
|
|
$
|
54.08
|
|
|
$
|
49.68
|
|
|
$
|
61.24
|
|
|
$
|
54.53
|
|
Year ending December 31, 2011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Quarter
|
|
$
|
52.68
|
|
|
$
|
46.17
|
|
|
$
|
63.95
|
|
|
$
|
57.67
|
|
Second Quarter
|
|
$
|
51.23
|
|
|
$
|
43.85
|
|
|
$
|
65.70
|
|
|
$
|
53.70
|
|
Third Quarter
(through ,
2011)
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
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|
160
DESCRIPTION
OF ALLIED WORLD SHARE CAPITAL
The following discussion is a summary of the terms of the
capital stock of Allied World and should be read in conjunction
with the section entitled Comparison of Rights of
TransAllied Shareholders and Transatlantic Stockholders
beginning on page 168. This summary is not meant to be
complete and is qualified in its entirety by reference to the
Swiss Federal Code of Obligations (the Swiss Code)
and to the Allied World Articles and the organizational
regulations of Allied World. You are urged to read those
documents carefully. Copies of the Allied World Articles and
organizational regulations of Allied World are incorporated by
reference in this joint proxy statement/prospectus. See
Where You Can Find More Information beginning on
page 184.
Authorized
Share Capital
The share capital of Allied World as registered with the Swiss
Commercial Register of the canton of Zug, Switzerland amounts to
CHF 597,019,530, divided into 39,801,302 Allied World shares
(Namenaktien) with a par value of CHF 15.00 per share and
the participation capital of Allied World amounts to CHF
3,035,100 and is divided into 202,340 registered participation
certificates with a par value of CHF 15.00 per participation
certificate, fully paid-in. As of July 22, 2011, there were
38,077,329 Allied World shares outstanding (excluding treasury
shares) and 43,860 participation certificates. Only Allied World
registered shares (Namenaktien) will be issued in the
merger.
The Allied World board of directors is authorized to issue new
voting shares at any time during the two-year period ending on
November 30, 2012 and thereby increase the share capital,
without further shareholder approval, by a maximum amount of 20%
of the share capital registered in the Swiss Commercial Register
or 7,960,260 Allied World shares, par value CHF 15.00 per share.
After the expiration of the initial two-year period, and each
subsequent two-year period, authorized share capital will be
available to the Allied World board of directors for issuance of
additional Allied World shares only if the authorization is
reapproved by shareholders. The Allied World Articles provide
for conditional capital that allows the Allied World board of
directors to authorize the issuance of up to 7,200,000 of
additional Allied World shares without obtaining additional
shareholder approval as follows: (i) up to a maximum amount
not exceeding CHF 15,000,000 (which is equivalent to 1,000,000
Allied World shares) in connection with the exercise of
conversion
and/or
option or warrant rights granted in connection with bonds, notes
or similar instruments, issued or to be issued by Allied World
or by subsidiaries of Allied World, including convertible debt
instruments; (ii) up to a maximum amount not exceeding CHF
63,000,000 (which is equivalent to 4,200,000 Allied World
shares) in connection with the exercise of option rights granted
to any employee of Allied World or a subsidiary, and any
consultant, director or other person providing services to
Allied World or a subsidiary; or (iii) up to a maximum
amount not exceeding CHF 30,000,000 (which is equivalent to
2,000,000 Allied World shares) in connection with the exercise
of the shareholder warrant previously granted at the time of
Allied Worlds formation to AIG.
Other
Classes or Series of Shares
The board of directors may not create shares with increased
voting powers (i.e., super voting shares) or preferred stock
(Vorzugsaktien). To create super-voting shares
(Vorzugsaktien), a resolution of the general meeting
passed by a qualified majority of at least
662/3%
of the votes and a majority of the par value of the voting
shares represented at the general meeting is required.
Voting
Rights
Pursuant to the Allied World Articles, each Allied World voting
share conveys the right to one vote. The Allied World Articles
limit the voting rights of Allied World shares that are
controlled shares of a shareholder to one vote less
than 10% of the total voting rights of Allied Worlds share
capital as registered with the Swiss Commercial Register.
Controlled shares of a shareholder consist of shares owned by
the shareholder (i) directly or (ii) by application of
certain constructive ownership rules. These rules are derived
from constructive ownership rules contained in the Code relating
to controlled foreign corporation status but
161
are broader than the Code in that the Code distinguishes in some
respects between U.S. and
non-U.S. persons,
while Swiss law would not support rules that discriminate based
on citizenship or residence. The Allied World board of directors
may waive this restriction.
The Allied World Articles also contain a provision regarding
voting rights that is customary for Swiss companies and provides
that, to be able to exercise voting rights, holders of shares
must apply to Allied World for enrollment in the Allied World
share register (Aktienregister) as shareholders with
voting rights. Registered holders of shares may obtain the form
of declaration from Continental Stock Transfer &
Trust Company, Allied Worlds transfer agent. If an
Allied World shareholder fails to register as a shareholder with
voting rights, such shareholder may not participate in or vote
at Allied World general shareholders meetings but will be
entitled to dividends, preemptive rights and liquidation
proceeds. Only Allied World shareholders that are registered as
shareholders with voting rights on the relevant record date are
permitted to participate in and vote at a general
shareholders meeting. The Allied World board of directors
may record nominees who hold shares in their own name, but for
the account of third parties, as shareholders of record in
Allied Worlds share register. Beneficial owners of shares
who hold shares through a nominee exercise the
shareholders rights through the intermediation of such
nominee.
Pursuant to the Allied World Articles, Allied World shareholders
generally pass resolutions and make elections at the general
meeting by the affirmative vote of a simple majority of the
votes cast (whereby abstentions, broker non-votes, blank or
invalid ballots are disregarded for purposes of establishing the
majority).
Supermajority
Voting
The Swiss Code
and/or the
Allied World Articles require the affirmative vote of at least
662/3%
of the voting rights and a majority of the par value of the
voting shares, in each case as represented at a general meeting
where two or more persons at the meeting representing in person
or by proxy more than 50% of Allied World total outstanding
registered shares throughout the meeting, to approve the
following matters:
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|
|
a change of the purpose of Allied World;
|
|
|
|
the creation of shares with privileged voting rights;
|
|
|
|
the restriction on the transferability of voting shares or
non-voting shares;
|
|
|
|
an increase of capital, authorized or subject to a condition;
|
|
|
|
an increase of capital out of equity against contributions in
kind, or for the purpose of acquisition of assets and the
granting of special benefits;
|
|
|
|
the limitation or withdrawal of preemptive rights;
|
|
|
|
a change in the domicile of Allied World;
|
|
|
|
the liquidation of Allied World;
|
|
|
|
the alleviating or withdrawal of restrictions upon the transfer
of Allied World shares or Allied World non-voting shares;
|
|
|
|
the conversion of voting shares into bearer shares and vice
versa as well as the conversion of Allied World non-voting
shares into Allied World shares;
|
|
|
|
the dismissal of any member of the Allied World board of
directors according to Article 705, paragraph 1 of the
Swiss Code; and
|
|
|
|
any alteration or amendment of articles 8, 14, 15 or 16 of
the Allied World Articles, which relate to the voting rights of
shareholders of Allied World.
|
The same supermajority voting requirements apply to resolutions
in relation to transactions among corporations based on
Switzerlands Federal Act on Mergers, Demergers,
Transformations and the Transfer of Assets, including a merger,
demerger or conversion of a corporation (other than a cash-out
or certain squeeze-
162
out mergers, in which minority shareholders of the company being
acquired may be compensated in a form other than through shares
of the acquiring company, for instance, through cash or
securities of a parent company of the acquiring company or of
another company in such a merger, an affirmative
vote of 90% of the outstanding voting shares is required). Swiss
law may also impose this supermajority voting requirement in
connection with the sale of all or substantially all of
its assets by Allied World. The merger will not have to be
approved with a supermajority as it does not qualify as a
statutory merger pursuant to the provisions of the Merger Act.
However, the ordinary capital increase requires the affirmative
vote of at least
662/3%
of the voting rights and a majority of the par value of the
voting shares, in each case, as represented at a shareholders
meeting, since the increase of capital is out of equity (capital
reserves).
Compulsory
Acquisitions; Appraisal Rights
Business combinations and other transactions that are binding on
all shareholders are governed by the Merger Act. A statutory
merger or demerger requires that at least
662/3%
of the voting shares and a majority of the par value of the
voting shares, each as represented at the general meeting of
shareholders vote in favor of the transaction. Under the Merger
Act, a demerger may take two forms:
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|
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|
|
a legal entity may divide all of its assets and transfer such
assets to other legal entities, with the shareholders of the
transferring entity receiving equity securities in the acquiring
entities and the transferring entity dissolving upon
deregistration in the commercial register; or
|
|
|
|
a legal entity may transfer all or a portion of its assets to
other legal entities, with the shareholders of the transferring
entity receiving equity securities in the acquiring entities (in
addition to the current shareholdings).
|
If a transaction under the Merger Act receives all of the
necessary consents, all shareholders would be compelled to
participate in the transaction. Swiss companies may be acquired
by an acquirer through the direct acquisition of the share
capital of the Swiss company. With respect to corporations
limited by shares, such as Allied World, the Merger Act provides
for the possibility of a so-called cash-out or
squeeze-out merger if the acquirer controls 90% of
the outstanding voting shares. In these limited circumstances,
minority shareholders of the company being acquired may be
compensated in a form other than through shares of the acquiring
company (for instance, through cash or securities of a parent
company of the acquiring company or of another company). For
business combinations effected in the form of a statutory merger
or demerger and subject to Swiss law, the Merger Act provides
that if the equity rights have not been adequately preserved or
compensation payments in the transaction are unreasonable, a
shareholder may request the competent court to determine a
reasonable amount of compensation.
In addition, under Swiss law, the sale of all or
substantially all of its assets by Allied World may
require a resolution of the general meeting of shareholders
passed by holders of at least
662/3%
of the voting rights and a majority of the par value of the
voting shares, each as represented at the general meeting of
shareholders.
Whether or not a shareholder resolution is required depends on
the particular transaction, including whether the following test
is satisfied:
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|
|
|
|
the company sells a core part of its business, without which it
is economically impracticable or unreasonable to continue to
operate the remaining business;
|
|
|
|
the companys assets, after the divestment, are not
invested in accordance with the companys statutory
business purpose; and
|
|
|
|
the proceeds of the divestment are not earmarked for
reinvestment in accordance with the companys business
purpose but, instead, are intended for distribution to
shareholders or for financial investments unrelated to the
companys business.
|
If all of the foregoing apply, a shareholder resolution would
likely be required.
163
Quorum
Under Swiss law, there is no mandatory quorum requirement unless
set forth in a companys articles of association (although
certain actions by shareholders require the approval of a
specified percentage of all voting shares, whether or not such
shares are actually voted, which has the practical effect of a
quorum requirement). The Allied World Articles provide for a
quorum requirement the presence of two or more persons at the
meeting representing in person or by proxy more than 50% of
Allied Worlds total outstanding Allied World shares
throughout the meeting.
Dividends
and Other Payments to Shareholders
Under Swiss law, dividends may be paid out only if Allied World
has sufficient distributable profits from previous fiscal years
or if Allied World has freely distributable reserves, each as
will be presented on Allied Worlds audited statutory
financial statements prepared in accordance with Swiss law.
Payments out of the share and participation capital (in other
words, the aggregate par value of Allied Worlds share and
participation capital) in the form of dividends are not allowed;
however, payments out of share and participation capital may be
made by way of a capital reduction to achieve a similar result
as the payment of dividends. The affirmative vote of
shareholders holding a majority of the votes cast at a
shareholder meeting must approve reserve reclassifications and
distributions of dividends. The Allied World board of directors
may propose to shareholders that a dividend be paid but cannot
itself authorize the dividend. In addition, Allied World
shareholders may propose dividends without any dividend proposal
by the Allied World board of directors. Under Swiss law, upon
satisfaction of all legal requirements (including shareholder
approval of a par value reduction), Allied World is required to
submit an application to the Swiss Commercial Register to
register each applicable par value reduction. Without effective
registration of the applicable par value reduction with the
Swiss Commercial Register, Allied World will not be able to
proceed with the payment of any installment of any dividend.
Under Swiss law, if the Allied World general capital reserves
amount to less than 20% of the share and participation capital
recorded in the Swiss Commercial Register (i.e., 20% of the
aggregate par value of Allied Worlds capital), then at
least 5% of Allied Worlds annual profit must be retained
as general reserves. Swiss law permits Allied World to accrue
additional general reserves. In addition, Allied World is
required to create a special reserve on its audited statutory
financial statements in the amount of the purchase price of
voting shares and Allied World non-voting shares that Allied
World or any of its subsidiaries repurchase, which amount may
not be used for dividends.
Swiss companies generally must maintain separate audited
statutory financial statements for the purpose of, among other
things, determining the amounts available for the return of
capital to shareholders, including by way of a distribution of
dividends. Amounts available for the return of capital as
indicated on Allied Worlds audited statutory financial
statements may be materially different from amounts reflected in
Allied Worlds consolidated GAAP financial statements.
Allied Worlds auditor must confirm that a dividend
proposal made to shareholders complies with Swiss law and the
Allied World Articles.
Allied World is required under Swiss law to declare any
dividends and other capital distributions in Swiss francs.
Allied World makes dividend payments to holders of its common
shares in U.S. dollars. Continental Stock
Transfer & Trust Company, Allied Worlds
transfer agent, will be responsible for paying the
U.S. dollars to registered holders of Allied World shares
and Allied World non-voting shares, less amounts subject to
withholding for taxes. As a result, Allied World shareholders
are exposed to fluctuations in the U.S. dollar
Swiss franc exchange rate between the date used for purposes of
calculating the Swiss franc amount of any proposed dividend or
par value reduction and the relevant payment date.
Pursuant to Swiss law, dividend payments, but not payments to
shareholders in the form of a return of capital, are subject to
Swiss withholding taxes. Any dividend payments remain subject to
Swiss withholding tax, imposed on the gross amount at the
current rate of 35%. The withholding tax must be borne by the
shareholder. Swiss resident beneficiaries of taxable dividends
are entitled to full subsequent relief of the withholding tax,
either through a tax refund or through a credit against their
income tax liability, if such recipients are the beneficial
owners of the shares at the time such dividend payment is made
and they duly
164
report the gross income in their tax returns or financial
statements used for tax purposes, as the case may be, and if
there is no tax avoidance. Non-Swiss resident beneficiaries of
dividends may be entitled to a partial or full refund of the
withholding tax in accordance with any applicable double
taxation convention between Switzerland and the
beneficiarys country of tax residence.
Any reduction of Allied World share capital recorded in the
Swiss Commercial Register requires the approval of Allied World
shareholders holding a majority of the shares represented at the
general shareholders meeting. A special audit report must
confirm that creditors claims remain fully covered despite
the reduction in share capital recorded in the Swiss Commercial
Register. Upon approval of the capital reduction by the general
meeting of Allied World shareholders, the Allied World board of
directors must give public notice of the capital reduction
resolution in the Swiss Official Gazette of Commerce three times
and notify creditors that they may request, within two months of
the third publication, satisfaction of or security for their
claims. Reduction of share and participation capital requires
that Allied Worlds net assets still exceed the share and
participation capital and statutory reserves after a par value
reduction payment to the shareholders has been made.
Preemptive
Rights and Advance Subscription Rights
Under the Swiss Code, if new Allied World shares or non-voting
shares are being issued, the existing shareholders or holders of
non-voting shares in Allied World will generally have preemptive
rights in relation to such Allied World shares or Allied World
non-voting shares or rights in proportion to the respective par
values of their holdings. In the context of an ordinary capital
increase resolved by the general meeting of Allied World
shareholders, the shareholders may by a qualified majority of at
least
662/3%
of the votes and a majority of the par value of the voting
shares represented at a general meeting resolve to withdraw or
limit the preemptive rights for valid reasons (such as a merger,
an acquisition or any of the reasons authorizing the board of
directors to withdraw or limit the preemptive rights of
shareholders in the context of an authorized capital increase as
described below).
If the general meeting of shareholders approves the creation of
authorized or conditional capital, it can thereby also delegate
the decision whether to withdraw or limit the preemptive and
advance subscription rights for valid reasons to the board of
directors. The Allied World Articles provide for this delegation
with respect to Allied Worlds authorized and conditional
share capital in certain circumstances, including in the case of
a merger or acquisition and the other circumstances described
below.
Rights
with Respect to Authorized Share Capital
The Allied World board of directors is authorized to withdraw or
limit preemptive rights with respect to the issuance of shares
from authorized capital if the issuances are made for the
purpose of:
|
|
|
|
|
mergers, acquisitions of enterprises or participations,
financing
and/or
refinancing of such mergers and acquisitions and other
investment projects (including by way of private placements);
|
|
|
|
improving the regulatory capital position of Allied World or its
subsidiaries (including by way of private placements);
|
|
|
|
broadening the shareholder constituency;
|
|
|
|
the participation of employees; or
|
|
|
|
exchanging Allied World non-voting shares as well as a buy-back
of Allied World non-voting shares in exchange for Allied World
shares out of authorized share capital.
|
Rights
with Respect to Conditional Share Capital
In connection with the issuance of bonds, notes or similar
instruments convertible into or exercisable or exchangeable for
Allied World shares, Allied World shareholders do not have
preemptive rights, and the Allied World board of directors is
authorized to withdraw or limit the advance subscription rights
of shareholders with respect to new bonds, notes or similar
instruments if the issuance is for purposes of the financing or
165
refinancing of the acquisition of an enterprise or business or
part thereof or new investments planned by Allied World, or for
the issuance of convertible bonds and warrants in international
capital markets or through a private placement. If the advance
subscription rights are withdrawn or limited:
|
|
|
|
|
the instruments have to be placed at market conditions;
|
|
|
|
the exercise period is not to exceed ten years from the date of
issue for warrants and twenty years for conversion
rights; and
|
|
|
|
the conversion or exercise price for the new shares is to be set
at least in line with the market conditions prevailing at the
date on which the instruments are issued. Preemptive rights are
excluded with respect to the conditional share capital created
for a shareholder warrant previously granted to AIG at the time
of Allied Worlds formation.
|
The preemptive rights of shareholders are excluded with respect
to issuances of new registered shares out of conditional share
capital under an equity-based incentive plan to directors,
employees, contractors or other persons providing services to
Allied World or one of its subsidiaries or affiliates.
Participation
Certificates
The Allied World Articles provide for participation capital
amounting to CHF 3,035,100 or 202,340 Allied World non-voting
shares.
The Allied World non-voting shares have the same entitlement to
dividends and liquidation distributions as the voting shares of
Allied World. The Allied World Articles further provide that if
the share capital and the participation capital are increased at
the same time and in the same proportion, shareholders may
subscribe only to Allied World shares and participants only to
Allied World non-voting shares. The Swiss Code states that if
only the participation capital or only the share capital is
increased or if one is increased more than the other, preemptive
rights are to be allocated in such a way that both shareholders
and participants maintain their participation in the same
proportion as before. Preemptive rights of the participants (be
it on Allied World non-voting shares or Allied World shares) can
be limited or withdrawn in accordance with the same criteria and
conditions as are applicable to the voting shares.
Holders of Allied World non-voting shares are not entitled to
attend or vote at the general meeting and may not exercise the
shareholder rights associated therewith (e.g., right to request
the convocation of a shareholders meeting, right to speak
and/or make
a motion at the shareholders meeting). As a matter of Swiss law,
however, holders of Allied World non-voting shares have the
following rights:
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right to orientation on the invitation to shareholders meetings;
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similar to shareholders, rights to request access or information
on corporate matters;
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right to make a motion to appoint a special commissioner;
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right to be informed about the resolutions of the shareholders
meetings; and
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right to initiate certain legal proceedings (e.g., challenge of
shareholders resolutions and (limited rights under Swiss law)
board resolutions, dissolution of the company, appointment of
special commissioner and directors liability law suits).
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The Allied World Articles provide that upon resolution of the
general meeting and with the approval of the holders of Allied
World non-voting shares, all or any portion of such
holders Allied World non-voting shares may be converted
into Allied World shares, at any time.
Some holders of Allied World non-voting shares may also hold a
put right that enables them to require Allied World to issue
voting shares of Allied World (to them or their third party
designees) on a
one-for-one
basis in exchange for their Allied World non-voting shares.
Allied World holds treasury shares for this purpose.
166
According to the Swiss Code, resolutions limiting the rights of
the holders of Allied World non-voting shares afforded by law or
the Allied World Articles require an affirmative resolution by
an extraordinary general meeting of holders of Allied World
non-voting shares.
New
Shares
The new Allied World shares to be issued as merger consideration
will be issued by way of an ordinary capital increase to be
approved at the Allied World Special Shareholder Meeting. With
respect to such issuance of Allied World shares, the pre-emptive
rights of the existing shareholders will have to be excluded by
resolution at the Allied World Special Shareholder Meeting. The
contributions for the new registered shares will be paid by
converting existing reserves (Kapitalreserven) into share
capital.
The new Allied World shares to be issued as merger consideration
will be issued, after the approval of the shareholders of Allied
World have been obtained as contemplated in this joint proxy
statement/prospectus, according to the resolution of the Allied
World board of directors implementing the share capital increase
in one multiple share document (Globalurkunde). This
multiple share document will be deposited with a depository
(Verwahrungsstelle), which will log in the Allied World
shares reflected by the multiple share document to one or
several securities accounts and thus create shares in book-entry
form (Bucheffekten).
Antitakeover
Provisions
The Allied World Articles have provisions that could have an
anti-takeover effect. These provisions are intended to enhance
the likelihood of continuity and stability in the composition of
the Allied World board of directors and in the policies
formulated by the Allied World board of directors, and may have
the effect of discouraging actual or threatened changes of
control by limiting certain actions that may be taken by a
potential acquiror prior to its having obtained sufficient
control to adopt a special resolution amending the Allied World
Articles.
The Allied World Articles provide that the Allied World board of
directors is divided into three classes serving staggered
three-year terms. Under the Swiss Code, directors may at any
time, with or without cause, be removed from office by
resolution of the shareholders at a general meeting of
shareholders, provided that a proposal for such resolution has
been put on the agenda for the meeting in accordance with the
requirements of the Swiss Code and the Allied World Articles.
The Allied World Articles provide that a decision of the
shareholders at a general meeting to remove a director requires
the vote of shareholders holding
662/3%
of the voting rights and a majority of the par value of the
voting shares, each as represented at a general meeting.
The Allied World Articles include an authorized share capital,
according to which the board of directors is authorized, at any
time during a maximum two-year period, to issue a number of
voting shares up to 20% of the share capital registered in the
Swiss Commercial Register and to limit or withdraw the
preemptive rights of the existing shareholders in various
circumstances.
The Allied World Articles include a provision that permits the
board of directors to refuse the registration of a shareholder
as shareholder with voting rights in the share register if, and
to the extent, such shareholder owns or otherwise controls alone
or together with others 10% of the total voting rights of Allied
World share capital as registered with the Swiss Commercial
Register or if such shareholder refuses to confirm to the
company that it has acquired the voting shares for its own
account and benefit.
In addition, pursuant to the Allied World Articles, shareholders
whose controlled shares (as defined in the Allied
World Articles) represent 10% or more of the total voting shares
of Allied World are limited to voting one vote less than 10% of
the total voting rights of Allied Worlds share capital as
registered with the Swiss Commercial Register, which could make
it more difficult for a third party to acquire Allied World
without the consent of the Allied World board of directors.
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Liquidation
Rights
Under Swiss law, any surplus arising out of liquidation, after
the settlement of all claims of all creditors, will be
distributed to shareholders in proportion to the
paid-up par
value of shares held, subject to Swiss withholding tax
requirements.
No
Redemption; Repurchase
Allied World shares are not subject to redemption by Allied
World. In addition, the Swiss Code limits a corporations
ability to hold or repurchase its own common shares. Allied
World and its subsidiaries may only repurchase shares to the
extent that sufficient freely distributable reserves (including
contributed surplus) are available, as described under
Dividends and Other Payments to Shareholders. The
aggregate par value of Allied World shares held by Allied World
and its subsidiaries may not exceed 10% of share capital
registered in the Swiss Commercial Register. Allied World may
repurchase common shares beyond the statutory limit of 10%,
however, if shareholders pass a resolution at a general
shareholders meeting authorizing the Allied World board of
directors to repurchase common shares in an amount in excess of
10% and the repurchased shares are dedicated for cancellation.
Any common shares repurchased pursuant to such an authorization
will then be cancelled at the next general shareholders
meeting upon the approval of shareholders holding a majority of
the common shares represented at the general meeting.
Repurchased common shares held by Allied World or its
subsidiaries do not carry any rights to vote at a general
shareholders meeting but are entitled to the economic
benefits generally associated with the shares.
Stock
Exchange Listing
Allied World shares are traded on the New York Stock Exchange
under the symbol AWH.
No
Sinking Fund
The Allied World shares have no sinking fund provisions.
Transfer;
Transfer Agent
Allied World has not imposed any restrictions applicable to the
transfer of Allied World shares. The transfer agent for the
Allied World shares is Continental Stock Transfer &
Trust Company.
168
COMPARISON
OF RIGHTS OF TRANSALLIED SHAREHOLDERS AND
TRANSATLANTIC STOCKHOLDERS
The rights of Allied World shareholders are currently governed
by the Swiss Code, the Allied World Articles and the
organizational regulations of Allied World. The rights of
Transatlantic stockholders are currently governed by the DGCL,
the Transatlantic charter, and the Transatlantic bylaws.
Pursuant to the terms of the merger agreement, Transatlantic
stockholders will be entitled to receive Allied World shares
and, upon completion of the merger, their rights will be
governed by the Swiss Code and the TransAllied Articles and
TransAllied organizational regulations, once adopted.
This section of the joint proxy statement/prospectus describes
the material differences between the rights of TransAllied
shareholders and Transatlantic stockholders.
This section does not include a complete description of all
differences among the rights of TransAllied shareholders and
Transatlantic stockholders, nor does it include a complete
description of the specific rights of these shareholders.
Furthermore, the identification of some of the differences in
the rights of these shareholders as material is not intended to
indicate that other differences do not exist.
You are urged to read carefully the relevant provisions of the
Swiss Code and the DGCL, as well as the TransAllied Articles and
the TransAllied organizational regulations and the Transatlantic
charter and Transatlantic bylaws. You are also urged to read the
section entitled The Merger Board of Directors
and Management Following the Merger, which describes
certain items regarding the board of directors and management of
TransAllied that will be reflected in the TransAllied
organizational regulations. Copies of the Allied World Articles
and organizational regulations and the Transatlantic charter and
Transatlantic bylaws are filed as exhibits to the reports of
Allied World and Transatlantic incorporated by reference in this
joint proxy statement/prospectus. See Where You Can Find
More Information beginning on page 184.
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TransAllied Group Holdings, AG
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Transatlantic
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Authorized Capital Shares
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The authorized share capital of TransAllied will consist
of common
shares with a nominal value of CHF 15.00 (as may be adjusted in
connection with the payment of dividends by virtue of a par
value reduction as approved by the shareholders) per share and
the conditional share capital will consist of a total
of common
shares with a nominal value of CHF 15.00 per share. The
participation capital of TransAllied amounts to CHF 3,035,100
and is divided into 202,340 registered participation
certificates with a par value of CHF 15.00 per participation
certificate (as may be adjusted in connection with the payment
of dividends by virtue of a par value reduction as approved by
the shareholders).
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The aggregated number of shares which Transatlantic is
authorized to issue is 210,000,000, consisting of (i)
10,000,000 shares of preferred stock, par value $1.00 per
share, and (ii) 200,000,000 shares of common stock, par
value $1.00 per share.
As
of July 22, 2011, the Transatlantic record date,
Transatlantic had issued and outstanding 62,488,896 shares of
common stock and no shares of preferred stock.
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Pursuant to Swiss law, dividend payments out of earnings and
similar payments are subject to Swiss withholding tax. Dividend
payments in the form of a return of
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169
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TransAllied Group Holdings, AG
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Transatlantic
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capital by reducing the par value of the underlying shares are
not subject to Swiss withholding tax.
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Voting Rights
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Under the TransAllied Articles, each holder of a common share
shall be entitled to one vote for each common share registered
in his or her name in the TransAllied share register
(Aktienregister). Participation certificates are not
entitled to any votes. Controlled Shares voting
rights will be limited, in the aggregate, to a voting power of
approximately 10% pursuant to a formula specified in the
TransAllied Articles. Controlled Shares are defined generally to
include all shares of TransAllied directly, indirectly or
constructively owned or beneficially owned by any person or
group of persons.
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Under the Transatlantic charter, each holder of common stock
shall be entitled to one vote for each share of common stock
standing in his or her name on the stock transfer books of
Transatlantic. Except as otherwise provided in the rights,
powers or preferences in any class or series of preferred stock
of Transatlantic, all voting rights of Transatlantic shall be
vested in the common stock.
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Supermajority Voting
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The Swiss Code and the TransAllied Articles require the
affirmative vote of at least two-thirds of the voting rights and
a majority of the par value of TransAllied shares, each as
represented at a general meeting, to approve the following
matters:
a change in TransAllieds purpose;
the creation of shares with privileged
voting rights;
the restriction on transferability of
TransAllied shares or TransAllied non-voting shares;
an increase of capital, authorized or
subject to a condition;
an increase in the share capital out of
equity through a contribution in kind or for an acquisition of
assets, or a grant of special benefits;
the limitation or withdrawal of
preemptive rights;
the alleviating or withdrawal of
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Under the Transatlantic by-laws, the affirmative vote of the
holders of a majority of the outstanding shares of Transatlantic
stock is all that is required for certain transactions that by
applicable law must be submitted to shareholders for their
approval, such as, a merger, the sale of substantially all of
Transatlantics assets, an amendment to the Transatlantic
charter or a proposal to dissolve Transatlantic.
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TransAllied Group Holdings, AG
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Transatlantic
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restrictions upon the transfer of voting shares or TransAllied
non-voting shares;
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the dismissal of any member of the
TransAllied board according to Article 705, paragraph 1 of the
Swiss Code;
a change in TransAllieds
domicile;
the conversion of TransAllied shares
into bearer shares and vice versa and the conversion of
TransAllied non- voting shares into TransAllied shares;
any alteration or amendment of articles
8, 14, 15 or 16 of the TransAllied Articles, which relate to the
voting rights of shareholders TransAllied; and
TransAllieds liquidation.
The
same supermajority voting requirements apply to resolutions in
relation to transactions among corporations based on the Merger
Act, including a merger, demerger or conversion of a
corporation, other than a cash-out or certain squeeze-out
mergers (in which minority shareholders of the company being
acquired may be compensated in a form other than through shares
of the acquiring company) where an affirmative vote of 90% of
the outstanding common shares is required. Swiss Law also may
impose this supermajority voting requirement in connection with
the sale of all or substantially all of its assets.
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Number of Directors
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The TransAllied Articles provide that the TransAllied board
shall consist of no less than three and no more than thirteen
members. The shareholders have an exclusive right to change the
size of the TransAllied board by amending the Articles of
Association. TransAllied will have 11 directors initially.
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The Transatlantic bylaws provide that the number of directors
will not be less than three nor more than twelve, which number
may be fixed from time to time by the Transatlantic board of
directors. Under the Transatlantic charter, only the
Transatlantic board of directors may change the size of
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TransAllied Group Holdings, AG
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Transatlantic
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the Transatlantic board of directors. The size of
Transatlantics board is currently fixed at seven directors
and there are currently seven directors serving on the
Transatlantic board of directors.
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Classification of Directors
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Under the TransAllied Articles, TransAllied the board of
directors is divided into three classes of directors,
Class I, Class II and Class III, each of approximately
equal size. Each year the TransAllied board shall be renewed by
rotation, to the extent possible in equal numbers and in such
manner that, after a period of three years, all members will
have been subject to re-election. The TransAllied board shall
establish the order of rotation, whereas the first term of some
members may be less than three years.
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The Transatlantic board of directors is not divided into
classes. Each director is elected at the annual meeting of
stockholders, to hold office until the next annual meeting and
until his or her respective successor is duly elected and
qualified or until his or her prior death, resignation or
removal.
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Election of Directors
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Under the TransAllied Articles, a vote of a simple majority of
the votes cast at a general meeting of the shareholders, is
required to elect the directors to succeed those whose terms
expire (whereby abstentions, broker non- votes, blank or invalid
ballots shall be disregarded for purposes of establishing the
majority).
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Under the Transatlantic bylaws, each director shall be elected
by the vote of the majority of the votes cast with respect to
the nominee at any meeting at which directors are to be elected
at which a quorum is present; provided, however, that the
directors shall be elected by a plurality of votes cast on an
election that is contested. An election is deemed to be
contested if as of a date that is 14 days in advance of the
filing date of Transatlantics proxy statement for the
relevant meeting with the SEC, the number of nominees exceeds
the number of directors to be elected.
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For purposes of the foregoing, a majority of votes cast means
that the number of shares voted for a nominee must
exceed the votes cast against such nominee.
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Vacancies on the Board of Directors
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Under the Swiss Code, a shareholder vote is required to fill
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Under the Transatlantic bylaws, if the office of any director
becomes
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TransAllied Group Holdings, AG
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Transatlantic
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vacancies on the TransAllied board.
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vacant, by reason of death, resignation or removal, the
directors remaining in office, although less than a quorum, may
fill the vacancy by the affirmative vote of a majority of such
remaining directors.
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A Transatlantic director elected to fill a vacancy shall serve
for the unexpired term of his predecessor in office. Any
directorship filled by reason of an increase in the number of
directors may be filled by election at a regular meeting or a
special meeting of the Transatlantic board of directors or
stockholders of Transatlantic, called for that purpose.
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Removal of Directors
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Under the Swiss Code and the TransAllied Articles, only the
shareholders may remove a director, and they may do so with or
without cause by the affirmative vote of at least
662/3%
of the voting rights and a majority of the par value of
TransAllied shares, at a shareholders meeting where such
removal was properly set on the agenda.
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Under the Transatlantic charter, a director may be removed from
office with or without cause, and only by the affirmative vote
of the holders of a majority of the voting power of all of the
outstanding capital stock of Transatlantic entitled to vote in
respect thereof.
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Amendment of Charter Documents
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Under the Swiss Code and the TransAllied Articles, only the
shareholders, acting at the general shareholders meeting,
have the power to amend the TransAllied Articles. A resolution
of the general shareholders meeting passed by at least
662/3%
of the represented share votes and the majority of the
represented shares par value is required to amend those sections
of the TransAllied Articles pertaining to the share register,
matters requiring a supermajority vote, the voting rights of
shares, matters relating to resolutions of the shareholders,
restrictions on transferability and shareholder proxies. To
amend other sections requires passage of a
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Under the Transatlantic charter, Transatlantic has reserved the
right to amend the Transatlantic charter. However, the DGCL
provides that any amendment to the certificate of incorporation
of a Delaware corporation shall be approved by the Transatlantic
board of directors, by an affirmative vote of a majority of the
outstanding stock entitled to vote thereon, and a majority of
the outstanding stock of each class entitled to vote thereon as
a class.
As
permitted by the Transatlantic charter, the Transatlantic board
of directors may determine the preferences, limitations, and
relative rights of preferred stock
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TransAllied Group Holdings, AG
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Transatlantic
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shareholder resolution upon a majority of the votes cast.
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prior to issuance by adopting a resolution or resolutions
without stockholder approval. For more information on
Transatlantic preferred stock, see the section of this chart
entitled Preferred Shares on page 179.
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Amendment to Organizational Regulations or Bylaws
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Under the TransAllied Articles, the TransAllied board may amend,
by majority vote, the organizational regulations at any time
without the approval of the shareholders. Under Swiss law,
shareholders may not pass or amend organizational regulations
but may pass resolutions amending the TransAllied Articles to
effectively supersede certain provisions in the TransAllied
organizational resolutions, provided that this does not violate
the separation of responsibilities.
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Under the Transatlantic charter, the Transatlantic board of
directors may amend the Transatlantic bylaws without the
approval of the stockholders of Transatlantic in any manner that
is not inconsistent with the DGCL or the Transatlantic charter.
In addition, under the Transatlantic bylaws, either of the board
of directors, by majority vote, or the stockholders, by the
affirmative vote of holders of record of at least a majority of
the combined voting power of all of the outstanding capital
stock entitled to vote thereon, may amend or repeal the bylaws
of Transatlantic.
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Extraordinary Shareholder Meetings
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Under the TransAllied Articles, extraordinary general
shareholders meetings may be called by resolution of the
shareholders at a general shareholders meeting, the
auditors or the TransAllied board, or by shareholders with
voting power representing at least 10% of the share capital.
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Under the Transatlantic bylaws, a special meeting of
stockholders for any purpose or purposes may be called by (i)
the Transatlantic board of directors, the chairman of the board
of directors, the lead director (as appointed under the
Transatlantic bylaws), the president or a committee of the
Transatlantic board of directors given such power or (ii) the
secretary of Transatlantic, upon the request in writing of
stockholders holding of record at least 25% of the voting power
of the outstanding shares of capital stock of Transatlantic
entitled to vote at such meeting.
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Nomination of Directors and Shareholder Proposals
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Under the Swiss Code, nominations of persons for election to the
TransAllied board may be made at any time prior to, or at, the
general shareholders meeting, provided that the election
of
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Under the Transatlantic bylaws, for nominations of directors and
other proposals properly brought before an annual meeting of
stockholders by a stockholder, timely notice must be given. In
general, to be considered timely, a stockholders
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174
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TransAllied Group Holdings, AG
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Transatlantic
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directors is a matter that has been included in the agenda.
Pursuant to the Swiss Code, any shareholder or group of
shareholders holding voting shares representing either an
aggregate par value of CHF 1 million or 10% of the share capital
registered in the commercial register may request that an item
be included on the agenda for the general meeting. Under the
TransAllied Articles, such request must be in writing and
submitted to the chairman up to 60 days before the date of
the meeting. Once included on the agenda, under the Swiss Code,
no prior notice is required to bring motions related to that
item.
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notice must be received by Transatlantics secretary at
the principal office of Transatlantic not later than the close
of business on the 90th day nor earlier than the close of
business on the 60th day prior to the first anniversary of
the preceding years annual meeting or in the case of the
special meeting, not later than the close of the 10th business
day following the day on which notice of the special meeting was
mailed or public announcement thereof was made, whichever occurs
first.
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Limitation of Liability of Directors
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Under the Swiss Code, a limitation of directors liability
is not possible. However, the general meeting of shareholders
may pass a resolution discharging the directors from certain
limited actions under certain conditions. Consequently,
TransAllieds Articles and the TransAllied organizational
regulations contain no provisions limiting the personal
liability of directors.
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The DGCL permits the adoption of a provision in the certificate
of incorporation limiting or eliminating the monetary liability
of a director to the corporation or its stockholders by reason
of a directors breach of the fiduciary duty of care.
However, the law does not permit any limitation of the liability
of a director for:
breaching the duty of loyalty to the
corporation or its stockholders;
failing to act in good faith;
obtaining an improper personal benefit
from the corporation; or
paying a dividend or approving a stock
repurchase that was illegal under Delaware law.
Under
the Transatlantic charter, to the fullest extent permitted by
Delaware law, a director of Transatlantic shall not be liable to
Transatlantic or its stockholders for monetary damages for
breach of fiduciary duty as a director. However, if the DGCL is
amended
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TransAllied Group Holdings, AG
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Transatlantic
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so that it eliminates or further limits the personal liability
of directors, then liability of a director of Transatlantic with
respect to actions taken prior to such DGCL amendment shall be
eliminated or limited to the fullest extent provided by the
DGCL, as so amended.
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Indemnification of Directors and Officers
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The TransAllied Articles provide that TransAllied shall
indemnify and hold harmless, to the fullest extent permitted by
law, each of the members of the TransAllied board and officers
out of the assets of TransAllied from and against all actions,
costs, charges, losses, damages and expenses which they or any
of them 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 on behalf of TransAllied; 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 with intent or gross negligence.
Additionally, TransAllied shall advance court costs and
attorneys fees to the members of the board of directors
and officers, except in cases where TransAllied itself is
plaintiff. TransAllied may however recover such advanced cost if
a court or another competent authority holds that the member of
the TransAllied board or the officer in question has breached
its duties to TransAllied.
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Under the Transatlantic bylaws, Transatlantic shall indemnify,
to the full extent of the law, any person made or threatened to
be made a party to or is otherwise involved in any threatened,
pending or completed action, suit or proceeding by reason of the
fact that such person is or was a director or officer of
Transatlantic or serves or served at the request of
Transatlantic as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust, or other
enterprise, including service with respect to an employee
benefit plan, against expenses (including attorneys fees),
judgments, fines and amounts paid in settlement actually and
reasonably incurred by him or her in connection with such a
proceeding, if he or she acted in good faith and in a manner
reasonably believed to be in or not opposed to the best
interests of Transatlantic, and, with respect to any criminal
action or proceeding, had no reasonable cause to believe his or
her conduct was unlawful.
Such
rights shall be contract rights and shall include the right to
be paid by Transatlantic expenses incurred in defending any
action, suit or proceeding in advance of its final disposition,
provided that such person shall repay all amounts advanced if it
is ultimately determined that such person is not entitled to
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TransAllied Group Holdings, AG
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Transatlantic
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indemnification under the Transatlantic bylaws.
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Preemptive Rights
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Under the Swiss Code, TransAllied shareholders are generally
entitled to preemptive rights in relation to new shares or
rights in proportion to the par value that the new shares bear
to the par value of shares outstanding before a new issuance.
These preemptive rights, however, are limited under the Swiss
Code and the TransAllied Articles. Under the TransAllied
Articles, shareholders with the affirmative vote of shareholders
holding
662/3%
of the voting rights and a majority of the par value of the
shares, each as represented at the general shareholders
meeting, may withdraw or limit the preemptive rights for valid
reasons, such as a merger or acquisition. In addition, a
general shareholders meeting that approves the creation of
authorized or conditional share capital thereby may delegate the
decision whether to withdraw or limit the preemptive or advance
subscription rights for valid reasons to the TransAllied board.
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Under the Transatlantic charter, the holders of common stock and
preferred stock are not entitled to preemptive or other similar
subscription rights to purchase any of Transatlantics
securities.
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Dividends
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Under the Swiss Code and the TransAllied Articles, TransAllied
shareholders are entitled to receive, from funds legally
available for the payment thereof, pro rata dividends as and
when declared. Under Swiss law, dividends may be paid out only
if a corporation has sufficient distributable profits from
previous fiscal years or if a corporation has freely
distributable reserves, which may include contributed surplus.
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Under the Transatlantic bylaws, subject to the express terms of
any outstanding series of preferred stock, the Transatlantic
board of directors may, out of funds legally available therefor
at any regular or special meeting, declare dividends upon the
capital stock of Transatlantic as and when they deem expedient.
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Under the Swiss Code and the TransAllied Articles, the board of
directors may propose to shareholders that a dividend be paid
but cannot itself authorize the dividend. The affirmative vote
of
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177
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TransAllied Group Holdings, AG
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Transatlantic
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shareholders holding a majority of shares represented at a
general meeting must approve distributions of dividends.
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Under Swiss law, dividend payments out of earnings and similar
payments are subject to Swiss withholding tax. Dividend
payments in the form of a return of capital by reducing the par
value are not subject to Swiss withholding tax. Until at least
TransAllieds Annual Shareholder Meeting in 2012,
TransAllied intends to make further payments to shareholders in
the form of reductions to registered share capital.
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Mergers and Consolidations, Generally
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Business combinations and other such transactions that are
binding on all shareholders of TransAllied are governed by the
Merger Act. As described above under Supermajority
Voting, a statutory merger or demerger requires that at
least
662/3%
of the shares and a majority of the par value of the shares,
each as represented at the general shareholders meeting,
vote in favor of the transaction.
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Under the DGCL, the vote of the holders of a majority of the
outstanding shares of Transatlantic common stock is required to
approve a business combination, unless the Transatlantic board
of directors conditions the submission of the business
combination on receipt of a greater vote.
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Restrictions on Business Combinations with Interested
Shareholders
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Under the Swiss Code, there generally is no prohibition of
business combinations with interested shareholders. However,
the TransAllied Articles provides that no individual or legal
entity may, directly or through Constructive Ownership (as
defined in Article 14 of the TransAllied Articles) or otherwise
control voting rights with respect to 10% or more of the
registered share capital recorded in the Swiss Commercial
Register, unless otherwise approved by the TransAllied board.
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The DGCL prohibits a Delaware corporation from engaging in a
business combination with an interested
stockholder owning 15% or more of the corporations
voting stock for three years following the time that the
interested stockholder becomes such, subject to
certain exceptions. Transatlantic has not opted out of Section
203 in the Transatlantic charter and is therefore governed by
the terms of this provision of the DGCL.
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Appraisal Rights
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For business combinations effected in the form of a statutory
merger
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Under Delaware law, in certain situations, appraisal rights may
be
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178
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TransAllied Group Holdings, AG
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Transatlantic
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or de-merger, the Merger Act provides that, if the equity
rights have not been adequately preserved or compensation
payments in the transaction are unreasonable, a shareholder may
request the competent court to determine a reasonable amount of
compensation.
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available in connection with a merger or a consolidation.
Appraisal rights are not available under Delaware law to
stockholders of the surviving corporation when a corporation is
to be the surviving corporation and no vote of its stockholders
is required to approve the merger in accordance with Section
251(f) of the DGCL. In addition, no appraisal rights are
available under Delaware law to holders of shares of any class
of or series of stock which is either:
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listed on a national securities
exchange; or
held of record by more than 2,000
stockholders.
Notwithstanding the above, appraisal rights shall be available
to those stockholders who are required by the terms of the
agreement of merger or consolidation to accept for that stock
anything other than:
shares of stock of the corporation
surviving or resulting from the merger or consolidation, or
depository receipts in respect thereof;
shares of stock of another corporation,
or depository receipts in respect thereof, which, as of the
effective date of the merger or consolidation, are listed on a
national securities exchange or held of record by more than
2,000 stockholders;
cash in lieu of fractional shares or
fractional depository receipts described in the foregoing
paragraphs; or
any combination of the items listed
above.
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Preferred Shares
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Blank check preferred stock, which generally allows
a
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Under the Transatlantic charter, Transatlantic has 10,000,000
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179
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TransAllied Group Holdings, AG
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Transatlantic
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companys board of directors to determine the preferences,
limitations and relative rights of an unissued class of
preferred stock, is not a recognized concept under Swiss law.
Therefore, the TransAllieds board of directors may create
shares with a liquidation preference or dividend preference only
upon the approval of a majority of the voting rights represented
at a general meeting. Similarly, the TransAllied board may only
create shares with preferential voting rights with the approval
of at least
662/3%
of the voting rights and a majority of the par value of the
shares represented at a general shareholders meeting. To
date, no such shares have been created.
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authorized shares of blank check preferred stock,
par value $1.00. As such, the Transatlantic board of directors
may determine the preferences, limitations, and relative rights
of this preferred stock by adopting resolutions fixing the
same. Such a determination may include, without limitation,
provisions with respect to voting rights (including rights with
respect to any transaction of a specified nature), redemption,
convertibility, distribution and preference on dissolution or
otherwise. To date, Transatlantic has no preferred stock issued
and outstanding.
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180
LEGAL
MATTERS
The validity of the Allied World shares to be issued pursuant to
the merger will be passed upon by Baker & McKenzie
Zurich, Swiss counsel to Allied World.
EXPERTS
Allied
World
The consolidated financial statements and related financial
statement schedules of Allied World incorporated herein by
reference from Allied Worlds Annual Report on
Form 10-K
for the year ended December 31, 2010, and the effectiveness
of Allied Worlds internal control over financial reporting
have been audited by Deloitte & Touche Ltd., an
independent registered public accounting firm, as stated in
their reports which are incorporated herein by reference which
(1) expresses an unqualified opinion on the financial
statements and financial statement schedules and includes an
explanatory paragraph referring to Note 2 to the
consolidated financial statements, where Allied World has
disclosed its change of method of accounting for
other-than-temporary
impairments of debt securities as of April 1, 2009 due to
the required adoption of new FASB guidance and
(2) expresses an unqualified opinion on the effectiveness
of internal control over financial reporting. Such financial
statements and financial statement schedules have been so
included in reliance upon the reports of such firm given upon
their authority as experts in accounting and auditing.
Transatlantic
The consolidated financial statements and managements
assessment of the effectiveness of internal control over
financial reporting (which is included in Managements
Report on Internal Control over Financial Reporting)
incorporated herein by reference to the Annual Report on
Form 10-K
for the year ended December 31, 2010 have been so
incorporated in reliance on the report(s) of
PricewaterhouseCoopers LLP, an independent registered public
accounting firm, given on the authority of said firm as experts
in auditing and accounting.
FUTURE
STOCKHOLDER PROPOSALS
Allied
World
Allied World held its Annual Shareholder Meeting on May 5,
2011.
Submission
of an Additional Item for the Proxy Statement Related to the
Annual Shareholder Meeting in 2012
If an Allied World shareholder wishes to submit a proposal to be
considered for inclusion in the proxy materials for Allied
Worlds Annual Shareholder Meeting in 2012 or propose a
nominee for the Allied World board of directors, please send
such proposal to the Corporate Secretary, attention: Wesley D.
Dupont, at Allied World Assurance Company Holdings, AG,
Lindenstrasse 8, 6340 Baar, Zug, Switzerland, or via
e-mail at
secretary@awac.com. Under the rules of the SEC, proposals must
be received by no later than November 16, 2011 to be
eligible for inclusion in the proxy statement and form of proxy
for Allied Worlds Annual Shareholder Meeting in 2012.
Under Swiss law, one or more shareholders of record owning
Allied World shares with an aggregate par value of CHF
1 million or more can request that an item be put on the
agenda of a shareholders meeting. The request must be made at
least 60 days prior to the shareholders meeting and sent to
the Corporate Secretary, attention: Wesley D. Dupont, at Allied
World Assurance Company Holdings, AG, Lindenstrasse 8, 6340
Baar, Zug, Switzerland, or via
e-mail at
secretary@awac.com. However, any such requests received after
November 16, 2011 may not be eligible for inclusion in
Allied Worlds proxy statement and form of proxy for Allied
Worlds Annual Shareholder Meeting in 2012.
181
Submission
of an Additional Item for the Agenda at an Annual Shareholder
Meeting
Under Swiss law, one or more shareholders of record owning
Allied World shares with an aggregate par value of CHF
1 million or more can request that an item be put on the
agenda of a shareholders meeting. If an Allied World shareholder
wishes to submit a proposal to Allied Worlds Annual
Shareholder Meeting in 2012 without including such proposal in
the proxy statement for that meeting, that proposal must be made
at least 60 days prior to the shareholders meeting and sent
to the Allied World Corporate Secretary, attention: Wesley D.
Dupont, at Allied World Assurance Company Holdings, AG,
Lindenstrasse 8, 6340 Baar, Zug, Switzerland, or via
e-mail at
secretary@awac.com. In that case, the proxies solicited by the
Allied World board of directors will confer discretionary
authority on the persons named in the accompanying form of proxy
to vote on that proposal as they see fit.
Transatlantic
Transatlantic held its 2011 annual meeting of stockholders on
May 26, 2011.
It is not expected that Transatlantic will hold an annual
meeting of stockholders for 2012 unless the merger is not
completed. Proposals intended to be presented at the 2012
Transatlantic annual meeting, and included in the proxy
statement, should be sent to the Transatlantic Corporate
Secretary at 80 Pine Street, New York, New York 10005 and must
be received by December 10, 2011. In addition, under
Transatlantics bylaws, stockholders must comply with
specified procedures to nominate directors or introduce an item
of business at an annual meeting. Nominations or an item of
business to be introduced at an annual meeting must be submitted
in writing and received by Transatlantic generally not less than
60 days nor more than 90 days in advance of the first
anniversary of the preceding years annual meeting. To be
in proper written form, a stockholders notice must contain
the specific information required by the Transatlantics
bylaws. A copy of the Transatlantic bylaws, which describes the
advance notice procedures, can be obtained from the
Transatlantic Corporate Secretary.
HOUSEHOLDING
OF JOINT PROXY STATEMENT/PROSPECTUS
The SEC has adopted rules that permit companies and
intermediaries such as brokers to satisfy delivery requirements
for proxy statements and annual reports with respect to two or
more stockholders sharing the same address by delivering a
single proxy statement or annual report, as applicable,
addressed to those stockholders. As permitted by the Exchange
Act, only one copy of this joint proxy statement/prospectus is
being delivered to stockholders residing at the same address,
unless stockholders have notified the company whose shares they
hold of their desire to receive multiple copies of the joint
proxy statement/prospectus. This process, which is commonly
referred to as householding, potentially provides
extra convenience for stockholders and cost savings for
companies.
If, at any time, you no longer wish to participate in
householding and would prefer to receive a separate joint proxy
statement/prospectus, or if you are receiving multiple copies of
this joint proxy statement/prospectus and wish to receive only
one, please contact the company whose shares you hold at their
address identified in the preceding paragraph. Each of
Transatlantic and Allied World will promptly deliver, upon oral
or written request, a separate copy of this joint proxy
statement/prospectus to any shareholder residing at an address
to which only one copy was mailed. Requests for additional
copies should be directed to: Allied World Assurance Company
Holdings, AG, Attention: Corporate Secretary, Lindenstrasse 8,
6340 Baar, Zug, Switzerland,
441-278-5400
or to Transatlantic Holdings, Inc. Attention: Investor
Relations, 80 Pine Street, New York, New York 10005,
212-365-2200.
182
OTHER
MATTERS
Other
Matters Presented at the Special Meetings
As of the date of this joint proxy statement/prospectus, neither
the Allied World board of directors nor the Transatlantic board
of directors knows of any matters that will be presented for
consideration at either the Allied World Special Shareholder
Meeting or the Transatlantic Special Shareholder Meeting other
than as described in this joint proxy statement/prospectus. If
any other matters come before either the Allied World Special
Shareholder Meeting or the Transatlantic Special Shareholder
Meeting or any adjournment or postponement thereof and shall be
voted upon, the proposed proxy will be deemed to confer
authority to the individuals named as authorized therein to vote
the shares represented by the proxy as to any matters that fall
within the purposes set forth in the notice of Special
Shareholder Meeting. It is intended that the persons named in
the enclosed proxy and acting thereunder will vote in accordance
with their best judgment on such matters.
183
WHERE YOU
CAN FIND MORE INFORMATION
Allied World and Transatlantic each file annual, quarterly and
current reports, proxy statements and other information with the
SEC under the Exchange Act. You may read and copy any of this
information at the SECs Public Reference Room at
100 F Street, N.E., Washington, D.C. 20549.
Please call the SEC at
1-800-SEC-0330
for further information on the Public Reference Room. The SEC
also maintains an internet website that contains reports, proxy
and information statements, and other information regarding
issuers, including Allied World and Transatlantic, who file
electronically with the SEC. The address of that site is
www.sec.gov.
Investors may also consult the Allied World and the
Transatlantic websites for more information about Allied World
and Transatlantic, respectively. Allied Worlds website is
www.awac.com. Transatlantics website is
www.transre.com. Information included on these websites
is not incorporated by reference into this joint proxy
statement/prospectus.
Allied World has filed with the SEC a registration statement of
which this joint proxy statement/prospectus forms a part. The
registration statement registers the Allied World shares to be
issued to Transatlantic stockholders pursuant to the merger. The
registration statement, including the attached exhibits,
contains additional relevant information about Allied World and
Allied World shares. The rules and regulations of the SEC allow
Allied World and Transatlantic to omit certain information
included in the registration statement from this joint proxy
statement/prospectus.
In addition, the SEC allows Allied World and Transatlantic to
disclose important information to you by referring you to other
documents filed separately with the SEC. This information is
considered to be a part of this joint proxy statement/prospectus.
This joint proxy statement/prospectus incorporates by reference
the documents listed below that Allied World has previously
filed with the SEC (other than information furnished pursuant to
Item 2.01 or Item 7.01 of a Current Report on
Form 8-K).
These documents contain important information about Allied
World, its financial condition or other matters.
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Annual Report on
Form 10-K
for the fiscal year ended December 31, 2010 filed
March 1, 2011.
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Proxy Statement on Schedule 14A filed March 17, 2011.
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Sections entitled Summary Tax
Considerations and Material Tax Considerations
of the Proxy Statement on Schedule 14A filed
October 14, 2010.
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Quarterly Reports on
Form 10-Q
for the quarterly period ended March 31, 2011 filed
May 10, 2011 and for the quarterly period ended
June 30, 2011 filed August 9, 2011.
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Current Reports on
Form 8-K
or 8-K/A,
filed January 5, 2011, February 3, 2011,
April 22, 2011, May 11, 2011, June 13, 2011,
June 14, 2011, June 15, 2011, July 13, 2011,
July 18, 2011, July 20, 2011, July 25, 2011, July 26,
2011, July 28, 2011, July 29, 2011, August 1,
2011, August 8, 2011 and August 9, 2011.
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The description of the Allied World shares contained in Allied
Worlds registration statements on
Form 8-A/A
(SEC File
No. 001-32938)
filed with the SEC under Section 12 of the Exchange Act on
December 1, 2010.
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In addition, Allied World incorporates by reference any future
filings it makes with the SEC under Section 13(a), 13(c),
14 or 15(d) of the Exchange Act after the date of this joint
proxy statement/prospectus and prior to the date of the Allied
World Special Shareholder Meeting (other than information
furnished pursuant to Item 2.02 or Item 7.01 of any
Current Report on
Form 8-K,
unless expressly stated otherwise therein). Such documents are
considered to be a part of this joint proxy
statement/prospectus, effective as of the date such documents
are filed.
184
You can obtain any of these documents from the SEC, through the
SECs website at the address described above, or Allied
World will provide you with copies of these documents, without
charge, upon written or oral request to:
Allied World Assurance Company Holdings, AG
Lindenstrasse 8, 6340 Baar
Zug, Switzerland
(441) 278-5400
Attn.: Corporate Secretary
This joint proxy statement/prospectus also incorporates by
reference the documents listed below that Transatlantic has
previously filed with the SEC (other than information furnished
pursuant to Item 2.02 or Item 7.01 of a Current Report
on
Form 8-K).
These documents contain important information about
Transatlantic its financial condition or other matters.
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Annual Report on
Form 10-K
for the fiscal year ended December 31, 2010 filed on
February 22, 2011.
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Proxy Statement on Schedule 14A filed April 8, 2011.
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Quarterly Reports on
Form 10-Q
for the quarterly period ended March 31, 2011 filed on
May 4, 2011 and for the quarterly period ended
June 30, 2011 filed on August 5, 2011.
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Current Reports on
Form 8-K,
filed March 29, 2011, May 20, 2011, June 1, 2011,
June 13, 2011 (both filings), June 15, 2011,
July 7, 2011, July 13, 2011 (both filings),
July 20, 2011, July 25, 2011, July 28, 2011, July
29, 2011, August 8, 2011 and August 9, 2011.
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In addition, Transatlantic incorporates by reference any future
filings it makes with the SEC under Section 13(a), 13(c),
14 or 15(d) of the Exchange Act after the date of this joint
proxy statement/prospectus and prior to the date of the
Transatlantic Special Shareholder Meeting (other than
information furnished pursuant to Item 2.02 or
Item 7.01 of any Current Report on
Form 8-K,
unless expressly stated otherwise therein). Such documents are
considered to be a part of this joint proxy
statement/prospectus, effective as of the date such documents
are filed.
You can obtain any of these documents from the SEC, through the
SECs website at the address described above, or
Transatlantic will provide you with copies of these documents,
without charge, upon written or oral request to:
Transatlantic Holdings, Inc.
80 Pine Street
New York, New York 10005
(212) 365-2200
In the event of conflicting information in this joint proxy
statement/prospectus in comparison to any document incorporated
by reference into this joint proxy statement/prospectus, or
among documents incorporated by reference, the information in
the latest filed document controls.
You should rely only on the information contained in or
incorporated by reference into this joint proxy
statement/prospectus. No one has been authorized to provide you
with information that is different from that contained in, or
incorporated by reference into, this joint proxy
statement/prospectus. This joint proxy statement/prospectus is
dated ,
2011. You should not assume that the information contained in
this joint proxy statement/prospectus is accurate as of any date
other than that date. You should not assume that the information
incorporated by reference into this joint proxy
statement/prospectus is accurate as of any date other than the
date of such incorporated document. Neither our mailing of this
joint proxy statement/prospectus to Allied World shareholders or
Transatlantic stockholders nor the issuance by Allied World of
Allied World shares pursuant to the merger will create any
implication to the contrary.
185
This document contains a description of the representations and
warranties that each of Allied World and Transatlantic made to
the other in the merger agreement. Representations and
warranties made by Allied World, Transatlantic and other
applicable parties are also set forth in contracts and other
documents (including the merger agreement) that are attached or
filed as exhibits to this document or are incorporated by
reference into this document. These materials are included or
incorporated by reference only to provide public disclosure
regarding their terms and conditions as required by U.S. federal
securities laws, and not to provide any other factual
information regarding Allied World, Transatlantic or their
respective businesses. Accordingly, the representations and
warranties and other provisions of the merger agreement should
not be read alone, but instead should be read only in
conjunction with the other information provided elsewhere in
this document or incorporated by reference into this document.
186
Annex A
AGREEMENT
AND PLAN OF MERGER
BY AND AMONG
ALLIED WORLD ASSURANCE COMPANY HOLDINGS, AG,
GO SUB, LLC
AND
TRANSATLANTIC HOLDINGS, INC.
DATED AS OF JUNE 12, 2011
TABLE OF
CONTENTS
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Page
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ARTICLE I. THE MERGER
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A-2
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1.1
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The Merger
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A-2
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1.2
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Closing
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A-2
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1.3
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Effective Time
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A-2
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1.4
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Effects
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A-3
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1.5
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Certificates of Incorporation and Bylaws
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A-3
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ARTICLE II. EFFECT ON CAPITAL STOCK; EXCHANGE OF
CERTIFICATES
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A-3
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2.1
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Effect on Capital Stock
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A-3
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2.2
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Exchange of Certificates
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A-4
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2.3
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Transatlantic Stock Options and Other Equity Awards
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A-6
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2.4
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Further Assurances
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A-7
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ARTICLE III. REPRESENTATIONS AND WARRANTIES OF ALLIED WORLD
AND MERGER SUB
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A-8
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3.1
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Corporate Organization
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A-8
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3.2
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Capitalization
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A-9
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3.3
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Corporate Authorization
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A-10
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3.4
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Governmental Authorization
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A-11
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3.5
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Non-Contravention
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A-12
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3.6
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Allied World SEC Filings, Etc.
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A-12
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3.7
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Allied World Financial Statements
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A-13
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3.8
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Form S-4
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A-14
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3.9
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Absence of Certain Changes or Events
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A-14
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3.10
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No Undisclosed Material Liabilities
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A-14
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3.11
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Compliance with Laws
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A-14
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3.12
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Litigation
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A-15
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3.13
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Title to Properties; Absence of Liens
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A-15
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3.14
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Opinion of Financial Advisor
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A-15
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3.15
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Taxes
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A-15
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3.16
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Employee Benefit Plans
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A-16
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3.17
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Employees, Labor Matters
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A-18
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3.18
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Environmental Matters
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A-18
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3.19
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Intellectual Property
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A-19
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3.20
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Allied World Material Contracts
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A-19
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3.21
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Brokers and Finders Fees
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A-20
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3.22
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Takeover Laws
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A-20
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3.23
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Affiliate Transactions
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A-20
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3.24
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Insurance Subsidiaries
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A-20
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3.25
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Statutory Statements; Examinations
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A-20
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3.26
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Agreements with Regulators
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A-21
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3.27
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Reinsurance and Retrocession
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A-21
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A-i
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Page
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3.28
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|
|
Rating Agency
|
|
|
A-22
|
|
|
3.29
|
|
|
Reserves
|
|
|
A-22
|
|
|
3.30
|
|
|
Risk-Based Capital
|
|
|
A-23
|
|
|
3.31
|
|
|
Insurance Issued by the Allied World P/C Subsidiaries
|
|
|
A-23
|
|
|
3.32
|
|
|
Other Allied World Insurance Business
|
|
|
A-24
|
|
|
3.33
|
|
|
Redomestication
|
|
|
A-24
|
|
|
3.34
|
|
|
No Other Representations and Warranties; Disclaimer
|
|
|
A-24
|
|
|
|
|
|
|
ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF TRANSATLANTIC
|
|
|
A-24
|
|
|
4.1
|
|
|
Corporate Organization
|
|
|
A-25
|
|
|
4.2
|
|
|
Capitalization
|
|
|
A-25
|
|
|
4.3
|
|
|
Corporate Authorization
|
|
|
A-26
|
|
|
4.4
|
|
|
Governmental Authorization
|
|
|
A-27
|
|
|
4.5
|
|
|
Non-Contravention
|
|
|
A-27
|
|
|
4.6
|
|
|
Transatlantic SEC Filings, Etc.
|
|
|
A-27
|
|
|
4.7
|
|
|
Transatlantic Financial Statements
|
|
|
A-29
|
|
|
4.8
|
|
|
Form S-4
|
|
|
A-29
|
|
|
4.9
|
|
|
Absence of Certain Changes or Events
|
|
|
A-29
|
|
|
4.10
|
|
|
No Undisclosed Material Liabilities
|
|
|
A-29
|
|
|
4.11
|
|
|
Compliance with Laws
|
|
|
A-29
|
|
|
4.12
|
|
|
Litigation
|
|
|
A-30
|
|
|
4.13
|
|
|
Title to Properties; Absence of Liens
|
|
|
A-30
|
|
|
4.14
|
|
|
Opinion of Financial Advisor
|
|
|
A-31
|
|
|
4.15
|
|
|
Taxes
|
|
|
A-31
|
|
|
4.16
|
|
|
Employee Benefit Plans
|
|
|
A-32
|
|
|
4.17
|
|
|
Employees, Labor Matters
|
|
|
A-33
|
|
|
4.18
|
|
|
Environmental Matters
|
|
|
A-34
|
|
|
4.19
|
|
|
Intellectual Property
|
|
|
A-34
|
|
|
4.20
|
|
|
Transatlantic Material Contracts
|
|
|
A-34
|
|
|
4.21
|
|
|
Brokers and Finders Fees
|
|
|
A-35
|
|
|
4.22
|
|
|
Takeover Laws
|
|
|
A-35
|
|
|
4.23
|
|
|
Affiliate Transactions
|
|
|
A-35
|
|
|
4.24
|
|
|
Insurance Subsidiaries
|
|
|
A-35
|
|
|
4.25
|
|
|
Statutory Statements; Examinations
|
|
|
A-35
|
|
|
4.26
|
|
|
Agreements with Regulators
|
|
|
A-36
|
|
|
4.27
|
|
|
Reinsurance and Retrocession
|
|
|
A-36
|
|
|
4.28
|
|
|
Rating Agency
|
|
|
A-37
|
|
|
4.29
|
|
|
Reserves
|
|
|
A-38
|
|
|
4.30
|
|
|
Risk-Based Capital
|
|
|
A-38
|
|
|
4.31
|
|
|
Transatlantic Insurance Business
|
|
|
A-38
|
|
|
4.32
|
|
|
Other Transatlantic Insurance Business
|
|
|
A-38
|
|
|
4.33
|
|
|
No Other Representations and Warranties; Disclaimer
|
|
|
A-39
|
|
A-ii
|
|
|
|
|
|
|
|
|
|
|
|
|
Page
|
|
ARTICLE V. COVENANTS RELATING TO CONDUCT OF BUSINESS
|
|
|
A-39
|
|
|
5.1
|
|
|
Conduct of Businesses Prior to the Effective Time
|
|
|
A-39
|
|
|
5.2
|
|
|
Allied World Forbearances
|
|
|
A-40
|
|
|
5.3
|
|
|
Transatlantic Forbearances
|
|
|
A-42
|
|
|
5.4
|
|
|
Control of Other Partys Business
|
|
|
A-44
|
|
|
5.5
|
|
|
No Solicitation
|
|
|
A-44
|
|
|
|
|
|
|
ARTICLE VI. ADDITIONAL AGREEMENTS
|
|
|
A-47
|
|
|
6.1
|
|
|
Preparation of the
Form S-4
and the Joint Proxy Statement; Stockholders Meetings
|
|
|
A-47
|
|
|
6.2
|
|
|
Access to Information; Confidentiality
|
|
|
A-49
|
|
|
6.3
|
|
|
Required Actions
|
|
|
A-50
|
|
|
6.4
|
|
|
Actions with Respect to Certain Existing Indebtedness
|
|
|
A-52
|
|
|
6.5
|
|
|
Indemnification and Directors and Officers Insurance
|
|
|
A-52
|
|
|
6.6
|
|
|
Fees and Expenses
|
|
|
A-53
|
|
|
6.7
|
|
|
Transaction Litigation
|
|
|
A-56
|
|
|
6.8
|
|
|
Section 16 Matters
|
|
|
A-56
|
|
|
6.9
|
|
|
Governance Matters
|
|
|
A-56
|
|
|
6.10
|
|
|
Retention Program and Employee Waivers
|
|
|
A-58
|
|
|
6.11
|
|
|
Transatlantic Common Stock Purchase
|
|
|
A-58
|
|
|
6.12
|
|
|
Cantonal Tax Ruling
|
|
|
A-58
|
|
|
6.13
|
|
|
Commercial Register Ruling
|
|
|
A-59
|
|
|
|
|
|
|
ARTICLE VII. CONDITIONS PRECEDENT
|
|
|
A-59
|
|
|
7.1
|
|
|
Conditions to Each Partys Obligation to Effect the Merger
|
|
|
A-59
|
|
|
7.2
|
|
|
Conditions to Obligations of Allied World
|
|
|
A-60
|
|
|
7.3
|
|
|
Conditions to Obligations of Transatlantic
|
|
|
A-60
|
|
|
|
|
|
|
ARTICLE VIII. TERMINATION AND AMENDMENT
|
|
|
A-61
|
|
|
8.1
|
|
|
Termination
|
|
|
A-61
|
|
|
8.2
|
|
|
Effect of Termination
|
|
|
A-61
|
|
|
8.3
|
|
|
Amendment
|
|
|
A-62
|
|
|
8.4
|
|
|
Extension; Waiver
|
|
|
A-62
|
|
|
|
|
|
|
ARTICLE IX. GENERAL PROVISIONS
|
|
|
A-62
|
|
|
9.1
|
|
|
Nonsurvival of Representations and Warranties
|
|
|
A-62
|
|
|
9.2
|
|
|
Notices
|
|
|
A-62
|
|
|
9.3
|
|
|
Definitions
|
|
|
A-63
|
|
|
9.4
|
|
|
Interpretation
|
|
|
A-68
|
|
|
9.5
|
|
|
Severability
|
|
|
A-68
|
|
|
9.6
|
|
|
Counterparts
|
|
|
A-69
|
|
A-iii
|
|
|
|
|
|
|
|
|
|
|
|
|
Page
|
|
|
9.7
|
|
|
Entire Agreement; No Third-Party Beneficiaries
|
|
|
A-69
|
|
|
9.8
|
|
|
Governing Law
|
|
|
A-69
|
|
|
9.9
|
|
|
Assignment; Successors; Tax Treatment
|
|
|
A-69
|
|
|
9.10
|
|
|
Specific Enforcement
|
|
|
A-69
|
|
|
9.11
|
|
|
Submission to Jurisdiction
|
|
|
A-70
|
|
|
9.12
|
|
|
Waiver of Jury Trial
|
|
|
A-70
|
|
|
9.13
|
|
|
No Presumption Against Drafting Party
|
|
|
A-70
|
|
|
9.14
|
|
|
Publicity
|
|
|
A-70
|
|
Annex A Defined Terms
|
|
|
A-72
|
|
Exhibit A Certificate of Incorporation of the Surviving
Corporation
|
|
|
|
|
Exhibit B Bylaws of the Surviving Corporation
|
|
|
|
|
Exhibit C Restated Articles of Association of Allied World
|
|
|
|
|
Exhibit D Amended and Restated Organizational Regulations
of Allied World
|
|
|
|
|
A-iv
AGREEMENT
AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER (this
Agreement), dated as of June 12, 2011,
is by and among Allied World Assurance Company Holdings, AG, a
corporation limited by shares organized under the laws of
Switzerland (Allied World), GO Sub, LLC, a
Delaware limited liability company and a wholly owned subsidiary
of Allied World (Merger Sub), and
Transatlantic Holdings, Inc., a Delaware corporation
(Transatlantic).
WHEREAS, the respective Boards of Directors of Allied World and
Transatlantic deem it advisable and in the best interests of
each corporation and its respective stockholders that Allied
World and Transatlantic engage in a business combination in
order to advance the long-term strategic business interests of
each of Allied World and Transatlantic;
WHEREAS, the respective Boards of Directors of Allied World and
Transatlantic have determined that such business combination
shall be effected pursuant to the terms of this Agreement
through the Merger in accordance with the applicable provisions
of Delaware Law;
WHEREAS, the respective Boards of Directors of Allied World and
Transatlantic and the sole member of Merger Sub have approved
and declared advisable this Agreement and the Merger, and
determined that the terms of this Agreement and the Merger are
in the respective best interests of Allied World, Transatlantic
or Merger Sub, as the case may be, and the stockholders of
Allied World and Transatlantic and the sole member of Merger
Sub; and
WHEREAS, Allied World, Transatlantic and Merger Sub desire to
make certain representations, warranties, covenants and
agreements in connection with the Merger and also to prescribe
various conditions to the Merger.
NOW, THEREFORE, in consideration of the foregoing and intending
to be legally bound hereby, the parties hereto agree as follows:
ARTICLE I.
THE MERGER
1.1 The Merger. On the terms and
subject to the conditions set forth in this Agreement, and in
accordance with the General Corporation Law of the State of
Delaware (Delaware Law), on the Closing Date,
Merger Sub shall be merged with and into Transatlantic (the
Merger). At the Effective Time, the separate
limited liability company existence of Merger Sub shall cease
and Transatlantic shall continue as the surviving corporation in
the Merger (the Surviving Corporation). As a
result of the Merger, Transatlantic shall become a wholly owned
subsidiary of Allied World.
1.2 Closing. The closing (the
Closing) of the Merger shall take place at
the offices of Gibson, Dunn & Crutcher LLP, 200 Park
Avenue, New York, New York 10166 at 10:00 a.m., Eastern
time, as promptly as practicable (but in no event later than the
second Business Day) following the satisfaction or (to the
extent permitted by Law) waiver by the party or parties entitled
to the benefits thereof of the conditions set forth in
Article VII (other than those conditions that by
their nature are to be satisfied at the Closing, but subject to
the satisfaction or (to the extent permitted by Law) waiver of
those conditions), or at such other place, time and date as
shall be agreed in writing between Allied World and
Transatlantic. The date on which the Closing occurs is referred
to in this Agreement as the Closing Date.
1.3 Effective Time. Subject to the
provisions of this Agreement, as soon as practicable on the
Closing Date, the parties shall file (i) with the Secretary
of State of the State of Delaware, the certificate of merger
relating to the Merger (the Certificate of
Merger) and (ii) with the appropriate Swiss
Governmental Entity, the Restated Articles, in each case in such
form as required by, and executed and acknowledged in accordance
with, the relevant provisions of Delaware Law and the Laws of
Switzerland, as applicable, and, as soon as practicable on or
after the Closing Date, shall make all other filings required
under applicable Law in connection with the Merger. The Merger
shall become effective at the time that the Certificate of
Merger has
A-2
been duly filed with the Secretary of State of the State of
Delaware, or at such later time as Allied World and
Transatlantic shall agree and specify in the Certificate of
Merger (the time the Merger becomes effective being the
Effective Time). The Restated Articles shall
be filed with the appropriate Swiss Governmental Entity
immediately prior to the filing of the Certificate of Merger and
shall become effective at the Effective Time.
1.4 Effects. The Merger shall have
the effects set forth in this Agreement and the applicable
provisions of Delaware Law.
1.5 Certificates of Incorporation and Bylaws.
(a) Surviving Corporation Certificate of
Incorporation and Bylaws. The certificate of
incorporation of Transatlantic, as in effect immediately prior
to the Effective Time, shall be amended and restated at the
Effective Time to read in the form of Exhibit A and,
as so amended and restated, such certificate of incorporation
shall be the certificate of incorporation of the Surviving
Corporation until thereafter changed or amended as provided
therein or by applicable Law. The bylaws of Transatlantic shall
be amended and restated at the Effective Time to read in the
form of Exhibit B and, as so amended and restated,
such bylaws shall be the bylaws of the Surviving Corporation
until thereafter changed or amended as provided therein or by
applicable Law.
(b) Allied World Articles of
Association. Subject to receipt of the Allied
World Articles Amendment Stockholder Approval, the Allied
World Articles (as in effect immediately prior to the Effective
Time) shall be amended and restated (the Allied World
Articles Amendment) as of the Effective Time to
read in the form of Exhibit C (the Restated
Articles) and, as so amended and restated, such
articles of association shall be the articles of association of
Allied World until thereafter changed or amended as provided
therein or by applicable Law. The Restated Articles shall
provide, among other things, that the name of Allied World shall
be changed at the Effective Time to TransAllied Group
Holdings, AG.
(c) Allied World Organizational
Regulations. The organizational regulations
of Allied World shall be amended and restated as of the
Effective Time to read in the form of Exhibit D and,
as so amended and restated, such organizational regulations
shall be the organizational regulations of Allied World until
thereafter changed or amended as provided therein or by
applicable Law.
ARTICLE II.
EFFECT ON
CAPITAL STOCK;
EXCHANGE OF
CERTIFICATES
2.1 Effect on Capital Stock.
(a) At the Effective Time, by virtue of the Merger and
without any action on the part of Allied World, Transatlantic,
Merger Sub or the holder of any shares of Transatlantic Common
Stock or any limited liability company interest of Merger Sub:
(i) Limited Liability Company Interest of Merger
Sub. The sole limited liability company
interest of Merger Sub (the Merger Sub Common
Stock) issued and outstanding immediately prior to the
Effective Time shall be converted into one hundred
(100) fully paid and nonassessable shares of common stock,
par value $0.01 per share, of the Surviving Corporation.
(ii) Cancellation of Certain
Stock. Each share of common stock, par value
$1.00 per share, of Transatlantic (the
Transatlantic Common Stock), issued and
outstanding immediately prior to the Effective Time that is
owned by Transatlantic or its Subsidiaries and each share of
Transatlantic Common Stock issued and outstanding immediately
prior to the Effective Time that is owned by Allied World,
Merger Sub or any of their respective Subsidiaries shall no
longer be outstanding and shall automatically be canceled and
shall cease to exist, and no consideration shall be delivered in
exchange therefor.
(iii) Conversion of Transatlantic Common
Stock. Subject to Section 2.2(e),
each share of Transatlantic Common Stock issued and outstanding
immediately prior to the Effective Time (other than shares to be
canceled in accordance with Section 2.1(a)(ii)),
shall be converted into the right to receive
A-3
0.88 (the ratio of such number to 1, the Exchange
Ratio) validly issued, fully paid and nonassessable
registered ordinary shares, par value CHF 15.00 per share
(as may be adjusted in connection with the payment of dividends
by virtue of a par value reduction, as approved by Allied
Worlds shareholders at its 2011 annual general meeting),
of Allied World (the Allied World Shares and,
such Allied World Shares into which shares of Transatlantic
Common Stock are converted pursuant to this
Section 2.1(a)(iii), together with any cash paid in
lieu of fractional shares pursuant to
Section 2.2(e), the Merger
Consideration). All shares of Transatlantic Common
Stock converted pursuant to this
Section 2.1(a)(iii), when so converted, shall no
longer be outstanding and shall automatically be canceled and
shall cease to exist, and each holder of a certificate that,
immediately prior to the Effective Time, represented any such
shares of Transatlantic Common Stock shall cease to have any
rights with respect thereto, except the right to receive the
Merger Consideration and any dividends or other distributions to
which holders become entitled upon the surrender of such shares
of Transatlantic Common Stock in accordance with
Section 2.2(c), without interest.
(b) Certain Adjustments. If,
between the date of this Agreement and the Effective Time (and
as permitted by Article V), the outstanding shares
of Allied World Capital Stock or Transatlantic Common Stock
shall have been changed into a different number of shares or a
different class of shares by reason of any stock dividend,
subdivision, reorganization, reclassification, recapitalization,
stock split, reverse stock split, combination or exchange of
shares, or any similar event shall have occurred, then the
Merger Consideration shall be appropriately and proportionately
adjusted to provide to the holders of Allied World Capital Stock
and the holders of Transatlantic Common Stock the same economic
effect as contemplated by this Agreement prior to such event.
2.2 Exchange of Certificates.
(a) Exchange Agent. Prior to the
Effective Time, Allied World and Transatlantic shall appoint a
commercial bank or trust company to be mutually agreed upon to
act as exchange agent (the Exchange Agent)
for the purpose of exchanging (i) certificates that
immediately prior to the Effective Time evidenced shares of
Transatlantic Common Stock (Certificates) or
(ii) uncertificated shares of Transatlantic Common Stock
represented by book-entry (Book-Entry
Shares), in each case, for the applicable Merger
Consideration pursuant to an exchange agent agreement. Allied
World shall deposit, or shall cause to be deposited, with the
Exchange Agent at or prior to the Effective Time,
(x) evidence of Allied World Shares in book-entry form
issuable pursuant to Section 2.1 (and/or
certificates representing such shares, at Allied Worlds
election), and (y) cash sufficient for payment in lieu of
fractional Allied World Shares pursuant to
Section 2.2(e). Allied World shall make available
from time to time after the Effective Time as necessary, cash in
an amount sufficient to pay any dividends or distributions to
which holders of shares of Transatlantic Common Stock may be
entitled pursuant to Section 2.2(c). All such Allied
World Shares and cash deposited with the Exchange Agent pursuant
to this Section 2.2(a) is hereinafter referred to as
the Exchange Fund.
(b) Exchange Procedures. As soon
as reasonably practicable after the Effective Time, Allied World
shall cause the Exchange Agent to mail to each holder of
Certificates or Book-Entry Shares whose shares were converted
pursuant to Section 2.1(a)(iii) into the right to
receive the Merger Consideration (A) a letter of
transmittal for use in such exchange (which shall be in form and
substance reasonably satisfactory to Allied World and
Transatlantic and shall specify that the delivery shall be
effected, and risk of loss and title in respect of the
Certificates or Book-Entry Shares shall pass, only upon proper
delivery of the Certificates to the Exchange Agent or, in the
case of Book-Entry Shares, upon adherence to the procedures set
forth in the letter of transmittal) and (B) instructions to
effect the surrender of the Certificates or Book-Entry Shares in
exchange for the applicable Merger Consideration and any
dividends or other distributions payable in respect thereof
pursuant to Section 2.2(c). Upon proper surrender of
a Certificate or Book-Entry Share to the Exchange Agent,
together with such letter of transmittal, duly completed and
validly executed in accordance with the instructions thereto,
and such other documents as may reasonably be required by the
Exchange Agent, the holder of such Certificate or Book-Entry
Share shall be entitled to receive in exchange therefor
(x) Allied World Shares representing that number of whole
Allied World Shares that such holder has the right to receive in
respect of the aggregate number of shares of Transatlantic
Common Stock previously represented by such Certificate or
Book-Entry Share pursuant to Section 2.1 and
(y) a check representing cash in lieu of fractional
A-4
shares that the holder has the right to receive pursuant to
Section 2.2(e) and in respect of any dividends or
other distributions that the holder has the right to receive
pursuant to Section 2.2(c). Until surrendered as
contemplated by this Section 2.2, each Certificate
and Book-Entry Share shall be deemed at any time after the
Effective Time to represent only the right to receive, upon such
surrender, the Merger Consideration that the holder of such
Certificate or Book-Entry Share has the right to receive in
respect thereof pursuant to Section 2.1 (and cash in
respect of any dividends or other distributions pursuant to
Section 2.2(c)). No interest shall be paid or shall
accrue on the cash payable upon surrender of any Certificate or
Book-Entry Share.
(c) Treatment of Unexchanged
Shares. No dividends or other distributions
declared or made with respect to Allied World Shares with a
record date after the Effective Time shall be paid to the holder
of any unsurrendered Certificate or Book-Entry Share with
respect to the Allied World Shares deliverable upon surrender
thereof, and no cash payment in lieu of fractional shares shall
be paid to any such holder pursuant to
Section 2.2(e), until the surrender of such
Certificate or Book-Entry Share in accordance with this
Article II. Subject to escheat or other applicable
Law, following surrender of any such Certificate or Book-Entry
Share, there shall be paid to the holder thereof, without
interest, (i) at the time of such surrender, the amount of
any cash payable in lieu of a fractional Allied World Share that
such holder has the right to receive pursuant to
Section 2.2(e) and the amount of dividends or other
distributions with a record date after the Effective Time
theretofore paid with respect to such number of whole Allied
World Shares that such holder has the right to receive pursuant
to Section 2.1(a)(iii) and (ii) at the
appropriate payment date, the amount of dividends or other
distributions with a record date after the Effective Time but
prior to such surrender and a payment date subsequent to such
surrender payable with respect to such number of whole Allied
World Shares that such holder has the right to receive pursuant
to Section 2.1(a)(iii).
(d) No Further Ownership Rights in Transatlantic
Common Stock. The Allied World Shares
delivered and cash paid in accordance with the terms of this
Article II upon conversion of any shares of
Transatlantic Common Stock shall be deemed to have been
delivered and paid in full satisfaction of all rights pertaining
to such shares of Transatlantic Common Stock. From and after the
Effective Time, (i) all holders of Certificates and
Book-Entry Shares shall cease to have any rights as stockholders
of Transatlantic other than the right to receive the Merger
Consideration and any dividends or other distributions that
holders have the right to receive upon the surrender of such
Certificate or Book-Entry Share in accordance with
Section 2.2(c), without interest, and (ii) the
stock transfer books of Transatlantic shall be closed with
respect to all shares of Transatlantic Common Stock outstanding
immediately prior to the Effective Time. From and after the
Effective Time, there shall be no further registration of
transfers on the stock transfer books of the Surviving
Corporation of shares of Transatlantic Common Stock that were
outstanding immediately prior to the Effective Time. If, after
the Effective Time, any Certificates or Book-Entry Shares
formerly representing shares of Transatlantic Common Stock are
presented to the Surviving Corporation, Allied World or the
Exchange Agent for any reason, such Certificates or Book-Entry
Shares shall be canceled and exchanged as provided in this
Article II.
(e) No Fractional Shares. No
fractional Allied World Shares shall be issued in connection
with the Merger, no certificates or scrip representing
fractional Allied World Shares shall be delivered upon the
conversion of Transatlantic Common Stock pursuant to
Section 2.1, and such fractional share interests
shall not entitle the owner thereof to vote or to any other
rights of a holder of Allied World Shares. Notwithstanding any
other provision of this Agreement, each holder of shares of
Transatlantic Common Stock converted pursuant to the Merger who
would otherwise have been entitled to receive a fraction of an
Allied World Share (after aggregating all shares represented by
the Certificates and Book-Entry Shares delivered by such holder)
shall receive, in lieu thereof and upon surrender thereof, cash
(without interest) in an amount equal to such fractional amount
multiplied by the last reported sale price of Allied World
Shares on the New York Stock Exchange (the
NYSE) (as reported in The Wall Street
Journal (Northeast edition) or, if not reported therein, in
another authoritative source mutually selected by Allied World
and Transatlantic) on the first trading day immediately
following the date on which the Effective Time occurs.
(f) Termination of Exchange
Fund. Any portion of the Exchange Fund
(including any interest or other amounts received with respect
thereto) that remains unclaimed by, or otherwise undistributed
to, the holders of Certificates and Book-Entry Shares for
180 days after the Effective Time shall be delivered to
Allied World, upon demand, and any holder of Certificates or
Book-Entry Shares who has not theretofore complied with this
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Article II shall thereafter look only to Allied
World for satisfaction of its claim for Merger Consideration and
any dividends and distributions which such holder has the right
to receive pursuant to this Article II.
(g) No Liability. None of Allied
World, Transatlantic, Merger Sub or the Exchange Agent shall be
liable to any Person in respect of any portion of the Exchange
Fund or the Merger Consideration delivered to a public official
pursuant to any applicable abandoned property, escheat or
similar Law. Notwithstanding any other provision of this
Agreement, any portion of the Merger Consideration or the cash
to be paid in accordance with this Article II that
remains undistributed to the holders of Certificates and
Book-Entry Shares as of the second anniversary of the Effective
Time (or immediately prior to such earlier date on which the
Merger Consideration or such cash would otherwise escheat to or
become the property of any Governmental Entity), shall, to the
extent permitted by applicable Law, become the property of the
Surviving Corporation, free and clear of all claims or interest
of any Person previously entitled thereto.
(h) Investment of Exchange
Fund. The Exchange Agent shall invest any
cash in the Exchange Fund as directed by Allied World on a daily
basis, provided that, subject to
Section 2.2(g), no such investment or losses will
affect the cash payable to holders of Certificates or Book-Entry
Shares. Any interest or other amounts received with respect to
such investments shall be paid to Allied World.
(i) Withholding Rights. Each of
Allied World and the Exchange Agent (without duplication) shall
be entitled to deduct and withhold from the consideration
otherwise payable to any holder of a Certificate or Book-Entry
Share pursuant to this Agreement such amounts as may be required
to be deducted and withheld with respect to the making of such
payment under applicable Tax Law. Any amounts so deducted,
withheld and paid over to the appropriate Taxing Authority shall
be treated for all purposes of this Agreement as having been
paid to the holder of the Certificate or Book-Entry Share in
respect of which such deduction or withholding was made.
(j) Lost Certificates. If any
Certificate shall have been lost, stolen or destroyed, upon the
making of an affidavit of that fact by the Person claiming such
Certificate to be lost, stolen or destroyed and, if required by
Allied World or the Exchange Agent, the posting by such Person
of a bond in such amount as Allied World or the Exchange Agent
may determine is reasonably necessary as indemnity against any
claim that may be made against it or the Surviving Corporation
with respect to such Certificate, the Exchange Agent (or, if
subsequent to the termination of the Exchange Fund and subject
to Section 2.2(g), Allied World) shall deliver, in
exchange for such lost, stolen or destroyed Certificate, the
Merger Consideration and any dividends and distributions
deliverable in respect thereof pursuant to this Agreement.
2.3 Transatlantic Stock Options and Other Equity
Awards.
(a) Prior to the Effective Time, the Board of Directors of
Transatlantic (the Transatlantic Board) (or,
if appropriate, the committee thereof administering the
Transatlantic Stock Plans) shall adopt such resolutions or take
such other actions as may be required to effect the following:
(i) adjust the terms of all outstanding Transatlantic Stock
Options to provide that, at the Effective Time, each
Transatlantic Stock Option outstanding immediately prior to the
Effective Time, whether vested or unvested, shall be deemed to
constitute an option to acquire, on the same terms and
conditions as were applicable under such Transatlantic Stock
Option (including any vesting or forfeiture provisions or
repurchase rights, but taking into account any acceleration
thereof provided for in the relevant Transatlantic Stock Plan or
in the related award document by reason of the transactions
contemplated hereby), a number of Allied World Shares (rounded
down to the nearest whole share) equal to the product of
(x) the number of shares of Transatlantic Common Stock
subject to such Transatlantic Stock Option multiplied by
(y) the Exchange Ratio, at an exercise price per Allied
World Share (rounded up to the nearest whole cent) equal to the
quotient of (x) the exercise price per share of
Transatlantic Common Stock subject to such Transatlantic Stock
Option divided by (y) the Exchange Ratio (each, a
Transatlantic Rollover Option);
provided, however, that in the case of any option
to which Section 421 of the Internal Revenue Code of 1986,
as amended (the Code), applies by reason of
its qualification under either Section 422 or 424 of the
Code, the option price, the number of shares purchasable
pursuant to such option and the terms and conditions of exercise
of such option shall be determined in order to
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comply with Section 424(a) of the Code and such adjustment
shall in all events comply with the requirements of
Section 409A of the Code;
(ii) adjust the terms of all outstanding Transatlantic
Stock-Based Awards (other than Transatlantic Stock Options) to
provide that, at the Effective Time, such Transatlantic
Stock-Based Awards outstanding immediately prior to the
Effective Time shall be converted into Allied World Shares or
other compensatory awards denominated in Allied World Shares
subject to a risk of forfeiture to, or right of repurchase by,
Allied World (each, a Converted Transatlantic
Stock-Based Award), with the same terms and conditions
as were applicable under such Transatlantic Stock-Based Awards
(including any vesting or forfeiture provisions or repurchase
rights, but taking into account any acceleration thereof
provided for in the relevant Transatlantic Stock Plan or in the
related award document by reason of the transactions
contemplated hereby), and each holder of Transatlantic
Stock-Based Awards shall be entitled to receive a number of
Converted Transatlantic Stock-Based Awards equal to the product
of (x) the number of Transatlantic Stock-Based Awards held
by such holder immediately prior to the Effective Time and
(y) the Exchange Ratio;
(iii) adjust the performance goals for, or convert, all
Converted Transatlantic Stock-Based Awards that vest based on
the achievement of performance criteria in the manner agreed to
by Transatlantic and Allied World within 15 Business Days
following the date hereof (or such later time as may be agreed
to by the parties) to appropriately reflect the Merger with
respect to performance periods that have not ended prior to the
Effective Time;
(iv) make such other changes to the Transatlantic Stock
Plans as it deems appropriate to give effect to the Merger
(subject to the approval of Allied World, which shall not be
unreasonably withheld, conditioned or delayed); and
(v) ensure that, after the Effective Time, no Transatlantic
Stock Options or Transatlantic Stock-Based Awards may be granted
under any Transatlantic Stock Plans and that from and after the
Effective Time awards under the Transatlantic Stock Plans shall
be granted with respect to Allied World Shares.
(b) At the Effective Time, and subject to compliance by
Transatlantic with Section 2.3(a), Allied World
shall assume all the obligations of Transatlantic under the
Transatlantic Stock Plans, each outstanding Transatlantic Stock
Option, each outstanding Transatlantic Stock-Based Award and the
agreements evidencing the grants thereof. As soon as practicable
after the Effective Time, Allied World shall deliver to the
holders of outstanding Transatlantic Stock Options and
Transatlantic Stock-Based Awards notices explaining the
adjustments being made to such Transatlantic Stock Options and
Transatlantic Stock-Based Awards in connection with the
transactions contemplated by this Section 2.3, and
the agreements evidencing the grants of such Transatlantic Stock
Options and Transatlantic Stock-Based Awards shall continue in
effect on the same terms and conditions (subject to the
adjustments required by this Section 2.3 after
giving effect to the Merger).
(c) Allied World shall take all corporate action necessary
to reserve for issuance a sufficient number of Allied World
Shares for delivery upon exercise of the Transatlantic Rollover
Options and Converted Transatlantic Stock-Based Awards assumed
in accordance with this Section 2.3. As soon as
reasonably practicable after the Effective Time, Allied World
shall file a registration statement on
Form S-8
(or any successor or other appropriate form) with respect to the
Allied World Shares subject to such Transatlantic Rollover
Options and Converted Transatlantic Stock-Based Awards and shall
use its reasonable best efforts to maintain the effectiveness of
such registration statement or registration statements (and
maintain the current status of the prospectus or prospectuses
contained therein) for so long as Allied World is subject to the
reporting requirements pursuant to Section 13 or 15(d) of
the Exchange Act and such Transatlantic Rollover Options and
Converted Transatlantic Stock-Based Awards remain outstanding.
2.4 Further Assurances. If, at any
time before or after the Effective Time, Allied World or
Transatlantic reasonably believes or is advised that any further
instruments, deeds, assignments or assurances are reasonably
necessary or desirable to consummate the Merger or to carry out
the purposes and intent of this Agreement at or after the
Effective Time, then Allied World, Merger Sub, Transatlantic,
the Surviving Corporation and their respective officers and
directors shall execute and deliver all such proper instruments,
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deeds, assignments or assurances and do all other things
reasonably necessary or desirable to consummate the Merger and
to carry out the purposes and intent of this Agreement.
ARTICLE III.
REPRESENTATIONS
AND WARRANTIES OF ALLIED WORLD AND MERGER SUB
Except as (x) disclosed in the Allied World SEC Documents
filed with or furnished to the U.S. Securities and Exchange
Commission (the SEC) at least one
(1) Business Day prior to the date of this Agreement
(excluding disclosure contained in the risk factors
section or constituting forward-looking statements,
in each case, to the extent such disclosure is cautionary,
predictive or speculative in nature) or (y) set forth in
the disclosure letter delivered by Allied World to Transatlantic
on or prior to the date of this Agreement (the Allied
World Disclosure Schedule), Allied World and Merger
Sub, jointly and severally, represent and warrant to
Transatlantic as set forth in this Article III. For
purposes of the representations and warranties of Allied World
and Merger Sub contained herein, disclosure in any section of
the Allied World Disclosure Schedule of any facts or
circumstances shall be deemed to be disclosure of such facts or
circumstances with respect to all representations or warranties
by Allied World to which the relevance of such disclosure to the
applicable representation and warranty is reasonably apparent on
the face thereof. The inclusion of any information in the Allied
World Disclosure Schedule or other document delivered by Allied
World pursuant to this Agreement shall not be deemed to be an
admission or evidence of the materiality of such item, nor shall
it establish a standard of materiality for any purpose
whatsoever. For purposes of this Article III,
references to Allied World that relate to a time
period prior to December 1, 2010 shall, for the time period
prior to December 1, 2010, refer to Allied World Assurance
Company Holdings, Ltd, an exempted company incorporated in
Bermuda (the Prior Allied World Parent) and
its Subsidiaries.
3.1 Corporate Organization.
(a) Allied World.
(i) Allied World (i) is a stock corporation duly
organized, validly existing and in good standing under the laws
of Switzerland, (ii) has all organizational powers and all
material governmental licenses, authorizations, permits,
consents and approvals required to carry on its business as now
conducted and (iii) is duly qualified to do business as a
foreign stock corporation in each jurisdiction where such
qualification is necessary, except for such variances from the
matters set forth in any of clauses (ii) or (iii)
as would not, individually or in the aggregate, reasonably be
expected to have an Allied World Material Adverse Effect.
(ii) True and complete copies of the Articles of
Association of Allied World, as amended through, and as in
effect as of, the date of this Agreement (the Allied
World Articles), and the Organizational Regulations of
Allied World, as amended through, and as in effect as of, the
date of this Agreement (the Allied World
Bylaws), have previously been made available to
Transatlantic.
(iii) Each Allied World Subsidiary (i) is duly
organized, validly existing and in good standing under the laws
of its jurisdiction of organization, (ii) is duly licensed
or qualified to do business in each jurisdiction in which the
nature of the business conducted by it or the character or
location of the properties and assets owned or leased by it
makes such licensing or qualification necessary, and
(iii) has all requisite corporate power and authority to
own or lease its properties and assets and to carry on its
business as now conducted, except for such variances from the
matters set forth in any of clauses (i), (ii) or
(iii) as would not, individually or in the aggregate,
reasonably be expected to have an Allied World Material Adverse
Effect.
(b) Merger Sub.
(i) True and complete copies of the certificate of
formation and limited liability company operating agreement of
Merger Sub, each as in effect as of the date of this Agreement,
have previously been made available to Transatlantic.
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(ii) Merger Sub is a limited liability company duly
organized, validly existing and in good standing under the laws
of the State of Delaware. Except as contemplated by this
Agreement, Merger Sub does not hold and has not held any
material assets or incurred any material liabilities, and has
not carried on any business activities other than in connection
with the Merger and the other transactions contemplated by this
Agreement. The sole issued and outstanding limited liability
company interest of Merger Sub is duly issued, fully paid and
nonassessable and is owned directly or indirectly by Allied
World, free and clear of any liens, pledges, charges and
security interests and similar encumbrances
(Liens).
3.2 Capitalization.
(a) Authorized and Issued Shares.
(i) As of the close of business on June 9, 2011 (the
Measurement Date), the share capital of
Allied World amounts to (A) CHF 568,483,965, divided into
37,898,931 fully paid-in Allied World Shares in accordance with
Articles 3a of the Allied World Articles plus (B) CHF
28,535,565, divided into 1,902,371 fully paid-in Allied World
Shares in accordance with Articles 3a of the Allied World
Articles that were held as treasury shares. In addition to the
issued and paid up share capital, as of the Measurement Date,
there exists (i) an authorized share capital of CHF
119,403,900, divided into 7,960,260 Allied World Shares,
allowing the Board of Directors of Allied World (the
Allied World Board) to issue additional
Allied World Shares without the approval of Allied Worlds
shareholders in accordance with Article 6 of the Allied
World Articles, (ii) a conditional capital of CHF
15,000,000, divided into 1,000,000 Allied World Shares, payable
in full, that can be issued by Allied World from time to time in
connection with the exercise of conversion
and/or
option or warrant rights granted in connection with bonds, notes
or similar instruments, issued or to be issued by Allied World
or its Subsidiaries, including convertible debt instruments in
accordance with Article 4 of the Allied World Articles,
(iii) a conditional capital of CHF 63,000,000, divided into
4,200,000 Allied World Shares that can be issued by Allied World
from time to time in connection with the exercise of option
rights granted to any employee of Allied World or of an Allied
World Subsidiary, any consultant, director or other person
providing services to Allied World or an Allied World Subsidiary
in accordance with Article 5 of the Allied World Articles
and (iv) a conditional capital of CHF 30,000,000, divided
into 2,000,000 Allied World Shares, payable in full, that can be
issued by Allied World in connection with the exercise of
shareholder warrants granted to American International Group,
Inc. in accordance with Article 5a of the Allied World
Articles. Section 3.2 of the Allied World Disclosure
Schedule contains a complete and correct list, as of the
Measurement Date, of each outstanding Allied World Stock Option
and Allied World RSU, including, as applicable, the holder, date
of grant, exercise price (to the extent applicable), vesting
schedule and number of Allied World Shares subject thereto and
each Allied World Stock Plan.
(ii) As of the Measurement Date, the participation capital
of Allied World amounts to CHF 3,035,100 and is divided into
202,340 fully paid-in participation certificates with a par
value of CHF 15.00 per participation certificate (a
Participation Certificate) in accordance with
Article 3b of the Allied World Articles.
(iii) As of the date of this Agreement, except for this
Agreement, Allied World Stock Options and Allied World RSUs,
there are not issued, reserved for issuance or outstanding, and
there are not any outstanding obligations of Allied World or any
Allied World Subsidiary to issue, deliver or sell, or cause to
be issued, delivered or sold, any Equity Equivalents of Allied
World or any Allied World Subsidiary. Except for Forfeitures and
Cashless Settlements in connection with the Allied World Stock
Options and Allied World Stock-Based Awards, there are not any
outstanding obligations of Allied World or any of the Allied
World Subsidiaries to directly or indirectly redeem, repurchase
or otherwise acquire any shares of capital stock or voting
securities of, other equity interests in or Equity Equivalents
of Allied World or any Allied World Subsidiary. Neither Allied
World nor any of the Allied World Subsidiaries is party to any
voting agreement with respect to the voting of any capital stock
or voting securities of, or other equity interests in, Allied
World. All outstanding shares of capital stock of Allied World
have been, and all shares that may be issued pursuant to any
employee stock option or other compensation plan or arrangement
or warrant will be, when issued in accordance with the
respective terms thereof, duly
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authorized and validly issued and fully paid. Except with
respect to the Share Issuance and as set forth in the Allied
World Articles, the consummation of the Merger and the other
transactions contemplated hereby or taken in contemplation of
this Agreement will not, as of the Effective Time, trigger any
preemptive rights of any Person with respect to the capital
stock of Allied World, whether by law or otherwise. As of the
date on which the Allied World Shares to be issued under the
Share Issuance will be issued, the preferential subscription
rights of Allied Worlds shareholders will have been
validly withdrawn and the Allied World Shares to be issued under
the Share Issuance will have been validly issued in accordance
with the Allied World Articles and Swiss Law, subject only to
the Allied World Share Issuance Stockholder Approval. With
respect to the Allied World Stock Options, (A) each grant
of an Allied World Stock Option was duly authorized no later
than the date on which the grant of such Allied World Stock
Option was by its terms to be effective (the Grant
Date) by all necessary corporate action, including, as
applicable, approval by the Allied World Board, or a committee
thereof, or a duly authorized delegate thereof, and any required
approval by the shareholders of Allied World by the necessary
number of votes or written consents, and the award agreement
governing such grant, if any, was duly executed and delivered by
each party thereto within a reasonable time following the Grant
Date, (B) each such grant was made in accordance with the
terms of the applicable Allied World Stock Plan, the Exchange
Act and all other applicable Law, including the rules of the
NYSE, (C) the per share exercise price of each Allied World
Stock Option was not less than the fair market value of an
Allied World Share on the applicable Grant Date, (D) each
such grant was properly accounted for in all material respects
in accordance with GAAP in the financial statements (including
the related notes) of Allied World and disclosed in Allied
Worlds filings with the SEC in accordance with the
Exchange Act and all other applicable Laws, and (E) no
amendments, modifications or other changes have been made to any
such grants after the Grant Date.
(b) As of the date of this Agreement, no bonds, debentures,
notes or other indebtedness of Allied World having the right to
vote on any matters on which stockholders may vote are issued or
outstanding.
(c) All of the issued and outstanding shares of capital
stock or other equity ownership interests of each
significant subsidiary (as such term is defined
under
Regulation S-X
promulgated by the SEC) of Allied World and of each Allied World
P/C Subsidiary are owned by Allied World, directly or
indirectly, free and clear of any material Liens other than
Permitted Liens, and free of any restriction on the right to
vote, sell or otherwise dispose of such capital stock or other
equity ownership interest (other than restrictions under
applicable securities Laws), and all of such shares or equity
ownership interests are duly authorized and validly issued and
are fully paid, nonassessable and free of preemptive rights.
Except for the capital stock or other equity ownership interests
of the Allied World Subsidiaries, as of the date of this
Agreement, Allied World does not beneficially own, directly or
indirectly, any capital stock, membership interest, partnership
interest, joint venture interest or other equity interest in any
Person. As used in this Agreement,
(i) Subsidiary, when used with respect
to either party, means any corporation, partnership, limited
liability company or other organization, whether incorporated or
unincorporated, (A) of which such party or any other
Subsidiary of such party is a general partner (excluding
partnerships, the general partnership interests of which held by
such party or any Subsidiary of such party do not have a
majority of the voting interests in such partnership) or
(B) a majority of the securities or other interests of
which having by their terms ordinary voting power to elect a
majority of the Board of Directors or others performing similar
functions with respect to such corporation or other organization
is directly or indirectly owned or controlled by such party or
by any one or more of its Subsidiaries, or by such party and one
or more of its Subsidiaries, (ii) the term
Subsidiaries means more than one such
Subsidiary, and (iii) the terms Allied World
Subsidiary and Transatlantic
Subsidiary will mean any direct or indirect Subsidiary
of Allied World or Transatlantic, respectively.
3.3 Corporate Authorization.
(a) Allied World has all necessary corporate power and
authority to execute and deliver this Agreement, to perform its
obligations hereunder and to consummate the transactions to
which it is a party contemplated hereby subject to obtaining the
Allied World Requisite Stockholder Vote. The execution, delivery
and performance by Allied World of this Agreement and the
consummation by Allied World of the transactions to
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which it is a party contemplated hereby have been duly and
validly authorized and approved by the Allied World Board. The
Allied World Board has, by resolutions duly adopted, unanimously
determined that this Agreement and the transactions contemplated
hereby are in the best interests of Allied World and its
stockholders, has approved and adopted this Agreement and the
plan of merger herein providing for the Merger, upon the terms
and subject to the conditions set forth herein, approved the
execution, delivery and performance by Allied World of this
Agreement and the consummation of the transactions to which it
is a party contemplated hereby, upon the terms and subject to
the conditions set forth herein and resolved, subject to
Section 5.5, to recommend approval of each of the
matters constituting the Allied World Requisite Stockholder Vote
by the stockholders of Allied World (such recommendation, the
Allied World Board Recommendation) and that
such matters and recommendation be submitted for consideration
at a duly held meeting of the stockholders of Allied World for a
vote for such purposes (the Allied World Stockholders
Meeting). Except (i) solely in the case of the
Allied World Articles Amendment, for the adoption of the
Allied World Articles Amendment at a meeting where holders
of at least 50% of the total outstanding Allied World Shares are
represented and voting, the affirmative vote of 50% of the
holders of the Allied World Shares voting at such meeting
entitled to vote on such adoption (the Allied World
Articles Amendment Stockholder Approval) and
(ii) solely in the case of the Share Issuance, (A) for
approval of the Share Issuance, including the exclusion of all
preferential subscription rights to which holders of Allied
World Shares may be entitled as a result of the transactions
contemplated hereby, at a meeting where holders of at least 50%
of the total outstanding Allied World Shares are represented and
voting, the affirmative vote of holders representing at least
two-thirds of the Allied World Shares voting at such meeting
entitled to vote on such issuance (the Allied World
Share Issuance Stockholder Approval and, together with
the Allied World Articles Amendment Stockholder Approval,
the Allied World Requisite Stockholder Vote)
and (B) for a resolution of the Allied World Board for the
ascertainment of the Share Issuance, no other corporate
proceedings on the part of Allied World or any other vote by the
holders of any class or series of capital stock of Allied World
are necessary to approve or adopt this Agreement or to
consummate the transactions contemplated hereby (except for the
filing of the Certificate of Merger and the Restated Articles,
as required by applicable Law).
(b) This Agreement has been duly executed and delivered by
Allied World and, assuming due power and authority of, and due
execution and delivery by, the other parties hereto, constitutes
a valid and binding obligation of Allied World, enforceable
against Allied World in accordance with its terms, subject to
bankruptcy, insolvency, fraudulent transfer, moratorium,
reorganization or similar Laws affecting the rights of creditors
generally and the availability of equitable remedies (regardless
of whether such enforceability is considered in a proceeding in
equity or at law) (together, the Bankruptcy and Equity
Exception).
(c) Merger Sub has all necessary limited liability company
power and authority to execute and deliver this Agreement, to
perform its obligations hereunder and to consummate the
transactions to which it is a party contemplated hereby. The
execution, delivery and performance by Merger Sub of this
Agreement and the consummation by Merger Sub of the transactions
to which it is a party contemplated hereby have been duly and
validly authorized and approved by the sole member of Merger
Sub. The sole member of Merger Sub has determined that this
Agreement and the transactions contemplated hereby are in the
best interests of Merger Sub and its sole member and has
approved this Agreement. No other limited liability company
proceeding on the part of Merger Sub is necessary to approve or
adopt this Agreement or to consummate the transactions
contemplated hereby (except for the filing of the Certificate of
Merger and the Restated Articles, as required by applicable
Law). This Agreement has been duly executed and delivered by
Merger Sub and, assuming due power and authority of, and due
execution and delivery by, the other parties hereto, constitutes
a valid and binding obligation of Merger Sub, enforceable
against Merger Sub in accordance with its terms, subject to the
Bankruptcy and Equity Exception.
3.4 Governmental Authorization. The
execution, delivery and performance by each of Allied World and
Merger Sub of this Agreement and the consummation by each of
Allied World and Merger Sub of the transactions to which it is a
party contemplated hereby require at or prior to the Closing no
consent or approval by, or filing with, or notification to any
Governmental Entity, other than (a) the filing of the
Certificate of Merger with the Secretary of State of the State
of Delaware and appropriate documents with the
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relevant authorities of other states in which Allied World is
qualified to do business, (b) the filing of the Restated
Articles with the appropriate Swiss Governmental Entities,
(c) compliance with any applicable requirements of the
Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended (the
HSR Act) and any other Antitrust Law,
(d) compliance with any applicable requirements of the
Securities Act, the Exchange Act, any other applicable
U.S. federal or state securities Laws or blue
sky Laws, and any foreign securities Laws,
(e) compliance with any applicable requirements of the
NYSE, (f) approvals or filings under all applicable
Insurance Laws as set forth in Section 3.4 of the
Allied World Disclosure Schedule (the Allied World
Insurance Approvals), (g) the Transatlantic
Insurance Approvals (assuming the accuracy and completeness of
Section 4.4(f)), (h) those consents, approvals
or filings as may be required as a result of the business or
identity of Transatlantic or any of its Affiliates (assuming the
accuracy and completeness of Section 4.4(f)) and
(i) any other consents, approvals or filings the failure of
which to be obtained or made would not, individually or in the
aggregate, reasonably be expected to have an Allied World
Material Adverse Effect or prevent or materially delay the
consummation of the transactions contemplated by this Agreement.
3.5 Non-Contravention. The
execution, delivery and performance by each of Allied World and
Merger Sub of this Agreement do not, and the consummation of the
transactions to which it is a party contemplated hereby will
not, (a) assuming (solely in the case of the Allied World
Articles Amendment and the Share Issuance) that the Allied
World Requisite Stockholder Vote is obtained, violate or
conflict with or result in any breach of any provision of the
Organizational Documents of Allied World or any of its
Subsidiaries; (b) assuming receipt of the Allied World
Requisite Stockholder Vote and compliance with the matters
referred to in Section 3.4 and
Section 4.4 (and assuming the accuracy and
completeness of Section 4.4(f)), violate or conflict
with any provision of any applicable Law; (c) violate or
conflict with or result in any breach or constitute a default,
or an event that, with or without notice or lapse of time or
both, would constitute a default under, or cause the
termination, cancellation, acceleration or other change of any
right or obligation or the loss of any benefit to which Allied
World or any of its Subsidiaries is entitled, or require consent
by any Person under, any loan or credit agreement, note,
mortgage, indenture, lease, Allied World Benefit Plan, or Allied
World Material Contract; or (d) subject to the receipt of
the Transatlantic Insurance Approvals (and assuming the accuracy
and completeness of Section 4.4(f)), result in the
creation or imposition of any Lien (other than Permitted Liens)
on any asset of Allied World or any of its Subsidiaries, except
in the case of clause (b), (c) or (d), as
would not, individually or in the aggregate, reasonably be
expected to have an Allied World Material Adverse Effect or
prevent or materially delay the consummation of the transactions
contemplated by this Agreement.
3.6 Allied World SEC Filings, Etc.
(a) Allied World has timely filed all reports, schedules,
forms, registration statements and other documents required to
be filed by Allied World with the SEC since January 1, 2008
(together with any documents furnished during such period by
Allied World to the SEC on a voluntary basis on Current Reports
on
Form 8-K
and any reports, schedules, forms, registration statements and
other documents filed with the SEC subsequent to the date
hereof, collectively, the Allied World SEC
Documents). Each of the Allied World SEC Documents, as
amended prior to the date of this Agreement, complied (and each
Allied World SEC Document filed subsequent to the date hereof
will comply) in all material respects with, to the extent in
effect at the time of filing or furnishing, the requirements of
the Securities Act and the Exchange Act applicable to such
Allied World SEC Documents, and none of the Allied World SEC
Documents when filed or furnished or, if amended prior to the
date of this Agreement, as of the date of such amendment,
contained, or with respect to Allied World SEC Documents filed
subsequent to the date hereof, will contain, any untrue
statement of a material fact or omit to state a material fact
required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which
they were made, not misleading. To the knowledge of Allied
World, there are no material unresolved comments received from
the SEC staff with respect to the Allied World SEC Documents on
or prior to the date hereof. To the knowledge of Allied World,
none of the Allied World SEC Documents filed on or prior to the
date hereof is subject to ongoing SEC review or investigation.
(b) Allied World maintains a system of internal control
over financial reporting (within the meaning of
Rules 13a-15(f)
and
15d-15(f) of
the Exchange Act) sufficient to provide reasonable assurances
regarding the
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reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with
GAAP. Allied World (i) maintains disclosure controls and
procedures (within the meaning of
Rules 13a-15(e)
and
15d-15(e) of
the Exchange Act) designed to ensure that information required
to be disclosed by Allied World in the reports that it files and
submits under the Exchange Act is recorded, processed,
summarized and reported within the time periods specified in the
SECs rules and forms, including that information required
to be disclosed by Allied World in the reports that it files and
submits under the Exchange Act is accumulated and communicated
to management of Allied World, as appropriate, to allow timely
decisions regarding required disclosure, and (ii) has
disclosed, based upon the most recent (prior to the date of this
Agreement) evaluation by the chief executive officer and chief
financial officer of Allied World of Allied Worlds
internal control over financial reporting, to its auditors and
the audit committee of the Allied World Board (A) all
significant deficiencies and material weaknesses in the design
or operation of Allied Worlds internal control over
financial reporting which are reasonably likely to adversely
affect in any material respect its ability to record, process,
summarize and report financial data and (B) any fraud,
whether or not material, that involves management or other
employees who have a significant role in Allied Worlds
internal control over financial reporting. Allied World has made
available to Transatlantic true and complete copies of any such
disclosure contemplated by clauses (A) and (B)
made by management to Allied Worlds independent auditors
and the audit committee of the Allied World Board since
January 1, 2008.
(c) Neither Allied World nor any of its Subsidiaries is a
party to, or has any commitment to become a party to, any joint
venture, off-balance sheet partnership or any similar Contract
(including any Contract relating to any transaction or
relationship between or among Allied World and any of its
Subsidiaries, on the one hand, and any unconsolidated Affiliate,
including any structured finance, special purpose or limited
purpose entity, on the other hand, or any off-balance
sheet arrangement (as defined in Item 303(a) of
Regulation S-K
promulgated by the SEC)), where the result, purpose or intended
effect of such Contract is to avoid disclosure of any material
transaction involving, or material liabilities of, Allied World
or any of its Subsidiaries in the Allied World SEC Documents.
(d) Allied World is in compliance in all material respects
with (i) the provisions of the Sarbanes-Oxley Act of 2002,
as amended (SOX) and (ii) the rules and
regulations of the NYSE, in each case, that are applicable to
Allied World.
(e) Neither Allied World nor any Allied World Subsidiary,
nor, to the knowledge of Allied World, any director, officer,
agent, employee or Affiliate of Allied World or any Allied World
Subsidiary is aware of any action, or any allegation made by any
Governmental Entity of any action, or has taken any action,
directly or indirectly, (i) that would constitute a
violation by such Persons of the Foreign Corrupt Practices Act
of 1977, as amended, and the rules and regulations thereunder
(the FCPA), including making use of the mails
or any means or instrumentality of interstate commerce corruptly
in furtherance of an offer, payment, promise to pay or
authorization of the payment of any money, or other property,
gift, promise to give, or authorization of the giving of
anything of value to any foreign official (as such
term is defined in the FCPA) or any foreign political party or
official thereof or any candidate for foreign political office,
in contravention of the FCPA, or (ii) that would constitute
an offer to pay, a promise to pay or a payment of money or
anything else of value, or an authorization of such offer,
promise or payment, directly or indirectly, to any employee,
agent or representative of another company or entity in the
course of their business dealings with Allied World or any
Allied World Subsidiary, in order to unlawfully induce such
person to act against the interest of his or her employer or
principal. There is no current, pending, or, to the knowledge of
Allied World, threatened charges, proceedings, investigations,
audits, or complaints against Allied World or any Allied World
Subsidiary or, to the knowledge of Allied World, any director,
officer, agent, employee or Affiliate of Allied World with
respect to the FCPA or any other anti-corruption Law or
regulation.
3.7 Allied World Financial
Statements. The consolidated financial statements
(including all related notes thereto) of Allied World included
in the Allied World SEC Documents (if amended, as of the date of
the last such amendment filed prior to the date of this
Agreement) fairly present in all material respects the
consolidated financial position of Allied World and its
consolidated Subsidiaries, as at the respective dates thereof,
and the consolidated results of their operations, the changes in
stockholders equity and their consolidated cash flows for
the respective periods then ended (subject, in the case of the
unaudited statements,
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to normal year-end audit adjustments and to the absence of
information or notes not required by GAAP to be included in
interim financial statements) and were prepared, in all material
respects, in accordance with, and complied, in all material
respects, with GAAP during the periods involved (except, in the
case of the unaudited statements, as permitted by the SEC)
applied on a consistent basis (except as may be indicated
therein or in the notes thereto).
3.8 Form S-4. The
information supplied or to be supplied by Allied World or Merger
Sub specifically for inclusion in the registration statement on
Form S-4
to be filed by Allied World in connection with the Share
Issuance (the
Form S-4)
shall not, at the time that the
Form S-4
is declared effective by the SEC, contain any untrue statement
of a material fact or omit to state any material fact required
to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which
they were made, not misleading, except that no representation or
warranty is made by Allied World or Merger Sub with respect to
statements made therein based on information supplied by or on
behalf of Transatlantic specifically for inclusion in the
Form S-4.
The Joint Proxy Statement/Prospectus will not, at the date the
Joint Proxy Statement/Prospectus is first mailed to the
stockholders of Allied World and at the time of the Allied World
Stockholders Meeting, contain any untrue statement of a material
fact or omit to state any material fact required to be stated
therein or necessary in order to make the statements therein, in
light of the circumstances under which they were made, not
misleading, except that, in each case, no representation or
warranty is made by Allied World or Merger Sub with respect to
statements made therein based on information supplied by or on
behalf of Transatlantic specifically for inclusion in the Joint
Proxy Statement/Prospectus.
3.9 Absence of Certain Changes or Events.
(a) Since December 31, 2010, no event or events or
development or developments have occurred that have had or would
reasonably be expected to have, individually or in the
aggregate, an Allied World Material Adverse Effect.
(b) Except in connection with the execution and delivery of
this Agreement and the transactions contemplated by this
Agreement, from December 31, 2010 through the date of this
Agreement, Allied World and the Allied World Subsidiaries have
carried on their respective businesses in all material respects
in the ordinary course of business consistent with past practice.
3.10 No Undisclosed Material
Liabilities. There are no material liabilities or
obligations of Allied World or any of its Subsidiaries of any
nature, whether accrued, contingent, absolute, determined,
determinable or otherwise, whether or not required by GAAP to be
reflected on a consolidated balance sheet of Allied World and
its Subsidiaries other than: (a) liabilities or obligations
reflected or reserved against in Allied Worlds
consolidated balance sheet as of March 31, 2011 included in
the Allied World SEC Documents or in the notes thereto and
(b) liabilities or obligations that were incurred since
March 31, 2011 in the ordinary course of business
consistent with past practice.
3.11 Compliance with Laws.
(a) Since January 1, 2008, (i) the business and
operations of Allied World and its Subsidiaries have been
conducted in compliance with all applicable Laws (including
Insurance Laws) and (ii) Allied World has complied with the
applicable listing and corporate governance rules and
regulations of the NYSE except, in each case, where the failure
to so conduct such business and operations or comply with such
rules and regulations would not, individually or in the
aggregate, reasonably be expected to have an Allied World
Material Adverse Effect, or prevent or materially delay the
consummation of the transactions contemplated by this Agreement.
(b) All of the Allied World Permits of each Allied World
P/C Subsidiary conducting insurance operations are in full force
and effect in accordance with their terms and there is no
proceeding or investigation to which Allied World or any Allied
World Subsidiary is subject before a Governmental Entity that is
pending or threatened in writing that would reasonably be
expected to result in the revocation, failure to renew or
suspension of, or placement of a restriction on, any such Allied
World Permits, except where the failure to be in full force and
effect in accordance with their terms, revocation, failure to
renew, suspension or restriction
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would not, individually or in the aggregate, reasonably be
expected to have an Allied World Material Adverse Effect, or
prevent or materially delay the consummation of the transactions
contemplated by this Agreement.
(c) There is no proceeding to which Allied World or any
Allied World Subsidiary is subject before any Governmental
Entity pending or threatened in writing regarding whether any of
the Allied World Subsidiaries has violated any applicable Laws
(including Insurance Laws), nor, any investigation by any
Governmental Entity pending or threatened in writing with
respect to possible violations of any applicable Laws, which, if
determined or resolved adversely against Allied World or any
Allied World Subsidiary, would, individually or in the
aggregate, reasonably be expected to be material to Allied World
and its Subsidiaries, taken as a whole, or would reasonably be
expected to prevent or materially delay the consummation of the
transactions contemplated by this Agreement. Since
January 1, 2008, each Allied World P/C Subsidiary has
timely filed all material reports, registrations, statements and
certifications, together with any amendments required to be made
with respect thereto, required to be filed by it with any
applicable Insurance Regulator or such failure to file has been
remedied.
3.12 Litigation. There is no
action, suit, investigation, claim, complaint, demand, summons,
cease and desist letter, subpoena, Injunction, notice of
violation or other proceeding pending against or threatened in
writing against Allied World, Merger Sub or any of their
respective Subsidiaries or pending against or threatened in
writing against any present or former officer, director or
employee of Allied World or any Allied World Subsidiary in
connection with which Allied World or any Allied World
Subsidiary has an indemnification obligation, before any
Governmental Entity (other than insurance and reinsurance claims
litigation or arbitration arising in the ordinary course of
business), which, if determined or resolved adversely in
accordance with the plaintiffs or claimants demands,
would, individually or in the aggregate, reasonably be expected
to be material to Allied World and its Subsidiaries, taken as a
whole, or would reasonably be expected to prevent or materially
delay the consummation of the transactions contemplated hereby.
There is no Order outstanding against Allied World or any of its
Subsidiaries which would, individually or in the aggregate,
reasonably be expected to be material to Allied World and its
Subsidiaries, taken as a whole, or would reasonably be expected
to prevent or materially delay the consummation of the
transactions contemplated hereby.
3.13 Title to Properties; Absence of
Liens. Section 3.13 of the Allied
World Disclosure Schedule sets forth a true and complete
description (including address, and for each lease, sublease and
license, and all amendments, extensions, renewals, guaranties,
modifications, supplements or other agreements, if any, with
respect thereto) of all real property leased, subleased or
licensed by Allied World or any of its Subsidiaries
(collectively, the Allied World Leased Real
Properties; and the leases, subleases and licenses
with respect thereto, collectively, the Allied World
Real Property Leases). Allied World has delivered or
otherwise made available to Transatlantic true, correct and
complete copies of the Allied World Real Property Leases,
together with all amendments, extensions, renewals, guaranties,
modifications, supplements or other agreements, if any, with
respect thereto. Each of the Allied World Real Property Leases
is in full force and effect. Allied World or one of its
Subsidiaries has a valid, binding and enforceable leasehold or
subleasehold interest (or license, as applicable) in each Allied
World Leased Real Property, in each case as to such leasehold or
subleasehold interest (or license, as applicable), free and
clear of all Liens (other than Permitted Liens). Neither Allied
World nor any of its Subsidiaries owns any real property or any
interests in real property.
3.14 Opinion of Financial
Advisor. The Allied World Board has received an
opinion from Deutsche Bank Securities Inc.
(DB), dated as of the date of this Agreement
and addressed to the Allied World Board to the effect that, as
of the date hereof and based upon and subject to the
limitations, qualifications and assumptions set forth therein,
the Exchange Ratio is fair, from a financial point of view, to
Allied World. Allied World has been authorized by DB to include
such opinion in its entirety in the Joint Proxy
Statement/Prospectus.
3.15 Taxes.
(a) All material Tax Returns required by applicable Law to
be filed with any Taxing Authority by, or on behalf of, Allied
World or any of its Subsidiaries have been duly filed when due
(including extensions) in
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accordance with all applicable Laws, and all such Tax Returns
are true, correct and complete in all material respects.
(b) Allied World and each of its Subsidiaries has duly and
timely paid or has duly and timely withheld and remitted to the
appropriate Taxing Authority all material Taxes due and payable,
or, where payment is not yet due, has established in accordance
with the applicable accounting standard an adequate accrual for
all material Taxes on the most recent financial statements
contained in the Allied World SEC Documents and on the Allied
World Statutory Statements.
(c) There is no claim, audit, action, suit, request for
written ruling, proceeding or investigation pending or
threatened in writing against or with respect to Allied World or
any of its Subsidiaries in respect of any Tax or Tax Return
which (except in the case of a request for a written ruling) if
determined adversely would, individually or in the aggregate, be
expected to result in a material Tax deficiency.
(d) Allied World and each of its Subsidiaries has withheld
all material amounts required to have been withheld by it in
connection with amounts paid or owed to any employee,
independent contractor, creditor, shareholder or any other third
party; such withheld amounts were either duly paid to the
appropriate Taxing Authority or set aside in accounts for such
purpose. Allied World and each of its Subsidiaries has reported
such withheld amounts to the appropriate Taxing Authority and to
each such employee, independent contractor, creditor,
shareholder or any other third party, as required under
applicable Law.
(e) Neither Allied World nor any of its Subsidiaries is
liable for any Taxes of any Person (other than Allied World and
its Subsidiaries) as a result of being (i) a transferee or
successor of such Person, (ii) a member of an affiliated,
consolidated, combined or unitary group that includes such
Person as a member or (iii) a party to a tax sharing, tax
indemnity or tax allocation agreement or any other agreement to
indemnify such Person.
(f) Neither Allied World nor any of its Subsidiaries shall
be required to include any item of income in, or exclude any
item of deduction from, taxable income for any period (or
portion thereof) ending after the Closing Date, as a result of
(1) any change in method of accounting for a taxable period
ending on or prior to the Closing Date under Section 481 of
the Code (or any corresponding provision of state, local or
foreign Law), (2) closing agreement as
described in Section 7121 of the Code (or any corresponding
or similar provision of state, local or foreign Tax Law)
executed on or prior to the Closing Date, (3) intercompany
transaction or excess loss account described in Treasury
Regulations under Section 1502 of the Code (or any
corresponding or similar provision of state, local or foreign
Tax Law), (4) installment sale or open transaction made on
or prior to the Closing Date, or (5) prepaid amount
received on or prior to the Closing Date.
(g) Neither Allied World nor any of its Subsidiaries has
participated or engaged in any reportable
transaction within the meaning of Treasury Regulations
Section 1.6011-4
(or any corresponding or similar provision of state, local or
foreign Tax Law). Neither Allied World nor any of its
Subsidiaries is a party to any understanding or arrangement
described in Section 6662(d)(2)(C)(ii) of the Code or
Treasury Regulations
Section 1.6011-4(b)
or is a material advisor as defined in Section 6111(b) of
the Code.
(h) Neither Allied World nor any of its Subsidiaries has
been informed by any Taxing Authority in any jurisdiction in
which it does not file a Tax Return that it may be required to
file a Tax Return in such jurisdiction.
(i) Neither Allied World nor any of its Subsidiaries has
distributed stock of another corporation, or has had its stock
distributed by another corporation, in a transaction that was
governed, or purported or intended to be governed or described,
in whole or in part, by Section 355 or
Section 368(a)(1)(D) of the Code.
3.16 Employee Benefit Plans.
(a) Section 3.16(a) of the Allied World
Disclosure Schedule sets forth as of the date of this Agreement
a true and complete list of each material employee benefit
plan (within the meaning of Section 3(3) of the
Employee Retirement Income Security Act of 1974, as amended
(ERISA)), multiemployer plans within the
meaning of ERISA Section 3(37), and all material stock
purchase, stock option, severance, employment,
change-in-control,
fringe benefit, bonus, incentive, deferred compensation and all
other employee benefit
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plans, agreements, programs, policies or other arrangements,
whether or not subject to ERISA (including any funding mechanism
therefor now in effect or required in the future as a result of
the transactions contemplated by this Agreement or otherwise),
whether formal or informal, written, legally binding or not,
under which any employee or former employee of Allied World or
its Subsidiaries has any present or future right to benefits or
Allied World or its Subsidiaries has had or has any present or
future liability (each, an Allied World Benefit
Plan). With respect to each such Allied World Benefit
Plan, Allied World has made available to Transatlantic a true
and complete copy of such Allied World Benefit Plan, if written,
or a description of the material terms of such Allied World
Benefit Plan if not written, and to the extent applicable,
(i) all trust agreements, Insurance Contracts or other
funding arrangements; (ii) the most recent actuarial and
trust reports for both ERISA funding and financial statement
purposes; (iii) the most recent Form 5500 with all
attachments required to have been filed with the Internal
Revenue Service (the IRS) or the Department
of Labor or any similar reports filed with any comparable
Governmental Entity in any
non-U.S. jurisdiction
having jurisdiction over any Allied World Benefit Plan and all
schedules thereto; (iv) the most recent IRS determination
or opinion letter; and (v) all current summary plan
descriptions.
(b) (i) Each Allied World Benefit Plan has been
maintained in all material respects in accordance with its terms
and the requirements of applicable Law, (ii) each of Allied
World and its Subsidiaries has performed all material
obligations required to be performed by it under any Allied
World Benefit Plan and, to the knowledge of Allied World, is not
in any material respect in default under or in violation of any
Allied World Benefit Plan and (iii) no action (other than
claims for benefits in the ordinary course) is pending or
threatened in writing with respect to any Allied World Benefit
Plan by any current or former employee, officer or director of
Allied World or any of its Subsidiaries that would reasonably be
expected to have an Allied World Material Adverse Effect.
(c) Each Allied World Benefit Plan that is intended to be
qualified under Section 401(a) of the Code has received a
determination or opinion letter from the IRS that it is so
qualified and each related trust that is intended to be exempt
from federal income taxation under Section 501(a) of the
Code has received a determination or opinion letter from the IRS
that it is so exempt and, to the knowledge of Allied World, no
fact or event has occurred since the date of such letter or
letters from the IRS that would reasonably be expected to
adversely affect the qualified status of any such Allied World
Benefit Plan or the exempt status of any such trust.
(d) No liability under Subtitle C or D of Title IV of
ERISA has been or is reasonably expected to be incurred by
Allied World or any of its Subsidiaries with respect to any
ongoing, frozen or terminated single-employer plan,
within the meaning of Section 4001(a)(15) of ERISA,
currently or formerly maintained by any of them, or the
single-employer plan of any entity which is considered one
employer with Allied World under Section 4001 of ERISA or
Section 414 of the Code (an Allied World ERISA
Affiliate). Allied World and its Subsidiaries have no
liability (contingent or direct) with respect to any
multiemployer plan under Subtitle E of Title IV of ERISA
(regardless of whether based on contributions of an Allied World
ERISA Affiliate) and no such liability is reasonably expected to
be incurred by Allied World or its Subsidiaries. No notices have
been required to be sent to participants and beneficiaries or to
the Pension Benefit Guaranty Corporation (the
PBGC) under Section 302 of ERISA or
Section 412 or Section 430 of the Code.
(e) All material contributions required to be made under
each Allied World Benefit Plan, as of the date hereof, have been
timely made. Neither any Allied World Benefit Plan nor any
single-employer plan of an Allied World ERISA Affiliate has
failed to satisfy the minimum funding standard within the
meaning of Section 412 of the Code or Section 302 of
ERISA. It is not reasonably anticipated that any Allied World
Benefit Plan is, or is expected to be, in at-risk
status (as defined in Section 430 of the Code or
Section 303 of ERISA). Allied World has no liability
pursuant to Section 4069 of ERISA.
(f) Neither Allied World nor any of its Subsidiaries has
any material liability in respect of post-retirement health,
medical or life insurance benefits for retired, former or
current employees of Allied World or its Subsidiaries, except as
required by applicable Law. Allied World has reserved the right
to amend, terminate or modify at any time all Allied World
Benefit Plans providing for retiree health or life insurance
coverage or other retiree death benefits, and there have been no
communications to employees or former employees which
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could reasonably be interpreted to promise or guarantee such
employees or former employees retiree health or life insurance
or other retiree death benefits on a permanent basis.
(g) Any arrangement of Allied World or any of its
Subsidiaries that is subject to Section 409A of the Code
was administered in reasonable, good faith compliance with the
requirements of Section 409A through December 31,
2008, and all arrangements of Allied World or any of its
Subsidiaries that are subject to Section 409A, provide for
payment after December 31, 2008 and were in existence on
such date have been amended to comply with the requirements of
the final regulations under Section 409A, in each case
except as would not, individually or in the aggregate,
reasonably be expected to have an Allied World Material Adverse
Effect. Neither Allied World nor any of its Subsidiaries has any
obligation to provide any
gross-up
payment to any individual with respect to any income Tax,
additional Tax, excise Tax or interest charge imposed pursuant
to Section 409A or 4999 of the Code.
(h) Except as set forth in Section 3.16(h) of
the Allied World Disclosure Schedule, the consummation of the
transactions contemplated hereby to which each of Allied World
and Merger Sub is a party, will not, either alone or in
combination with another event, (i) entitle any current or
former director, officer or employee of Allied World or of any
of its Subsidiaries to severance pay, unemployment compensation
or any other payment; (ii) result in any payment becoming
due, accelerate the time of payment or vesting, or increase the
amount of compensation due to any such director, officer or
employee; (iii) result in any forgiveness of indebtedness,
trigger any funding obligation under any Allied World Benefit
Plan or impose any restrictions or limitations on Allied
Worlds rights to administer, amend or terminate any Allied
World Benefit Plan; or (iv) result in any payment (whether
in cash or property or the vesting of property) to any
disqualified individual (as such term is defined in
Treasury Regulations
Section 1.280G-1)
that could reasonably be expected, individually or in
combination with any other such payment, to constitute an
excess parachute payment (as defined in
Section 280G(b)(1) of the Code).
3.17 Employees, Labor Matters.
(a) Neither Allied World nor any of its Subsidiaries is a
party to or bound by any collective bargaining agreement, and
there are no labor unions or other organizations representing,
purporting to represent or, to the knowledge of Allied World,
attempting to represent any employees of Allied World or any of
its Subsidiaries in their capacity as such.
(b) Since January 1, 2008, there has not occurred or
been threatened in writing any material strike, slowdown, work
stoppage, concerted refusal to work overtime or other similar
labor activity or union organizing campaign with respect to any
employees of Allied World or any of its Subsidiaries. There are
no labor disputes subject to any formal grievance procedure,
arbitration or litigation and there is no representation
petition pending or threatened in writing with respect to any
employee of Allied World or any of its Subsidiaries.
(c) Allied World and its Subsidiaries have been in
compliance with all applicable Laws relating to employment of
labor, including all applicable Laws relating to wages, hours,
collective bargaining, employment discrimination, civil rights,
safety and health, workers compensation, pay equity,
classification of employees, and the collection and payment of
withholding
and/or
social security Taxes, except where noncompliance would not
reasonably be expected to result in an Allied World Material
Adverse Effect.
3.18 Environmental Matters. Except
as would not, individually or in the aggregate, reasonably be
expected to have an Allied World Material Adverse Effect,
(a) neither Allied World nor any of its Subsidiaries has
received any written notice, demand, request for information,
citation, summons or Order, and no complaint has been filed, no
penalty has been assessed, no liability has been incurred, and
no investigation, action, written claim, suit or proceeding is
pending or is threatened in writing by any Governmental Entity
or other Person with respect to or arising out of any applicable
Environmental Law; and (b) no release of a
hazardous substance (as those terms are defined in
the Comprehensive Environmental Response, Compensation, and
Liability Act, 42 U.S.C. § 9601 et seq.)
has occurred at, on, above, under or from any properties
currently or formerly owned, leased, operated or used by Allied
World, any Allied World Subsidiary
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or any predecessors in interest that are reasonably likely to
result in any cost, liability or obligation of Allied World or
any Allied World Subsidiary under any applicable Environmental
Law.
3.19 Intellectual Property.
(a) Each of Allied World and its Subsidiaries owns or
otherwise has a valid and enforceable license or right to use
material Intellectual Property used in the respective businesses
of Allied World and each of its Subsidiaries as currently
conducted; and all patents and all registrations for trademarks,
service marks and copyrights owned by Allied World or its
Subsidiaries are valid and subsisting, except to the extent
Allied World or its Subsidiaries have determined to abandon such
patents or registrations for trademarks, service marks and
copyrights in the exercise of their reasonable business judgment.
(b) There are no claims pending or threatened in writing by
any Person alleging that Allied World or its Subsidiaries or
their respective businesses as conducted on the date of this
Agreement infringes the Intellectual Property of any Person,
which, if determined or resolved adversely against Allied World
or any Allied World Subsidiary, would, individually or in the
aggregate, reasonably be expected to be material to Allied World
and its Subsidiaries, taken as a whole. To the knowledge of
Allied World, no Person is infringing the Intellectual Property
owned by Allied World or any of its Subsidiaries, which
infringement would, individually or in the aggregate, reasonably
be expected to be material to Allied World and its Subsidiaries,
taken as a whole.
(c) Allied World and its Subsidiaries have established and
are in compliance with commercially reasonable security programs
that are sufficient to protect (i) the security,
confidentiality and integrity of transactions executed through
their computer systems, including encryption
and/or other
security protocols and techniques when appropriate; and
(ii) the security, confidentiality and integrity of all
confidential or proprietary data, except, in each case, which
would not, individually or in the aggregate, reasonably be
expected to have an Allied World Material Adverse Effect.
Neither Allied World nor any of its Subsidiaries has suffered a
material security breach with respect to their data or systems,
and neither Allied World nor any of its Subsidiaries has
notified customers or employees of any information security
breach. Allied World and its Subsidiaries take reasonable steps
to protect their material trade secrets and none of such trade
secrets have been disclosed to any Person except pursuant to
written and enforceable confidentiality obligations.
3.20 Allied World Material Contracts.
(a) Allied World has made available to Transatlantic a true
and complete copy of each Contract to which Allied World or any
of its Subsidiaries is a party as of the date of this Agreement
or by which Allied World, any of its Subsidiaries or any of its
respective properties or assets is bound as of the date of this
Agreement, which: (i) is a material contract
within the meaning of Item 601(b)(10) of
Regulation S-K
promulgated by the SEC (each, an Allied World Material
Contract); (ii) contains covenants of Allied
World or any of its Subsidiaries not to compete or engage in any
line of business or compete with any Person in any geographic
area; (iii) pursuant to which Allied World or any of its
Subsidiaries has entered into a partnership or joint venture
with any other Person (other than Allied World or any of its
Subsidiaries); (iv) relates to or evidences indebtedness
for borrowed money or any guarantee of indebtedness for borrowed
money by Allied World or any of its Subsidiaries in excess of
ten million dollars ($10,000,000); or (v) evidences any
guarantee of obligations of any Person other than a wholly owned
Subsidiary of Allied World in excess of ten million dollars
($10,000,000).
(b) Each Allied World Material Contract is (assuming due
power and authority of, and due execution and delivery by the
parties thereto other than Allied World or any of its
Subsidiaries) a valid and binding obligation of Allied World or
its Subsidiaries party thereto, subject to the Bankruptcy and
Equity Exception, except (i) to the extent it has
previously expired or terminated in accordance with their terms
and (ii) for any failures to be valid and binding which
would not, individually or in the aggregate, reasonably be
expected to have an Allied World Material Adverse Effect.
Neither Allied World nor any of its Subsidiaries nor, to the
knowledge of Allied World, any other party to any Allied World
Material Contract is in breach of or in default under any Allied
World Material Contract, and, to the knowledge of Allied World,
no event has occurred that, with the lapse of time or the giving
of notice or both, would constitute a default thereunder by any
party thereto, and neither Allied World nor any of its
Subsidiaries has received any claim of any such breach or
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default, except for such breaches and defaults which would not,
individually or in the aggregate, reasonably be expected to have
an Allied World Material Adverse Effect.
3.21 Brokers and Finders
Fees. Except for DB, the fees and expenses of
which will be paid by Allied World, there is no investment
banker, broker, finder or other intermediary that has been
retained by or is authorized to act on behalf of Allied World,
Merger Sub or any of their respective Subsidiaries who is
entitled to any fee or commission from Allied World, Merger Sub
or any of their respective Subsidiaries in connection with the
transactions to which Allied World is a party contemplated
hereby.
3.22 Takeover Laws. No fair
price, moratorium, control share
acquisition, interested stockholder or other
anti-takeover statute or regulation is applicable to this
Agreement, the Merger or the other transactions contemplated
hereby by reason of Allied World or Merger Sub being a party to
this Agreement, performing its obligations hereunder and
consummating the Merger and the other transactions contemplated
hereby.
3.23 Affiliate Transactions. There
are no transactions, agreements, arrangements or understandings
between (i) Allied World or any of its Subsidiaries, on the
one hand, and (ii) any directors, officers or stockholders
of Allied World, on the other hand, of the type that would be
required to be disclosed under Item 404 of
Regulation S-K
promulgated under the Securities Act.
3.24 Insurance Subsidiaries. Each
Allied World Subsidiary that conducts the business of insurance
or reinsurance (each, an Allied World P/C
Subsidiary) is (i) duly licensed or authorized as
an insurance or reinsurance company, as applicable, in its
jurisdiction of incorporation; (ii) duly licensed,
authorized or otherwise eligible to transact the business of
insurance or reinsurance in each other jurisdiction where it is
required to be so licensed, authorized or eligible in order to
conduct its business as currently conducted; and (iii) duly
licensed, authorized or eligible in its jurisdiction of
incorporation and each other applicable jurisdiction where it
writes each line of insurance or reinsurance reported as being
written in the Allied World Statutory Statements. Each
jurisdiction in which any Allied World P/C Subsidiary is
domiciled or commercially domiciled or otherwise licensed,
authorized or eligible with respect to the conduct of the
business of insurance or reinsurance is set forth in
Section 3.24 of the Allied World Disclosure Schedule.
3.25 Statutory Statements; Examinations.
(a) Since January 1, 2008, each of the Allied World
P/C Subsidiaries has timely filed or submitted all material
annual and, to the extent applicable Law requires, quarterly and
other periodic statements, together with all exhibits,
interrogatories, notes, schedules and any actuarial opinions,
affirmations or certifications or other supporting documents in
connection therewith, required to be filed with or submitted to
the appropriate insurance regulatory authorities of each
jurisdiction in which it is licensed, authorized or eligible on
forms prescribed or permitted by such authority (as filed
through the date hereof and thereafter, collectively, the
Allied World Statutory Statements), except,
in each case, as has been cured or resolved to the satisfaction
of such insurance regulatory authority without imposition of any
material penalty.
(b) Allied World has delivered or made available to
Transatlantic, to the extent permitted by applicable Law, true
and complete copies of all annual Allied World Statutory
Statements filed with Governmental Entities for each of the
Allied World P/C Subsidiaries for the periods beginning
January 1, 2008, each in the form (including exhibits,
annexes and any amendments thereto) filed with the applicable
insurance regulatory authority. Financial statements included in
the Allied World Statutory Statements were prepared in
conformity with applicable SAP, consistently applied for the
periods covered thereby, were prepared in accordance with the
books and records of the applicable Allied World P/C Subsidiary,
and present fairly in all material respects the statutory
financial position of the relevant Allied World P/C Subsidiary
as of the respective dates thereof and the results of
operations, cash flows, and changes in capital and surplus (or
stockholders equity, as applicable) of such Allied World
P/C Subsidiary for the respective periods then ended. The Allied
World Statutory Statements complied in all material respects
with all applicable Laws when filed or submitted and no material
violation or deficiency has been asserted in writing (or, to the
knowledge of Allied World, orally) by any Governmental Entity
with respect to any of the Allied World Statutory Statements
that have not been cured or otherwise resolved to the
satisfaction of such Governmental Entity. The statutory balance
sheets and
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income statements included in the annual Allied World Statutory
Statements have been audited by Allied Worlds independent
auditors, and Allied World has delivered or made available to
Transatlantic true and complete copies of all audit opinions
related thereto for the periods beginning January 1, 2008
through the date hereof, in each case as filed with the
insurance regulatory authority of the jurisdiction of domicile
of such Allied World P/C Subsidiary. Except as is indicated
therein, all assets that are reflected on the Allied World
Statutory Statements comply in all material respects with all
applicable Insurance Laws regulating the investments of the
Allied World P/C Subsidiaries and all applicable Insurance Laws
with respect to admitted assets. The financial statements
included in the Allied World Statutory Statements accurately
reflect in all material respects the extent to which, pursuant
to applicable Laws and applicable SAP, the applicable Allied
World P/C Subsidiary is entitled to take credit for reinsurance
(or any local equivalent concept) on such Allied World Statutory
Statements.
(c) Allied World has delivered or made available to
Transatlantic, to the extent permitted by applicable Law, true
and complete copies of all examination reports (and has notified
the other party of any pending examinations) of any insurance
regulatory authorities received by it on or after
January 1, 2008 through the date hereof relating to the
Allied World P/C Subsidiaries. Except as set forth in
Section 3.25(c) of the Allied World Disclosure
Schedule, all material deficiencies or violations noted in the
examination reports have been resolved to the reasonable
satisfaction of the insurance regulatory authority that noted
such deficiencies or violations.
(d) Section 3.25(d) of the Allied World
Disclosure Schedule sets forth a true and complete list of
permitted practices under SAP that are used in any of the Allied
World Statutory Statements of any Allied World P/C Subsidiary.
3.26 Agreements with
Regulators. Except as required by Insurance Laws
and the insurance and reinsurance licenses maintained by the
Allied World P/C Subsidiaries or as set forth in
Section 3.26 of the Allied World Disclosure
Schedule, there are no written agreements, memoranda of
understanding, commitment letters or similar undertakings
binding on it or any of its subsidiaries or to which Allied
World or any Allied World Subsidiaries is a party, on the one
hand, and any Governmental Entity is a party or addressee, on
the other hand, or any Orders or directives by, or supervisory
letters or
cease-and-desist
orders from, any Governmental Entity, neither has Allied World
nor any Allied World Subsidiary adopted any board resolution at
the request of any Governmental Entity, in each case
specifically with respect to Allied World or any Allied World
Subsidiary, which (a) limit the ability of Allied World or
any Allied World P/C Subsidiary to issue or enter into Insurance
Contracts, Allied World Reinsurance Contracts or other material
reinsurance or retrocession treaties or agreements, slips,
binders, cover notes or other similar arrangements;
(b) require any divestiture of any investment of any Allied
World Subsidiary; (c) in any manner relate to the ability
of any Allied World Subsidiary to pay dividends;
(d) require any investment of any Allied World P/C
Subsidiary to be treated as non-admitted assets (or the local
equivalent); or (e) otherwise restrict the conduct of
business of Allied World or any Allied World Subsidiary, nor has
it been advised in writing by any Governmental Entity that it is
contemplating any such undertakings.
3.27 Reinsurance and Retrocession.
(a) As of the date of this Agreement, all material
reinsurance or retrocession treaties or agreements, slips,
binders, cover notes or other similar arrangements pursuant to
which any Allied World P/C Subsidiary is the cedent (the
Allied World Reinsurance Contracts) are, and
after the consummation of the transactions contemplated hereby
will continue to be, valid and binding obligations of Allied
World and the Allied World Subsidiaries (to the extent they are
parties thereto or bound thereby) and, to Allied Worlds
knowledge, each other party thereto, in accordance with their
terms and are in full force and effect, and Allied World and the
Allied World Subsidiaries (to the extent they are party thereto
or bound thereby) and, to Allied Worlds knowledge, each
other party thereto has performed in all material respects all
obligations required to be performed by it under each Allied
World Reinsurance Contract. Neither Allied World nor any of the
Allied World Subsidiaries has received notice, nor does it have
knowledge, of any violation or default in respect of any
material obligation under (or any condition which, with the
passage of time or the giving of notice or both, would result in
such a violation or default), or any intention to cancel,
terminate or change the scope of
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rights and obligations under, or not to renew, any Allied World
Reinsurance Contract. Since January 1, 2008,
(i) neither Allied World nor the Allied World Subsidiaries
have received any written notice from any party to an Allied
World Reinsurance Contract that any amount of reinsurance ceded
by Allied World or such Allied World Subsidiary to such
counterparty will be uncollectible or otherwise defaulted upon;
(ii) to Allied Worlds knowledge, no party to an
Allied World Reinsurance Contract is insolvent or the subject of
a rehabilitation, liquidation, conservatorship, receivership,
bankruptcy or similar proceeding; (iii) to Allied
Worlds knowledge, the financial condition of any party to
an Allied World Reinsurance Contract is not impaired to the
extent that a default thereunder is reasonably anticipated;
(iv) there are no material disputes under any Allied World
Reinsurance Contract other than disputes in the ordinary course
for which adequate loss reserves have been established; and
(v) Allied Worlds relevant Allied World P/C
Subsidiary is entitled under any applicable Law and applicable
SAP to take full credit in its Allied World Statutory Statements
for all amounts recoverable by it pursuant to any Allied World
Reinsurance Contract and all such amounts recoverable have been
properly recorded in its books and records of account (if so
accounted therefor) and are properly reflected in the Allied
World Statutory Statements, except for such events or
circumstances as have not been and would not reasonably be
expected to be, individually or in the aggregate, material to
Allied World and its Subsidiaries, taken as a whole.
(b) Except for such events or circumstances as have not
been and would not reasonably be expected to be, individually or
in the aggregate, material to Allied World and its Subsidiaries,
taken as a whole, with respect to any Allied World Reinsurance
Contract for which an Allied World P/C Subsidiary as ceding
insurer thereto is taking credit on its most recent Allied World
Statutory Statements, to its knowledge, from and after
January 1, 2008 (i) there has been no separate written
or oral agreement between such Allied World P/C Subsidiary and
the assuming reinsurer that would under any circumstances
reduce, limit, mitigate or otherwise affect any actual or
potential loss to the parties under any such Allied World
Reinsurance Contract, other than inuring contracts that are
explicitly defined in any such Allied World Reinsurance
Contract; (ii) for each such Allied World Reinsurance
Contract entered into, renewed or amended on or after
January 1, 2008, for which risk transfer is not reasonably
considered to be self-evident to the extent required by any
applicable provisions of Statement of Statutory Accounting
Principles (SSAP) No. 62, documentation concerning the
economic intent of the transaction and the risk transfer
analysis evidencing the proper accounting treatment is available
for review by the relevant Governmental Entities for such Allied
World P/C Subsidiary; (iii) the Allied World P/C Subsidiary
that is a party thereto, and to its knowledge, any other party
thereto, complies and has complied from and after
January 1, 2008 with any applicable requirements set forth
in SSAP No. 62; and (iv) such Allied World P/C
Subsidiary has and has had since January 1, 2008
appropriate controls in place to monitor the use of reinsurance
and comply with the provisions of SSAP No. 62.
3.28 Rating Agency. Since
December 31, 2010, no rating agency has imposed conditions
(financial or otherwise) on retaining any currently held rating
assigned to any Allied World P/C Subsidiary or, to the knowledge
of Allied World, stated to Allied World that it is considering
lowering any rating assigned to any Allied World P/C Subsidiary
or placing any Allied World P/C Subsidiary on an under
review status. As of the date of this Agreement, each U.S
Allied World P/C Subsidiary has the A.M. Best Company
rating set forth in Section 3.28 of the Allied World
Disclosure Schedule.
3.29 Reserves.
(a) The insurance policy reserves for claims, losses
(including incurred but not reported losses), loss adjustment
expenses (whether allocated or unallocated) and unearned premium
of each Allied World P/C Subsidiary contained in its Allied
World Statutory Statements (i) were determined in all
material respects in accordance with generally accepted
actuarial standards consistently applied (except as otherwise
noted in the financial statements and notes thereto included in
such financial statements) and (ii) satisfied the
requirements of all applicable Insurance Laws in all material
respects.
(b) Allied World has made available to Transatlantic true
and complete copies of all material actuarial reports prepared
by actuaries, independent or otherwise, from and after
January 1, 2008, with respect to the Allied World P/C
Subsidiaries, and all material attachments, addenda, supplements
and modifications thereto. There have been no actuarial reports
of a similar nature covering any Allied World P/C Subsidiary in
respect
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of any period subsequent to the latest period covered in such
actuarial reports. The information and data furnished by Allied
World and the Allied World Subsidiaries to its independent
actuaries in connection with the preparation of such actuarial
reports were accurate in all material respects for the periods
covered in such reports.
3.30 Risk-Based Capital. Allied
World has made available to Transatlantic true and complete
copies of all analyses and reports submitted by Allied World to
any insurance regulatory authority during the past twenty-four
(24) months relating to risk-based capital calculations
(Allied World Risk-Based Capital Reports).
The Allied World Risk-Based Capital Reports were true and
accurate in all material respects at the time of submission.
3.31 Insurance Issued by the Allied World P/C
Subsidiaries.
(a) All policies, binders, slips, certificates, and other
agreements of insurance issued or distributed by any Allied
World P/C Subsidiary in any jurisdiction (Insurance
Contracts) have been issued or distributed, to the
extent required by Law, on forms filed with and approved by all
applicable insurance departments, or not objected to by any such
insurance department within any period provided for objection,
and all such forms comply with applicable Laws. All premium
rates with respect to the Insurance Contracts, to the extent
required by Law, have been filed with and approved by all
applicable insurance departments or were not objected to by any
such insurance department within any period provided for
objection. All such premium rates comply with applicable Laws
and are within the amount permitted by such Laws. Each of Allied
World and each of the Allied World Subsidiaries is and has been
marketing, selling and issuing Insurance Contracts in compliance
in all material respects with all applicable Laws, all
applicable orders and directives of all insurance regulatory
authorities and all market conduct recommendations resulting
from market conduct or other examinations of insurance
regulatory authorities in the respective jurisdictions in which
such products have been marketed, issued or sold, have been
complied with in connection with the marketing and sale of
Insurance Contracts. All Insurance Contracts due and payable by
or on behalf of any Allied World P/C Subsidiary have in all
material respects been paid in accordance with the terms of the
Insurance Contracts under which they arose, except for such
benefits for which Allied World believes there is a reasonable
basis to contest payment.
(b) There are no unpaid claims or assessments made against
any Allied World P/C Subsidiary by any state insurance guaranty
associations or similar organizations in connection with such
associations insurance guarantee fund.
(c) All underwriting, management and administration
agreements entered into by any Allied World P/C Subsidiary are,
to the extent required by Law, in forms acceptable to all
applicable insurance departments or have been filed with and
approved by all applicable insurance departments or were not
objected to by any such insurance department within any period
provided for objection.
(d) All advertising, promotional, sales and solicitation
materials and all product illustrations used by any Allied World
P/C Subsidiary or any agent, broker, intermediary, manager or
producer employed or engaged by any Allied World P/C Subsidiary
of any Allied World P/C Subsidiary are in material compliance
with applicable Laws.
(e) Since December 31, 2010, (i) salaried
employees of Allied World and the Allied World Subsidiaries and,
to the knowledge of Allied World, each other Person, who, in
each of the foregoing cases, is performing the duties of
insurance producer or reinsurance intermediary for Allied World
and the Allied World Subsidiaries (collectively, Allied
World Agents), at the time such Allied World Agent
wrote, sold or produced business for or on behalf of Allied
World or any Allied World Subsidiary that requires a license,
was duly licensed and appointed as required by applicable Law,
in the particular jurisdiction in which such Allied World Agent
wrote, sold or produced business, and to the knowledge of Allied
World, no Allied World Agent is in violation of (or with or
without notice or lapse of time or both, would have violated)
any term or provision of any Law applicable to the writing,
sale, production or solicitation of insurance or other business
for or on behalf of Allied World or any Allied World Subsidiary,
except for such failures to be so licensed or such violations
which have been cured, which have been resolved or settled
through agreements with the
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applicable Governmental Entity, or which are barred by an
applicable statute of limitations, and (ii) each of the
agency agreements and appointments between the Allied World
Agents and Allied World and any Allied World Subsidiary, is
valid and binding and in full force and effect in accordance
with its terms, except as would not, individually or in the
aggregate, reasonably be expected to have an Allied World
Material Adverse Effect. As of the date of this Agreement, no
Allied World Agent individually accounting for 1% or more of the
total gross premiums of all Allied World Subsidiaries for the
year ended December 31, 2010 has notified Allied World or
any Allied World Subsidiary that such Allied World Agent will be
unable in any material respect or unwilling to continue its
relationship as an Allied World Agent with Allied World or any
Allied World Subsidiary within twelve (12) months after the
date hereof.
3.32 Other Allied World Insurance
Business. Neither Allied World nor any of its
Subsidiaries nor any of their respective salaried employees is
performing the duties of insurance producer or reinsurance
intermediary for any Person that is not an Affiliate of Allied
World.
3.33 Redomestication. The
contribution in kind, scheme of arrangement and related
transactions pursuant to which Allied World became the ultimate
parent of the Prior Allied World Parent on December 1, 2010
(the Redomestication) were conducted in
material compliance with all applicable Laws. The Prior Allied
World Parent, Allied World and the other parties to the
Redomestication had all necessary corporate power and authority
to effect the Redomestication.
3.34 No Other Representations and Warranties;
Disclaimer.
(a) Except for the representations and warranties made by
Allied World and Merger Sub in this Article III,
neither Allied World, Merger Sub nor any other Person makes any
express or implied representation or warranty with respect to
Allied World, Merger Sub or any of their respective Subsidiaries
or their respective businesses, operations, assets, liabilities,
condition (financial or otherwise) or prospects, and Allied
World and Merger Sub hereby disclaim any such other
representations or warranties. In particular, without limiting
the foregoing disclaimer, except for the representations and
warranties made by Allied World and Merger Sub in this
Article III, neither Allied World, Merger Sub nor
any other Person makes or has made any representation or
warranty to Transatlantic or any of its Affiliates or
Representatives with respect to (i) any financial
projection, forecast, estimate, budget or prospective
information relating to Allied World, Merger Sub, any of their
respective Subsidiaries or their respective businesses or
operations, or (ii) any oral or written information
presented to Transatlantic or any of its Affiliates or
Representatives in the course of its due diligence investigation
of Allied World and Merger Sub, the negotiation of this
Agreement or in the course of the transactions contemplated
hereby.
(b) Notwithstanding anything contained in this Agreement to
the contrary, Allied World and Merger Sub acknowledge and agree
that neither Transatlantic nor any other Person has made or is
making any representations or warranties whatsoever, express or
implied, beyond those expressly given by Transatlantic in
Article IV hereof, including any implied
representation or warranty as to the accuracy or completeness of
any information regarding Transatlantic furnished or made
available to Allied World, Merger Sub, or any of their
respective Affiliates or Representatives. Without limiting the
generality of the foregoing, Allied World and Merger Sub
acknowledge and agree that no representations or warranties are
made with respect to any projections, forecasts, estimates,
budgets or prospect information that may have been made
available to Allied World, Merger Sub or any of their respective
Affiliates or Representatives.
ARTICLE IV.
REPRESENTATIONS
AND WARRANTIES OF TRANSATLANTIC
Except as (x) disclosed in the Transatlantic SEC Documents
filed with or furnished to the SEC at least one
(1) Business Day prior to the date of this Agreement
(excluding disclosure contained in the risk factors
section or constituting forward-looking statements,
in each case, to the extent such disclosure is cautionary,
predictive or speculative in nature) or (y) set forth in
the disclosure letter delivered by Transatlantic to Allied World
on or prior to the date of this Agreement (the
Transatlantic Disclosure Schedule),
Transatlantic represents and warrants to Allied World as set
forth in this Article IV. For purposes of the
representations and
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warranties of Transatlantic contained herein, disclosure in any
section of the Transatlantic Disclosure Schedule of any facts or
circumstances shall be deemed to be disclosure of such facts or
circumstances with respect to all representations or warranties
by Transatlantic to which the relevance of such disclosure to
the applicable representation and warranty is reasonably
apparent on the face thereof. The inclusion of any information
in the Transatlantic Disclosure Schedule or other document
delivered by Transatlantic pursuant to this Agreement shall not
be deemed to be an admission or evidence of the materiality of
such item, nor shall it establish a standard of materiality for
any purpose whatsoever.
4.1 Corporate Organization.
(a) Transatlantic (i) is a corporation duly organized,
validly existing and in good standing under the laws of the
State of Delaware, (ii) has all organizational powers and
all material governmental licenses, authorizations, permits,
consents and approvals required to carry on its business as now
conducted and (iii) is duly qualified to do business as a
foreign corporation in each jurisdiction where such
qualification is necessary, except for such variances from the
matters set forth in any of clauses (ii) or (iii)
as would not, individually or in the aggregate, reasonably be
expected to have a Transatlantic Material Adverse Effect.
(b) True and complete copies of the Certificate of
Incorporation of Transatlantic, as amended through, and as in
effect as of, the date of this Agreement (the
Transatlantic Charter), and the Bylaws of
Transatlantic, as amended through, and as in effect as of, the
date of this Agreement (the Transatlantic
Bylaws), have previously been made available to Allied
World.
(c) Each Transatlantic Subsidiary (i) is duly
organized, validly existing and in good standing under the laws
of its jurisdiction of organization, (ii) is duly licensed
or qualified to do business in each jurisdiction in which the
nature of the business conducted by it or the character or
location of the properties and assets owned or leased by it
makes such licensing or qualification necessary, and
(iii) has all requisite corporate power and authority to
own or lease its properties and assets and to carry on its
business as now conducted, except for such variances from the
matters set forth in any of clauses (i), (ii) or
(iii) as would not, individually or in the aggregate,
reasonably be expected to have a Transatlantic Material Adverse
Effect.
4.2 Capitalization.
(a) Authorized and Issued Shares.
(i) As of the date of this Agreement, the authorized
capital stock of Transatlantic consists of
200,000,000 shares of Transatlantic Common Stock and
10,000,000 shares of preferred stock of Transatlantic, par
value $1.00 (the Transatlantic Preferred
Stock). As of the Measurement Date,
(i) 62,475,513 shares of Transatlantic Common Stock
and no shares of Transatlantic Preferred Stock were issued and
outstanding, (ii) 5,362,800 shares of Transatlantic
Common Stock were held in treasury,
(iii) 2,082,687 shares of Transatlantic Common Stock
were subject to outstanding Transatlantic RSUs,
(iv) 2,024,855 shares of Transatlantic Common Stock
were subject to outstanding Transatlantic Stock Options (of
which Transatlantic Stock Options to purchase an aggregate of
1,975,480 shares of Transatlantic Common Stock were
exercisable), (v) no shares of Transatlantic Common Stock
were subject to outstanding Transatlantic Restricted Shares and
(vi) no shares of Transatlantic Common Stock were subject
to Transatlantic SARs. Section 4.2 of the
Transatlantic Disclosure Schedule contains a complete and
correct list, as of the Measurement Date, of each outstanding
Transatlantic Stock Option, each outstanding Transatlantic RSU,
each outstanding Transatlantic Restricted Share and each
outstanding Transatlantic SAR, including, as applicable, the
holder, date of grant, exercise price (to the extent
applicable), vesting schedule and number of shares of
Transatlantic Common Stock subject thereto and each
Transatlantic Stock Plan.
(ii) As of the date of this Agreement, except for this
Agreement, Transatlantic Stock Options, Transatlantic RSUs,
Transatlantic Restricted Shares, and Transatlantic SARs, there
are not issued, reserved for issuance or outstanding, and there
are not any outstanding obligations of Transatlantic or any
Transatlantic Subsidiary to issue, deliver or sell, or cause to
be issued, delivered or sold, any Equity Equivalents of
Transatlantic or any Transatlantic Subsidiary. Except for
Forfeitures and Cashless Settlements in connection with the
Transatlantic Stock Options and Transatlantic Stock-Based
Awards,
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there are not any outstanding obligations of Transatlantic or
any of the Transatlantic Subsidiaries to directly or indirectly
redeem, repurchase or otherwise acquire any shares of capital
stock or voting securities of, other equity interests in or
Equity Equivalents of Transatlantic or any Transatlantic
Subsidiary. Neither Transatlantic nor any of the Transatlantic
Subsidiaries is a party to any voting agreement with respect to
the voting of any capital stock or voting securities of, or
other equity interests in, Transatlantic. All outstanding shares
of capital stock of Transatlantic have been, and all shares that
may be issued pursuant to any employee stock option or other
compensation plan or arrangement or warrant will be, when issued
in accordance with the respective terms thereof, duly authorized
and validly issued and fully paid. The consummation of the
Merger and the other transactions contemplated hereby or taken
in contemplation of this Agreement will not, as of the Effective
Time, trigger any preemptive rights of any Person with respect
to the capital stock of Transatlantic, whether by law or
otherwise. With respect to the Transatlantic Stock Options,
(A) each grant of a Transatlantic Stock Option was duly
authorized no later than the Grant Date by all necessary
corporate action, including, as applicable, approval by the
Transatlantic Board, or a committee thereof, or a duly
authorized delegate thereof, and any required approval by the
stockholders of Transatlantic by the necessary number of votes
or written consents, and the award agreement governing such
grant, if any, was duly executed and delivered by each party
thereto within a reasonable time following the Grant Date,
(B) each such grant was made in accordance with the terms
of the applicable Transatlantic Stock Plan, the Exchange Act and
all other applicable Law, including the rules of the NYSE,
(C) the per share exercise price of each Transatlantic
Stock Option was not less than the fair market value of a share
of Transatlantic Common Stock on the applicable Grant Date,
(D) each such grant was properly accounted for in all
material respects in accordance with GAAP in the financial
statements (including the related notes) of Transatlantic and
disclosed in Transatlantics filings with the SEC in
accordance with the Exchange Act and all other applicable Laws,
and (E) no amendments, modifications or other changes have
been made to any such grants after the Grant Date.
(b) As of the date of this Agreement, no bonds, debentures,
notes or other indebtedness of Transatlantic having the right to
vote on any matters on which stockholders may vote are issued or
outstanding.
(c) All of the issued and outstanding shares of capital
stock or other equity ownership interests of each
significant subsidiary (as such term is defined
under
Regulation S-X
promulgated by the SEC) of Transatlantic and of each
Transatlantic P/C Subsidiary are owned by Transatlantic,
directly or indirectly, free and clear of any material Liens
other than Permitted Liens, and free of any restriction on the
right to vote, sell or otherwise dispose of such capital stock
or other equity ownership interest (other than restrictions
under applicable securities Laws), and all of such shares or
equity ownership interests are duly authorized and validly
issued and are fully paid, nonassessable and free of preemptive
rights. Except for the capital stock or other equity ownership
interests of the Transatlantic Subsidiaries, as of the date of
this Agreement, Transatlantic does not beneficially own,
directly or indirectly, any capital stock, membership interest,
partnership interest, joint venture interest or other equity
interest in any Person.
4.3 Corporate Authorization.
(a) Transatlantic has all necessary corporate power and
authority to execute and deliver this Agreement, to perform its
obligations hereunder and to consummate the transactions to
which it is a party contemplated hereby subject to obtaining the
Transatlantic Requisite Stockholder Vote. The execution,
delivery and performance by Transatlantic of this Agreement and
the consummation by Transatlantic of the transactions to which
it is a party contemplated hereby have been duly and validly
authorized and approved by the Transatlantic Board. The
Transatlantic Board has, by resolutions duly adopted,
unanimously determined that this Agreement and the transactions
contemplated hereby are in the best interests of Transatlantic
and its stockholders, has approved and adopted this Agreement
and the plan of merger herein providing for the Merger, upon the
terms and subject to the conditions set forth herein, approved
the execution, delivery and performance by Transatlantic of this
Agreement and the consummation of the transactions to which it
is a party contemplated hereby, upon the terms and subject to
the conditions set forth herein and has resolved, subject to
Section 5.5, to recommend approval of each of the
matters constituting the Transatlantic Requisite Stockholder
Vote by the stockholders of Transatlantic (such recommendation,
the Transatlantic Board
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Recommendation) and that such matters and
recommendation be submitted for consideration at a duly held
meeting of the stockholders of Transatlantic for a vote for such
purposes (the Transatlantic Stockholders
Meeting). Except solely in the case of the Merger, for
the adoption of this Agreement by the affirmative vote of the
holders of a majority of the shares of Transatlantic Common
Stock (the Transatlantic Requisite Stockholder
Vote), no other corporate proceedings on the part of
Transatlantic or any other vote by the holders of any class or
series of capital stock of Transatlantic are necessary to
approve or adopt this Agreement or to consummate the
transactions contemplated hereby (except for the filing of the
Certificate of Merger and the Restated Articles, as required by
applicable Law).
(b) This Agreement has been duly executed and delivered by
Transatlantic and, assuming due power and authority of, and due
execution and delivery by, the other parties hereto, constitutes
a valid and binding obligation of Transatlantic, enforceable
against Transatlantic in accordance with its terms, subject to
the Bankruptcy and Equity Exception.
4.4 Governmental Authorization. The
execution, delivery and performance by Transatlantic of this
Agreement and the consummation by Transatlantic of the
transactions to which it is a party contemplated hereby require
at or prior to the Closing no consent or approval by, or filing
with, or notification to any Governmental Entity, other than
(a) the filing of the Certificate of Merger with the
Secretary of State of the State of Delaware and appropriate
documents with the relevant authorities of other states in which
Transatlantic is qualified to do business, (b) the filing
of the Restated Articles with the appropriate Swiss Governmental
Entities, (c) compliance with any applicable requirements
of the HSR Act and any other Antitrust Law, (d) compliance
with any applicable requirements of the Securities Act, the
Exchange Act, any other applicable U.S. federal or state
securities Laws or blue sky Laws, and any foreign
securities Laws, (e) compliance with any applicable
requirements of the NYSE, (f) approvals or filings under
all applicable Insurance Laws as set forth in
Section 4.4 of the Transatlantic Disclosure Schedule
(the Transatlantic Insurance Approvals),
(g) the Allied World Insurance Approvals (assuming the
accuracy and completeness of Section 3.4(f)),
(h) those consents, approvals or filings as may be required
as a result of the business or identity of Allied World or any
of its Affiliates (assuming the accuracy and completeness of
Section 3.4(f)) and (i) any other consents,
approvals or filings the failure of which to be obtained or made
would not, individually or in the aggregate, reasonably be
expected to have a Transatlantic Material Adverse Effect or
prevent or materially delay the consummation of the transactions
contemplated by this Agreement.
4.5 Non-Contravention. The
execution, delivery and performance by Transatlantic of this
Agreement do not, and the consummation of the transactions to
which it is a party contemplated hereby will not,
(a) violate or conflict with or result in any breach of any
provision of the Organizational Documents of Transatlantic or
any of its Subsidiaries; (b) assuming receipt of the
Transatlantic Requisite Stockholder Vote and compliance with the
matters referred to in Section 3.4 and
Section 4.4 (and assuming the accuracy and
completeness of Section 3.4(f)), violate or conflict
with any provision of any applicable Law; (c) violate or
conflict with or result in any breach or constitute a default,
or an event that, with or without notice or lapse of time or
both, would constitute a default under, or cause the
termination, cancellation, acceleration or other change of any
right or obligation or the loss of any benefit to which
Transatlantic or any of its Subsidiaries is entitled, or require
consent by any Person under, any loan or credit agreement, note,
mortgage, indenture, lease, Transatlantic Benefit Plan, or
Transatlantic Material Contract; or (d) subject to the
receipt of the Transatlantic Insurance Approvals (and assuming
the accuracy and completeness of Section 3.4(f)),
result in the creation or imposition of any Lien (other than
Permitted Liens) on any asset of Transatlantic or any of its
Subsidiaries, except in the case of clause (b),
(c) or (d), as would not, individually or in the
aggregate, reasonably be expected to have a Transatlantic
Material Adverse Effect or prevent or materially delay the
consummation of the transactions contemplated by this Agreement.
4.6 Transatlantic SEC Filings, Etc.
(a) Transatlantic has timely filed all reports, schedules,
forms, registration statements and other documents required to
be filed by Transatlantic with the SEC since January 1,
2008 (together with any documents furnished during such period
by Transatlantic to the SEC on a voluntary basis on Current
Reports on
Form 8-K
and any reports, schedules, forms, registration statements and
other documents filed with the
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SEC subsequent to the date hereof, collectively, the
Transatlantic SEC Documents). Each of the
Transatlantic SEC Documents, as amended prior to the date of
this Agreement, complied (and each Transatlantic SEC Document
filed subsequent to the date hereof will comply) in all material
respects with, to the extent in effect at the time of filing or
furnishing, the requirements of the Securities Act and the
Exchange Act applicable to such Transatlantic SEC Documents, and
none of the Transatlantic SEC Documents when filed or furnished
or, if amended prior to the date of this Agreement, as of the
date of such amendment, contained, or with respect to the
Transatlantic SEC Documents filed subsequent to the date hereof,
will contain, any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary
in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. To the
knowledge of Transatlantic, there are no material unresolved
comments received from the SEC staff with respect to the
Transatlantic SEC Documents on or prior to the date hereof. To
the knowledge of Transatlantic, none of the Transatlantic SEC
Documents filed on or prior to the date hereof is subject to
ongoing SEC review or investigation.
(b) Transatlantic maintains a system of internal control
over financial reporting (within the meaning of
Rules 13a-15(f)
and
15d-15(f) of
the Exchange Act) sufficient to provide reasonable assurances
regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in
accordance with GAAP. Transatlantic (i) maintains
disclosure controls and procedures (within the meaning of
Rules 13a-15(e)
and
15d-15(e) of
the Exchange Act) designed to ensure that information required
to be disclosed by Transatlantic in the reports that it files
and submits under the Exchange Act is recorded, processed,
summarized and reported within the time periods specified in the
SECs rules and forms, including that information required
to be disclosed by Transatlantic in the reports that it files
and submits under the Exchange Act is accumulated and
communicated to management of Transatlantic, as appropriate, to
allow timely decisions regarding required disclosure, and
(ii) has disclosed, based upon the most recent (prior to
the date of this Agreement) evaluation by the chief executive
officer and chief financial officer of Transatlantic of
Transatlantics internal control over financial reporting,
to its auditors and the audit committee of the Transatlantic
Board (A) all significant deficiencies and material
weaknesses in the design or operation of Transatlantics
internal control over financial reporting which are reasonably
likely to adversely affect in any material respect its ability
to record, process, summarize and report financial data and
(B) any fraud, whether or not material, that involves
management or other employees who have a significant role in
Transatlantics internal control over financial reporting.
Transatlantic has made available to Allied World true and
complete copies of any such disclosure contemplated by
clauses (A) and (B) made by management to
Transatlantics independent auditors and the audit
committee of the Transatlantic Board since January 1, 2008.
(c) Neither Transatlantic nor any of its Subsidiaries is a
party to, or has any commitment to become a party to, any joint
venture, off-balance sheet partnership or any similar Contract
(including any Contract relating to any transaction or
relationship between or among Transatlantic and any of its
Subsidiaries, on the one hand, and any unconsolidated Affiliate,
including any structured finance, special purpose or limited
purpose entity, on the other hand, or any off-balance
sheet arrangement (as defined in Item 303(a) of
Regulation S-K
promulgated by the SEC)), where the result, purpose or intended
effect of such Contract is to avoid disclosure of any material
transaction involving, or material liabilities of, Transatlantic
or any of its Subsidiaries in the Transatlantic SEC Documents.
(d) Transatlantic is in compliance in all material respects
with (i) the provisions of SOX and (ii) the rules and
regulations of the NYSE, in each case, that are applicable to
Transatlantic.
(e) Neither Transatlantic nor any Transatlantic Subsidiary,
nor, to the knowledge of Transatlantic, any director, officer,
agent, employee or Affiliate of Transatlantic or any
Transatlantic Subsidiary is aware of any action, or any
allegation made by any Governmental Entity of any action, or has
taken any action, directly or indirectly, (i) that would
constitute a violation by such Persons of the FCPA, including
making use of the mails or any means or instrumentality of
interstate commerce corruptly in furtherance of an offer,
payment, promise to pay or authorization of the payment of any
money, or other property, gift, promise to give, or
authorization of the giving of anything of value to any
foreign official (as such term is defined in the
FCPA) or any foreign political party or official thereof or any
candidate for foreign political office, in contravention of the
FCPA, or (ii) that would constitute an offer to pay, a
promise to pay or a payment of money or anything
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else of value, or an authorization of such offer, promise or
payment, directly or indirectly, to any employee, agent or
representative of another company or entity in the course of
their business dealings with Transatlantic or any Transatlantic
Subsidiary, in order to unlawfully induce such person to act
against the interest of his or her employer or principal. There
is no current, pending, or, to the knowledge of Transatlantic,
threatened charges, proceedings, investigations, audits, or
complaints against Transatlantic or any Transatlantic Subsidiary
or, to the knowledge of Transatlantic, any director, officer,
agent, employee or Affiliate of Transatlantic with respect to
the FCPA or any other anti-corruption Law or regulation.
4.7 Transatlantic Financial
Statements. The consolidated financial statements
(including all related notes thereto) of Transatlantic included
in the Transatlantic SEC Documents (if amended, as of the date
of the last such amendment filed prior to the date of this
Agreement) fairly present in all material respects the
consolidated financial position of Transatlantic and its
consolidated Subsidiaries, as at the respective dates thereof,
and the consolidated results of their operations, the changes in
stockholders equity and their consolidated cash flows for
the respective periods then ended (subject, in the case of the
unaudited statements, to normal year-end audit adjustments and
to the absence of information or notes not required by GAAP to
be included in interim financial statements) and were prepared,
in all material respects, in accordance with, and complied, in
all material respects, with GAAP during the periods involved
(except, in the case of the unaudited statements, as permitted
by the SEC) applied on a consistent basis (except as may be
indicated therein or in the notes thereto).
4.8 Form S-4. The
information supplied or to be supplied by Transatlantic
specifically for inclusion in the
Form S-4
shall not, at the time that the
Form S-4
is declared effective by the SEC, contain any untrue statement
of a material fact or omit to state any material fact required
to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which
they were made, not misleading, except that no representation or
warranty is made by Transatlantic with respect to statements
made therein based on information supplied by or on behalf of
Allied World or Merger Sub specifically for inclusion in the
Form S-4.
The Joint Proxy Statement/Prospectus will not, at the date the
Joint Proxy Statement/Prospectus is first mailed to the
stockholders of Transatlantic and at the time of the
Transatlantic Stockholders Meeting, contain any untrue statement
of a material fact or omit to state any material fact required
to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which
they were made, not misleading, except that, in each case, no
representation or warranty is made by Transatlantic with respect
to statements made therein based on information supplied by or
on behalf of Allied World or Merger Sub specifically for
inclusion in the Joint Proxy Statement/Prospectus.
4.9 Absence of Certain Changes or Events.
(a) Since December 31, 2010, no event or events or
development or developments have occurred that have had or would
reasonably be expected to have, individually or in the
aggregate, a Transatlantic Material Adverse Effect.
(b) Except in connection with the execution and delivery of
this Agreement and the transactions contemplated by this
Agreement, from December 31, 2010 through the date of this
Agreement, Transatlantic and the Transatlantic Subsidiaries have
carried on their respective businesses in all material respects
in the ordinary course of business consistent with past practice.
4.10 No Undisclosed Material
Liabilities. There are no material liabilities or
obligations of Transatlantic or any of its Subsidiaries of any
nature, whether accrued, contingent, absolute, determined,
determinable or otherwise, whether or not required by GAAP to be
reflected on a consolidated balance sheet of Transatlantic and
its Subsidiaries other than: (a) liabilities or obligations
reflected or reserved against in Transatlantics
consolidated balance sheet as of March 31, 2011 included in
the Transatlantic SEC Documents or in the notes thereto and
(b) liabilities or obligations that were incurred since
March 31, 2011 in the ordinary course of business
consistent with past practice.
4.11 Compliance with Laws.
(a) Since January 1, 2008, (i) the business and
operations of Transatlantic and its Subsidiaries have been
conducted in compliance with all applicable Laws (including
Insurance Laws) and (ii) Transatlantic has
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complied with the applicable listing and corporate governance
rules and regulations of the NYSE except, in each case, where
the failure to so conduct such business and operations or comply
with such rules and regulations would not, individually or in
the aggregate, reasonably be expected to have a Transatlantic
Material Adverse Effect, or prevent or materially delay the
consummation of the transactions contemplated by this Agreement.
(b) All of the Transatlantic Permits of each Transatlantic
P/C Subsidiary conducting insurance operations are in full force
and effect in accordance with their terms and there is no
proceeding or investigation to which Transatlantic or any
Transatlantic Subsidiary is subject before a Governmental Entity
that is pending or threatened in writing that would reasonably
be expected to result in the revocation, failure to renew or
suspension of, or placement of a restriction on, any such
Transatlantic Permits, except where the failure to be in full
force and effect in accordance with their terms, revocation,
failure to renew, suspension or restriction would not,
individually or in the aggregate, reasonably be expected to have
a Transatlantic Material Adverse Effect, or prevent or
materially delay the consummation of the transactions
contemplated by this Agreement.
(c) There is no proceeding to which Transatlantic or any
Transatlantic Subsidiary is subject before any Governmental
Entity pending or threatened in writing regarding whether any of
the Transatlantic Subsidiaries has violated any applicable Laws
(including Insurance Laws), nor, any investigation by any
Governmental Entity pending or threatened in writing with
respect to possible violations of any applicable Laws, which, if
determined or resolved adversely against Transatlantic or any
Transatlantic Subsidiary, would, individually or in the
aggregate, reasonably be expected to be material to
Transatlantic and its Subsidiaries, taken as a whole, or would
reasonably be expected to prevent or materially delay the
consummation of the transactions contemplated by this Agreement.
Since January 1, 2008, each Transatlantic P/C Subsidiary
has timely filed all material reports, registrations, statements
and certifications, together with any amendments required to be
made with respect thereto, required to be filed by it with any
applicable Insurance Regulator or such failure to file has been
remedied.
4.12 Litigation. There is no
action, suit, investigation, claim, complaint, demand, summons,
cease and desist letter, subpoena, Injunction, notice of
violation or other proceeding pending against or threatened in
writing against Transatlantic or any of its Subsidiaries or
pending against or threatened in writing against any present or
former officer, director or employee of Transatlantic or any
Transatlantic Subsidiary in connection with which Transatlantic
or any Transatlantic Subsidiary has an indemnification
obligation, before any Governmental Entity (other than insurance
and reinsurance claims litigation or arbitration arising in the
ordinary course of business), which, if determined or resolved
adversely in accordance with the plaintiffs or
claimants demands, would, individually or in the
aggregate, reasonably be expected to be material to
Transatlantic and its Subsidiaries, taken as a whole, or would
reasonably be expected to prevent or materially delay the
consummation of the transactions contemplated hereby. There is
no Order outstanding against Transatlantic or any of its
Subsidiaries which would, individually or in the aggregate,
reasonably be expected to be material to Transatlantic and its
Subsidiaries, taken as a whole, or would reasonably be expected
to prevent or materially delay the consummation of the
transactions contemplated hereby.
4.13 Title to Properties; Absence of
Liens. Section 4.13 of the
Transatlantic Disclosure Schedule sets forth a true and complete
description (including address, and for each lease, sublease and
license, and all amendments, extensions, renewals, guaranties,
modifications, supplements or other agreements, if any, with
respect thereto) of all real property leased, subleased or
licensed by Transatlantic or any of its Subsidiaries
(collectively, the Transatlantic Leased Real
Properties; and the leases, subleases and licenses
with respect thereto, collectively, the Transatlantic
Real Property Leases). Transatlantic has delivered or
otherwise made available to Allied World true, correct and
complete copies of the Transatlantic Real Property Leases,
together with all amendments, extensions, renewals, guaranties,
modifications, supplements or other agreements, if any, with
respect thereto. Each of the Transatlantic Real Property Leases
is in full force and effect. Transatlantic or one of its
Subsidiaries has a valid, binding and enforceable leasehold or
subleasehold interest (or license, as applicable) in each
Transatlantic Leased Real Property, in each case as to such
leasehold or subleasehold interest (or license, as applicable),
free and clear of all Liens (other than Permitted Liens).
Neither Transatlantic nor any of its Subsidiaries owns any real
property or any interests in real property.
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4.14 Opinion of Financial
Advisor. The Transatlantic Board has received the
opinion of Moelis & Co. LLC
(Moelis), dated as of the date of this
Agreement and addressed to the Transatlantic Board, to the
effect that, as of such date and based upon and subject to the
limitations, qualifications and assumptions set forth therein,
the Exchange Ratio is fair, from a financial point of view, to
the holders of shares of Transatlantic Common Stock (the
Moelis Fairness Opinion). Transatlantic has
been authorized by Moelis to permit the inclusion of the Moelis
Fairness Opinion and references thereto in the Joint Proxy
Statement/Prospectus, subject to prior review and consent by
Moelis.
4.15 Taxes.
(a) All material Tax Returns required by applicable Law to
be filed with any Taxing Authority by, or on behalf of,
Transatlantic or any of its Subsidiaries have been duly filed
when due (including extensions) in accordance with all
applicable Laws, and all such Tax Returns are true, correct and
complete in all material respects.
(b) Transatlantic and each of its Subsidiaries has duly and
timely paid or has duly and timely withheld and remitted to the
appropriate Taxing Authority all material Taxes due and payable,
or, where payment is not yet due, has established in accordance
with the applicable accounting standard an adequate accrual for
all material Taxes on the most recent financial statements
contained in the Transatlantic SEC Documents and on the
Transatlantic Statutory Statements.
(c) There is no claim, audit, action, suit, request for
written ruling, proceeding or investigation pending or
threatened in writing against or with respect to Transatlantic
or any of its Subsidiaries in respect of any Tax or Tax Return
which (except in the case of a request for a written ruling) if
determined adversely would, individually or in the aggregate, be
expected to result in a material Tax deficiency.
(d) Transatlantic and each of its Subsidiaries has withheld
all material amounts required to have been withheld by it in
connection with amounts paid or owed to any employee,
independent contractor, creditor, shareholder or any other third
party; such withheld amounts were either duly paid to the
appropriate Taxing Authority or set aside in accounts for such
purpose. Transatlantic and each of its Subsidiaries has reported
such withheld amounts to the appropriate Taxing Authority and to
each such employee, independent contractor, creditor,
shareholder or any other third party, as required under
applicable Law.
(e) Neither Transatlantic nor any of its Subsidiaries is
liable for any Taxes of any Person (other than Transatlantic and
its Subsidiaries) as a result of being (i) a transferee or
successor of such Person, (ii) a member of an affiliated,
consolidated, combined or unitary group that includes such
Person as a member or (iii) a party to a tax sharing, tax
indemnity or tax allocation agreement or any other agreement to
indemnify such Person.
(f) Neither Transatlantic nor any of its Subsidiaries shall
be required to include any item of income in, or exclude any
item of deduction from, taxable income for any period (or
portion thereof) ending after the Closing Date, as a result of
(1) any change in method of accounting for a taxable period
ending on or prior to the Closing Date under Section 481 of
the Code (or any corresponding provision of state, local or
foreign Law), (2) closing agreement as
described in Section 7121 of the Code (or any corresponding
or similar provision of state, local or foreign Tax Law)
executed on or prior to the Closing Date, (3) intercompany
transaction or excess loss account described in Treasury
Regulations under Section 1502 of the Code (or any
corresponding or similar provision of state, local or foreign
Tax Law), (4) installment sale or open transaction made on
or prior to the Closing Date, or (5) prepaid amount
received on or prior to the Closing Date.
(g) Neither Transatlantic nor any of its Subsidiaries has
participated or engaged in any reportable
transaction within the meaning of Treasury Regulations
Section 1.6011-4
(or any corresponding or similar provision of state, local or
foreign Tax Law). Neither Transatlantic nor any of its
Subsidiaries is a party to any understanding or arrangement
described in Section 6662(d)(2)(C)(ii) of the Code or
Treasury Regulations
Section 1.6011-4(b)
or is a material advisor as defined in Section 6111(b) of
the Code.
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(h) Neither Transatlantic nor any of its Subsidiaries has
been informed by any Taxing Authority in any jurisdiction in
which it does not file a Tax Return that it may be required to
file a Tax Return in such jurisdiction.
(i) Neither Transatlantic nor any of its Subsidiaries has
distributed stock of another corporation, or has had its stock
distributed by another corporation, in a transaction that was
governed, or purported or intended to be governed or described,
in whole or in part, by Section 355 or
Section 368(a)(1)(D) of the Code.
4.16 Employee Benefit Plans.
(a) Section 4.16(a) of the Transatlantic
Disclosure Schedule sets forth as of the date of this Agreement
a true and complete list of each material employee benefit
plan (within the meaning of Section 3(3) of ERISA),
multiemployer plans within the meaning of ERISA
Section 3(37), and all material stock purchase, stock
option, severance, employment,
change-in-control,
fringe benefit, bonus, incentive, deferred compensation and all
other employee benefit plans, agreements, programs, policies or
other arrangements, whether or not subject to ERISA (including
any funding mechanism therefor now in effect or required in the
future as a result of the transactions contemplated by this
Agreement or otherwise), whether formal or informal, written,
legally binding or not, under which any employee or former
employee of Transatlantic or its Subsidiaries has any present or
future right to benefits or Transatlantic or its Subsidiaries
has had or has any present or future liability (each, a
Transatlantic Benefit Plan). With respect to
each such Transatlantic Benefit Plan, Transatlantic has made
available to Allied World a true and complete copy of such
Transatlantic Benefit Plan, if written, or a description of the
material terms of such Transatlantic Benefit Plan if not
written, and to the extent applicable, (i) all trust
agreements, Insurance Contracts or other funding arrangements;
(ii) the most recent actuarial and trust reports for both
ERISA funding and financial statement purposes; (iii) the
most recent Form 5500 with all attachments required to have
been filed with the IRS or the Department of Labor or any
similar reports filed with any comparable Governmental Entity in
any
non-U.S. jurisdiction
having jurisdiction over any Transatlantic Benefit Plan and all
schedules thereto; (iv) the most recent IRS determination
or opinion letter; and (v) all current summary plan
descriptions.
(b) (i) Each Transatlantic Benefit Plan has been maintained
in all material respects in accordance with its terms and the
requirements of applicable Law, (ii) each of Transatlantic
and its Subsidiaries has performed all material obligations
required to be performed by it under any Transatlantic Benefit
Plan and, to the knowledge of Transatlantic, is not in any
material respect in default under or in violation of any
Transatlantic Benefit Plan and (iii) no action (other than
claims for benefits in the ordinary course) is pending or
threatened in writing with respect to any Transatlantic Benefit
Plan by any current or former employee, officer or director of
Transatlantic or any of its Subsidiaries that would reasonably
be expected to have a Transatlantic Material Adverse Effect.
(c) Each Transatlantic Benefit Plan that is intended to be
qualified under Section 401(a) of the Code has received a
determination or opinion letter from the IRS that it is so
qualified and each related trust that is intended to be exempt
from federal income taxation under Section 501(a) of the
Code has received a determination or opinion letter from the IRS
that it is so exempt and, to the knowledge of Transatlantic, no
fact or event has occurred since the date of such letter or
letters from the IRS that would reasonably be expected to
adversely affect the qualified status of any such Transatlantic
Benefit Plan or the exempt status of any such trust.
(d) No liability under Subtitle C or D of Title IV of
ERISA has been or is reasonably expected to be incurred by
Transatlantic or any of its Subsidiaries with respect to any
ongoing, frozen or terminated single-employer plan,
within the meaning of Section 4001(a)(15) of ERISA,
currently or formerly maintained by any of them, or the
single-employer plan of any entity which is considered one
employer with Transatlantic under Section 4001 of ERISA or
Section 414 of the Code (a Transatlantic ERISA
Affiliate). Transatlantic and its Subsidiaries have no
liability (contingent or direct) with respect to any
multiemployer plan under Subtitle E of Title IV of ERISA
(regardless of whether based on contributions of a Transatlantic
ERISA Affiliate) and no such liability is reasonably expected to
be incurred by Transatlantic or its Subsidiaries. No notices
have been required to be sent to participants and beneficiaries
or to the PBGC under Section 302 of ERISA or
Section 412 or Section 430 of the Code.
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(e) All material contributions required to be made under
each Transatlantic Benefit Plan, as of the date hereof, have
been timely made. Neither any Transatlantic Benefit Plan nor any
single-employer plan of a Transatlantic ERISA Affiliate has
failed to satisfy the minimum funding standard within the
meaning of Section 412 of the Code or Section 302 of
ERISA. It is not reasonably anticipated that any Transatlantic
Benefit Plan is, or is expected to be, in at-risk
status (as defined in Section 430 of the Code or
Section 303 of ERISA). Transatlantic has no liability
pursuant to Section 4069 of ERISA.
(f) Neither Transatlantic nor any of its Subsidiaries has
any material liability in respect of post-retirement health,
medical or life insurance benefits for retired, former or
current employees of Transatlantic or its Subsidiaries, except
as required by applicable Law. Transatlantic has reserved the
right to amend, terminate or modify at any time all
Transatlantic Benefit Plans providing for retiree health or life
insurance coverage or other retiree death benefits, and there
have been no communications to employees or former employees
which could reasonably be interpreted to promise or guarantee
such employees or former employees retiree health or life
insurance or other retiree death benefits on a permanent basis.
(g) Any arrangement of Transatlantic or any of its
Subsidiaries that is subject to Section 409A of the Code
was administered in reasonable, good faith compliance with the
requirements of Section 409A through December 31,
2008, and all arrangements of Transatlantic or any of its
Subsidiaries that are subject to Section 409A, provide for
payment after December 31, 2008 and were in existence on
such date have been amended to comply with the requirements of
the final regulations under Section 409A, in each case
except as would not, individually or in the aggregate,
reasonably be expected to have a Transatlantic Material Adverse
Effect. Neither Transatlantic nor any of its Subsidiaries has
any obligation to provide any
gross-up
payment to any individual with respect to any income Tax,
additional Tax, excise Tax or interest charge imposed pursuant
to Section 409A or 4999 of the Code.
(h) Except as set forth in Section 4.16(h) of
the Transatlantic Disclosure Schedule, the consummation of the
transactions contemplated hereby to which Transatlantic is a
party, will not, either alone or in combination with another
event, (i) entitle any current or former director, officer
or employee of Transatlantic or of any of its Subsidiaries to
severance pay, unemployment compensation or any other payment;
(ii) result in any payment becoming due, accelerate the
time of payment or vesting, or increase the amount of
compensation due to any such director, officer or employee;
(iii) result in any forgiveness of indebtedness, trigger
any funding obligation under any Transatlantic Benefit Plan or
impose any restrictions or limitations on Transatlantics
rights to administer, amend or terminate any Transatlantic
Benefit Plan; or (iv) result in any payment (whether in
cash or property or the vesting of property) to any
disqualified individual (as such term is defined in
Treasury Regulations
Section 1.280G-1)
that could reasonably be expected, individually or in
combination with any other such payment, to constitute an
excess parachute payment (as defined in
Section 280G(b)(1) of the Code).
4.17 Employees, Labor Matters.
(a) Neither Transatlantic nor any of its Subsidiaries is a
party to or bound by any collective bargaining agreement, and
there are no labor unions or other organizations representing,
purporting to represent or, to the knowledge of Transatlantic,
attempting to represent any employees of Transatlantic or any of
its Subsidiaries in their capacity as such.
(b) Since January 1, 2008, there has not occurred or
been threatened in writing any material strike, slowdown, work
stoppage, concerted refusal to work overtime or other similar
labor activity or union organizing campaign with respect to any
employees of Transatlantic or any of its Subsidiaries. There are
no labor disputes subject to any formal grievance procedure,
arbitration or litigation and there is no representation
petition pending or threatened in writing with respect to any
employee of Transatlantic or any of its Subsidiaries.
(c) Transatlantic and its Subsidiaries have been in
compliance with all applicable Laws relating to employment of
labor, including all applicable Laws relating to wages, hours,
collective bargaining, employment discrimination, civil rights,
safety and health, workers compensation, pay equity,
classification of
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employees, and the collection and payment of withholding
and/or
social security Taxes, except where noncompliance would not
reasonably be expected to result in a Transatlantic Material
Adverse Effect.
4.18 Environmental Matters. Except
as would not, individually or in the aggregate, reasonably be
expected to have a Transatlantic Material Adverse Effect,
(a) neither Transatlantic nor any of its Subsidiaries has
received any written notice, demand, request for information,
citation, summons or Order, and no complaint has been filed, no
penalty has been assessed, no liability has been incurred, and
no investigation, action, written claim, suit or proceeding is
pending or is threatened in writing by any Governmental Entity
or other Person with respect to or arising out of any applicable
Environmental Law and (b) no release of a
hazardous substance (as those terms are defined in
the Comprehensive Environmental Response, Compensation, and
Liability Act, 42 U.S.C. § 9601 et seq.)
has occurred at, on, above, under or from any properties
currently or formerly owned, leased, operated or used by
Transatlantic, any Transatlantic Subsidiary or any predecessors
in interest that are reasonably likely to result in any cost,
liability or obligation of Transatlantic or any Transatlantic
Subsidiary under any applicable Environmental Law.
4.19 Intellectual Property.
(a) Each of Transatlantic and its Subsidiaries owns or
otherwise has a valid and enforceable license or right to use
material Intellectual Property used in the respective businesses
of Transatlantic and each of its Subsidiaries as currently
conducted; and all patents and all registrations for trademarks,
service marks and copyrights owned by Transatlantic or its
Subsidiaries are valid and subsisting, except to the extent
Transatlantic or its Subsidiaries have determined to abandon
such patents or registrations for trademarks, service marks and
copyrights in the exercise of their reasonable business judgment.
(b) There are no claims pending or threatened in writing by
any Person alleging that Transatlantic or its Subsidiaries or
their respective businesses as conducted on the date of this
Agreement infringes the Intellectual Property of any Person,
which, if determined or resolved adversely against Transatlantic
or any Transatlantic Subsidiary, would, individually or in the
aggregate, reasonably be expected to be material to
Transatlantic and its Subsidiaries, taken as a whole. To the
knowledge of Transatlantic, no Person is infringing the
Intellectual Property owned by Transatlantic or any of its
Subsidiaries, which infringement would, individually or in the
aggregate, reasonably be expected to be material to
Transatlantic and its Subsidiaries, taken as a whole.
(c) Transatlantic and its Subsidiaries have established and
are in compliance with commercially reasonable security programs
that are sufficient to protect (i) the security,
confidentiality and integrity of transactions executed through
their computer systems, including encryption
and/or other
security protocols and techniques when appropriate; and
(ii) the security, confidentiality and integrity of all
confidential or proprietary data, except, in each case, which
would not, individually or in the aggregate, reasonably be
expected to have a Transatlantic Material Adverse Effect.
Neither Transatlantic nor any of its Subsidiaries has suffered a
material security breach with respect to their data or systems,
and neither Transatlantic nor any of its Subsidiaries has
notified customers or employees of any information security
breach. Transatlantic and its Subsidiaries take reasonable steps
to protect their material trade secrets and none of such trade
secrets have been disclosed to any Person except pursuant to
written and enforceable confidentiality obligations.
4.20 Transatlantic Material Contracts.
(a) Transatlantic has made available to Allied World a true
and complete copy of each Contract to which Transatlantic or any
of its Subsidiaries is a party as of the date of this Agreement
or by which Transatlantic, any of its Subsidiaries or any of its
respective properties or assets is bound as of the date of this
Agreement, which: (i) is a material contract
within the meaning of Item 601(b)(10) of
Regulation S-K
promulgated by the SEC (each, a Transatlantic Material
Contract); (ii) contains covenants of
Transatlantic or any of its Subsidiaries not to compete or
engage in any line of business or compete with any Person in any
geographic area; (iii) pursuant to which Transatlantic or
any of its Subsidiaries has entered into a partnership or joint
venture with any other Person (other than Transatlantic or any
of its Subsidiaries); (iv) relates to or evidences
indebtedness for borrowed money or any guarantee of indebtedness
for borrowed money by Transatlantic or any of its Subsidiaries
in excess of ten million dollars ($10,000,000); or
(v) evidences any guarantee of
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obligations of any Person other than a wholly owned Subsidiary
of Transatlantic in excess of ten million dollars ($10,000,000).
(b) Each Transatlantic Material Contract is (assuming due
power and authority of, and due execution and delivery by the
parties thereto other than Transatlantic or any of its
Subsidiaries) a valid and binding obligation of Transatlantic or
its Subsidiaries party thereto, subject to the Bankruptcy and
Equity Exception, except (i) to the extent it has
previously expired or terminated in accordance with their terms
and (ii) for any failures to be valid and binding which
would not, individually or in the aggregate, reasonably be
expected to have a Transatlantic Material Adverse Effect.
Neither Transatlantic nor any of its Subsidiaries nor, to the
knowledge of Transatlantic, any other party to any Transatlantic
Material Contract is in breach of or in default under any
Transatlantic Material Contract, and, to the knowledge of
Transatlantic, no event has occurred that, with the lapse of
time or the giving of notice or both, would constitute a default
thereunder by any party thereto, and neither Transatlantic nor
any of its Subsidiaries has received any claim of any such
breach or default, except for such breaches and defaults which
would not, individually or in the aggregate, reasonably be
expected to have a Transatlantic Material Adverse Effect.
4.21 Brokers and Finders
Fees. Except for Moelis and Goldman
Sachs & Co., the fees and expenses of which will be
paid by Transatlantic, there is no investment banker, broker,
finder or other intermediary that has been retained by or is
authorized to act on behalf of Transatlantic or any of its
Subsidiaries who is entitled to any fee or commission from
Transatlantic or any of its Subsidiaries in connection with the
transactions to which Transatlantic is a party contemplated
hereby.
4.22 Takeover Laws. No fair
price, moratorium, control share
acquisition, interested stockholder or other
anti-takeover statute or regulation is applicable to this
Agreement, the Merger or the other transactions contemplated
hereby by reason of Transatlantic being a party to this
Agreement, performing its obligations hereunder and consummating
the Merger and the other transactions contemplated hereby.
4.23 Affiliate Transactions. There
are no transactions, agreements, arrangements or understandings
between (i) Transatlantic or any of its Subsidiaries, on
the one hand, and (ii) any directors, officers or
stockholders of Transatlantic, on the other hand, of the type
that would be required to be disclosed under Item 404 of
Regulation S-K
promulgated under the Securities Act.
4.24 Insurance Subsidiaries. Each
Transatlantic Subsidiary that conducts the business of
reinsurance (each, a Transatlantic P/C
Subsidiary) is (i) duly licensed or authorized as
a reinsurance company in its jurisdiction of incorporation;
(ii) duly licensed, authorized or otherwise eligible to
transact the business of reinsurance in each other jurisdiction
where it is required to be so licensed, authorized or eligible
in order to conduct its business as currently conducted; and
(iii) duly licensed, authorized or eligible in its
jurisdiction of incorporation and each other applicable
jurisdiction where it writes each line of reinsurance reported
as being written in the Transatlantic Statutory Statements. Each
jurisdiction in which any Transatlantic P/C Subsidiary is
domiciled or commercially domiciled or otherwise licensed,
authorized or eligible with respect to the conduct of the
business of reinsurance is set forth in Section 4.24
of the Transatlantic Disclosure Schedule.
4.25 Statutory Statements; Examinations.
(a) Since January 1, 2008, each of the Transatlantic
P/C Subsidiaries has timely filed or submitted all material
annual and, to the extent applicable Law requires, quarterly and
other periodic statements, together with all exhibits,
interrogatories, notes, schedules and any actuarial opinions,
affirmations or certifications or other supporting documents in
connection therewith, required to be filed with or submitted to
the appropriate insurance regulatory authorities of each
jurisdiction in which it is licensed, authorized or eligible on
forms prescribed or permitted by such authority (as filed
through the date hereof and thereafter, collectively, the
Transatlantic Statutory Statements), except,
in each case, as has been cured or resolved to the satisfaction
of such insurance regulatory authority without imposition of any
material penalty.
(b) Transatlantic has delivered or made available to Allied
World, to the extent permitted by applicable Law, true and
complete copies of all annual Transatlantic Statutory Statements
filed with Governmental Entities for each of the Transatlantic
P/C Subsidiaries for the periods beginning January 1, 2008,
each in the form (including exhibits, annexes and any amendments
thereto) filed with the applicable insurance regulatory
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authority. Financial statements included in the Transatlantic
Statutory Statements were prepared in conformity with applicable
SAP, consistently applied for the periods covered thereby, were
prepared in accordance with the books and records of the
applicable Transatlantic P/C Subsidiary, and present fairly in
all material respects the statutory financial position of the
relevant Transatlantic P/C Subsidiary as of the respective dates
thereof and the results of operations, cash flows, and changes
in capital and surplus (or stockholders equity, as
applicable) of such Transatlantic P/C Subsidiary for the
respective periods then ended. The Transatlantic Statutory
Statements complied in all material respects with all applicable
Laws when filed or submitted and no material violation or
deficiency has been asserted in writing (or, to the knowledge of
Transatlantic, orally) by any Governmental Entity with respect
to any of the Transatlantic Statutory Statements that have not
been cured or otherwise resolved to the satisfaction of such
Governmental Entity. The statutory balance sheets and income
statements included in the annual Transatlantic Statutory
Statements have been audited by Transatlantics independent
auditors, and Transatlantic has delivered or made available to
Allied World true and complete copies of all audit opinions
related thereto for the periods beginning January 1, 2008
through the date hereof, in each case as filed with the
insurance regulatory authority of the jurisdiction of domicile
of such Transatlantic P/C Subsidiary. Except as is indicated
therein, all assets that are reflected on the Transatlantic
Statutory Statements comply in all material respects with all
applicable Insurance Laws regulating the investments of
Transatlantic P/C Subsidiaries and all applicable Insurance Laws
with respect to admitted assets. The financial statements
included in the Transatlantic Statutory Statements accurately
reflect in all material respects the extent to which, pursuant
to applicable Laws and applicable SAP, the applicable
Transatlantic P/C Subsidiary is entitled to take credit for
reinsurance (or any local equivalent concept) on such
Transatlantic Statutory Statements.
(c) Transatlantic has delivered or made available to Allied
World, to the extent permitted by applicable Law, true and
complete copies of all examination reports (and has notified the
other party of any pending examinations) of any insurance
regulatory authorities received by it on or after
January 1, 2008 through the date hereof relating to the
Transatlantic P/C Subsidiaries. Except as set forth in
Section 4.25(c) of the Transatlantic Disclosure
Schedule, all material deficiencies or violations noted in the
examination reports have been resolved to the reasonable
satisfaction of the insurance regulatory authority that noted
such deficiencies or violations.
(d) Section 4.25(d) of the Transatlantic
Disclosure Schedule sets forth a true and complete list of
permitted practices under SAP that are used in any of the
Transatlantic Statutory Statements of any Transatlantic P/C
Subsidiary.
4.26 Agreements with
Regulators. Except as required by Insurance Laws
and the reinsurance licenses maintained by the Transatlantic P/C
Subsidiaries or as set forth in Section 4.26 of the
Transatlantic Disclosure Schedule, there are no written
agreements, memoranda of understanding, commitment letters or
similar undertakings binding on it or any of its subsidiaries or
to which Transatlantic or any Transatlantic Subsidiaries is a
party, on the one hand, and any Governmental Entity is a party
or addressee, on the other hand, or any Orders or directives by,
or supervisory letters or
cease-and-desist
orders from, any Governmental Entity, neither has Transatlantic
nor any Transatlantic Subsidiary adopted any board resolution at
the request of any Governmental Entity, in each case
specifically with respect to Transatlantic or any Transatlantic
Subsidiary, which (a) limit the ability of Transatlantic or
any Transatlantic P/C Subsidiary to issue or enter into
Transatlantic Reinsurance Contracts or other material
reinsurance or retrocession treaties or agreements, slips,
binders, cover notes or other similar arrangements;
(b) require any divestiture of any investment of any
Transatlantic Subsidiary; (c) in any manner relate to the
ability of any Transatlantic Subsidiary to pay dividends;
(d) require any investment of any Transatlantic P/C
Subsidiary to be treated as non-admitted assets (or the local
equivalent); or (e) otherwise restrict the conduct of
business of Transatlantic or any Transatlantic Subsidiary, nor
has it been advised in writing by any Governmental Entity that
it is contemplating any such undertakings.
4.27 Reinsurance and Retrocession.
(a) As of the date of this Agreement, all material
reinsurance or retrocession treaties or agreements, slips,
binders, cover notes or other similar arrangements pursuant to
which any Transatlantic P/C Subsidiary is the
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cedent (the Transatlantic Reinsurance
Contracts) are, and after the consummation of the
transactions contemplated hereby will continue to be, valid and
binding obligations of Transatlantic and the Transatlantic
Subsidiaries (to the extent they are parties thereto or bound
thereby) and, to Transatlantics knowledge, each other
party thereto, in accordance with their terms and are in full
force and effect, and Transatlantic and the Transatlantic
Subsidiaries (to the extent they are party thereto or bound
thereby) and, to Transatlantics knowledge, each other
party thereto has performed in all material respects all
obligations required to be performed by it under each
Transatlantic Reinsurance Contract. Neither Transatlantic nor
any of the Transatlantic Subsidiaries has received notice, nor
does it have knowledge, of any violation or default in respect
of any material obligation under (or any condition which, with
the passage of time or the giving of notice or both, would
result in such a violation or default), or any intention to
cancel, terminate or change the scope of rights and obligations
under, or not to renew, any Transatlantic Reinsurance Contract.
Since January 1, 2008, (i) neither Transatlantic nor
the Transatlantic Subsidiaries have received any written notice
from any party to a Transatlantic Reinsurance Contract that any
amount of reinsurance ceded by Transatlantic or such
Transatlantic Subsidiary to such counterparty will be
uncollectible or otherwise defaulted upon; (ii) to
Transatlantics knowledge, no party to a Transatlantic
Reinsurance Contract is insolvent or the subject of a
rehabilitation, liquidation, conservatorship, receivership,
bankruptcy or similar proceeding; (iii) to
Transatlantics knowledge, the financial condition of any
party to a Transatlantic Reinsurance Contract is not impaired to
the extent that a default thereunder is reasonably anticipated;
(iv) there are no material disputes under any Transatlantic
Reinsurance Contract other than disputes in the ordinary course
for which adequate loss reserves have been established; and
(v) Transatlantics relevant Transatlantic P/C
Subsidiary is entitled under any applicable Law and applicable
SAP to take full credit in its Transatlantic Statutory
Statements for all amounts recoverable by it pursuant to any
Transatlantic Reinsurance Contract and all such amounts
recoverable have been properly recorded in its books and records
of account (if so accounted therefor) and are properly reflected
in the Transatlantic Statutory Statements, except for such
events or circumstances as have not been and would not
reasonably be expected to be, individually or in the aggregate,
material to Transatlantic and its Subsidiaries, taken as a whole.
(b) Except for such events or circumstances as have not
been and would not reasonably be expected to be, individually or
in the aggregate, material to Allied World and its Subsidiaries,
taken as a whole, with respect to any Transatlantic Reinsurance
Contract for which a Transatlantic P/C Subsidiary as ceding
insurer thereto is taking credit on its most recent
Transatlantic Statutory Statements, to its knowledge, from and
after January 1, 2008 (i) there has been no separate
written or oral agreement between such Transatlantic P/C
Subsidiary and the assuming reinsurer that would under any
circumstances reduce, limit, mitigate or otherwise affect any
actual or potential loss to the parties under any such
Transatlantic Reinsurance Contract, other than inuring contracts
that are explicitly defined in any such Transatlantic
Reinsurance Contract; (ii) for each such Transatlantic
Reinsurance Contract entered into, renewed or amended on or
after January 1, 2008, for which risk transfer is not
reasonably considered to be self-evident to the extent required
by any applicable provisions of SSAP No. 62, documentation
concerning the economic intent of the transaction and the risk
transfer analysis evidencing the proper accounting treatment is
available for review by the relevant Governmental Entities for
such Transatlantic P/C Subsidiary; (iii) the Transatlantic
P/C Subsidiary that is a party thereto, and to its knowledge,
any other party thereto, complies and has complied from and
after January 1, 2008 with any applicable requirements set
forth in SSAP No. 62; and (iv) such Transatlantic P/C
Subsidiary has and has had since January 1, 2008
appropriate controls in place to monitor the use of reinsurance
and comply with the provisions of SSAP No. 62.
4.28 Rating Agency. Since
December 31, 2010, no rating agency has imposed conditions
(financial or otherwise) on retaining any currently held rating
assigned to any Transatlantic P/C Subsidiary or, to the
knowledge of Transatlantic, stated to Transatlantic that it is
considering lowering any rating assigned to any Transatlantic
P/C Subsidiary or placing any Transatlantic P/C Subsidiary on an
under review status, except as set forth in
Section 4.28 of the Transatlantic Disclosure
Schedule. As of the date of this Agreement, each
U.S. Transatlantic P/C Subsidiary has the A.M. Best
Company rating set forth in Section 4.28 of the
Transatlantic Disclosure Schedule.
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4.29 Reserves.
(a) The insurance policy reserves for claims, losses
(including incurred but not reported losses), loss adjustment
expenses (whether allocated or unallocated) and unearned premium
of each Transatlantic P/C Subsidiary contained in its
Transatlantic Statutory Statements (i) were determined in
all material respects in accordance with generally accepted
actuarial standards consistently applied (except as otherwise
noted in the financial statements and notes thereto included in
such financial statements) and (ii) satisfied the
requirements of all applicable Insurance Laws in all material
respects.
(b) Transatlantic has made available to Allied World true
and complete copies of all material actuarial reports prepared
by actuaries, independent or otherwise, from and after
January 1, 2008, with respect to the Transatlantic P/C
Subsidiaries, and all material attachments, addenda, supplements
and modifications thereto. There have been no actuarial reports
of a similar nature covering any Transatlantic P/C Subsidiary in
respect of any period subsequent to the latest period covered in
such actuarial reports. The information and data furnished by
Transatlantic and the Transatlantic Subsidiaries to its
independent actuaries in connection with the preparation of such
actuarial reports were accurate in all material respects for the
periods covered in such reports.
4.30 Risk-Based
Capital. Transatlantic has made available to
Allied World true and complete copies of all analyses and
reports submitted by Transatlantic to any insurance regulatory
authority during the past twenty-four (24) months relating
to risk-based capital calculations (Transatlantic
Risk-Based Capital Reports). The Transatlantic
Risk-Based Capital Reports were true and accurate in all
material respects at the time of submission.
4.31 Transatlantic Insurance Business.
(a) All underwriting, management and administration
agreements entered into by any Transatlantic P/C Subsidiary are,
to the extent required by Law, in forms acceptable to all
applicable insurance departments or have been filed with and
approved by all applicable insurance departments or were not
objected to by any such insurance department within any period
provided for objection.
(b) Since December 31, 2010, (i) salaried
employees of Transatlantic and the Transatlantic Subsidiaries
and, to the knowledge of Transatlantic, each other Person, who,
in each of the foregoing cases, is performing the duties of
reinsurance intermediary for Transatlantic and the Transatlantic
Subsidiaries (collectively, Transatlantic
Agents), at the time such Transatlantic Agent wrote,
sold or produced business for or on behalf of Transatlantic or
any Transatlantic Subsidiary that requires a license, was duly
licensed and appointed as required by applicable Law, in the
particular jurisdiction in which such Transatlantic Agent wrote,
sold or produced business, and to the knowledge of
Transatlantic, no Transatlantic Agent is in violation of (or
with or without notice or lapse of time or both, would have
violated) any term or provision of any Law applicable to the
writing, sale, production or solicitation of insurance or other
business for or on behalf of Transatlantic or any Transatlantic
Subsidiary, except for such failures to be so licensed or such
violations which have been cured, which have been resolved or
settled through agreements with applicable Governmental Entity,
or which are barred by an applicable statute of limitations, and
(ii) each of the agency agreements and appointments between
the Transatlantic Agents, including as subagents under
Transatlantics affiliated insurance agency, and
Transatlantic and any Transatlantic Subsidiary, is valid and
binding and in full force and effect in accordance with its
terms, except as would not, individually or in the aggregate,
reasonably be expected to have a Transatlantic Material Adverse
Effect. As of the date of this Agreement, no Transatlantic Agent
individually accounting for 1% or more of the total gross
premiums of all Transatlantic Subsidiaries for the year ended
December 31, 2010 has notified Transatlantic or any
Transatlantic Subsidiary that such Transatlantic Agent will be
unable in any material respect or unwilling to continue its
relationship as a Transatlantic Agent with Transatlantic or any
Transatlantic Subsidiary within twelve (12) months after
the date hereof.
4.32 Other Transatlantic Insurance
Business. Since December 31, 2010,
(i) each Transatlantic Subsidiary and the salaried
employees of Transatlantic and the Transatlantic Subsidiaries,
who, in each of the foregoing cases, is performing the duties of
insurance producer or reinsurance intermediary for any Person
that is not an Affiliate of Transatlantic (collectively,
Transatlantic Insurance Intermediaries), at
the time such Transatlantic Insurance Intermediaries wrote, sold
or produced business for or on behalf of any Person that is not
an Affiliate of Transatlantic that requires a license, was duly
licensed and appointed as required by
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applicable Law, in the particular jurisdiction in which such
Transatlantic Insurance Intermediary wrote, sold or produced,
and to the knowledge of Transatlantic, no Transatlantic
Insurance Intermediary is in violation of (or with or without
notice or lapse of time or both, would have violated) any term
or provision of any Law applicable to the writing, sale or
production for or on behalf of any Person that is not an
Affiliate of Transatlantic, except for such failures to be so
licensed or such violations which have been cured, which have
been resolved or settled through agreements with applicable
Governmental Entity, or which are barred by an applicable
statute of limitations, and (ii) each of the agency
agreements and appointments between the Transatlantic Insurance
Intermediary and any such Person that is not an Affiliate of
Transatlantic, is valid and binding and in full force and effect
in accordance with its terms, except as would not, individually
or in the aggregate, reasonably be expected to have a
Transatlantic Material Adverse Effect.
4.33 No Other Representations and Warranties;
Disclaimer.
(a) Except for the representations and warranties made by
Transatlantic in this Article IV, neither
Transatlantic nor any other Person makes any express or implied
representation or warranty with respect to Transatlantic or any
of its Subsidiaries or their respective businesses, operations,
assets, liabilities, condition (financial or otherwise) or
prospects, and Transatlantic hereby disclaims any such other
representations or warranties. In particular, without limiting
the foregoing disclaimer, except for the representations and
warranties made by Transatlantic in this Article IV,
neither Transatlantic nor any other Person makes or has made any
representation or warranty to Allied World, Merger Sub or any of
their Affiliates or Representatives with respect to (i) any
financial projection, forecast, estimate, budget or prospective
information relating to Transatlantic, any of its Subsidiaries
or their respective businesses or operations or (ii) any
oral or written information presented to Allied World, Merger
Sub or any of their Affiliates or Representatives in the course
of their due diligence investigation of Transatlantic, the
negotiation of this Agreement or in the course of the
transactions contemplated hereby.
(b) Notwithstanding anything contained in this Agreement to
the contrary, Transatlantic acknowledges and agrees that neither
Allied World, Merger Sub, nor any other Person has made or is
making any representations or warranties whatsoever, express or
implied, beyond those expressly given by Allied World and Merger
Sub in Article III hereof, including any implied
representation or warranty as to the accuracy or completeness of
any information regarding Allied World or Merger Sub furnished
or made available to Transatlantic or any of its Affiliates or
Representatives. Without limiting the generality of the
foregoing, Transatlantic acknowledges and agrees that no
representations or warranties are made with respect to any
projections, forecasts, estimates, budgets or prospect
information that may have been made available to Transatlantic
or any of its Affiliates or Representatives.
ARTICLE V.
COVENANTS
RELATING TO CONDUCT OF BUSINESS
5.1 Conduct of Businesses Prior to the Effective
Time. During the period from the date of this
Agreement to the Effective Time, except as expressly
contemplated or permitted by this Agreement (including by
Section 5.2 or Section 5.3 below, as
applicable), except as specifically set forth in
Section 5.1 of the Allied World Disclosure Schedule
or Section 5.1 of the Transatlantic Disclosure
Schedule, as applicable, and except with the prior written
consent of the other party (which shall not be unreasonably
withheld, conditioned or delayed), each of Allied World and
Transatlantic shall, and shall cause each of its respective
Subsidiaries to (i) conduct its business in the ordinary
course consistent with past practice in all material respects,
(ii) use commercially reasonable efforts to maintain and
preserve intact its business organization and advantageous
business relationships and retain the services of its officers
and key employees, and (iii) take no action that would
prohibit or materially impair or delay the ability of either
Allied World or Transatlantic to obtain any necessary approvals
of any regulatory agency or other Governmental Entity required
for the transactions contemplated hereby or to consummate the
transactions contemplated hereby. Notwithstanding the foregoing
provisions of this Section 5.1, (i) neither
party will take any action prohibited by Section 5.2
or Section 5.3, as applicable, in order to satisfy
such partys obligations under this Section 5.1
and (ii) each party shall be deemed not to have failed to
satisfy its obligations under this Section 5.1 to
the extent such failure resulted,
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directly or indirectly, from such partys failure to take
any action prohibited by Section 5.2 or
Section 5.3, as applicable.
5.2 Allied World
Forbearances. During the period from the date of
this Agreement to the Effective Time, except as set forth in
Section 5.2 of the Allied World Disclosure Schedule
and except as required by Law or the rules and regulations of
the SEC or the NYSE or as expressly contemplated or permitted by
this Agreement, Allied World will not, and will not permit any
of the Allied World Subsidiaries to, without the prior written
consent of Transatlantic (which shall not be unreasonably
withheld, conditioned or delayed):
(a) amend its Organizational Documents (whether by merger,
consolidation or otherwise);
(b) (i) split, combine or reclassify any shares of its
capital stock, or propose to split, combine or reclassify, any
of its share capital, or issue or authorize or propose the
issuance or authorization of any other securities in respect of,
or in lieu of or in substitution for, shares of its share
capital, (ii) declare, set aside or pay any dividend or
other distribution (whether in cash, stock or property or any
combination thereof) in respect of its capital stock, except
dividends paid by a direct or indirect wholly owned Subsidiary
of Allied World to Allied World or to any of Allied Worlds
other direct or indirect wholly owned Subsidiaries (to the
extent that any such dividends do not result in any Subsidiary
of Allied World breaching or otherwise violating any applicable
regulatory capital requirements or becoming subject to any
additional regulatory oversight or reporting requirements) or
(iii) redeem, repurchase or otherwise acquire or offer to
redeem, repurchase, or otherwise acquire any shares of Allied
Worlds (or any of its Subsidiaries) share capital or
any securities convertible into or exercisable for any shares of
Allied Worlds (or any of its Subsidiaries) share
capital, other than repurchases, redemptions or acquisitions by
Allied World or any wholly owned Subsidiary of Allied World of
share capital or such other securities, as the case may be, of
any other wholly owned Subsidiary of Allied World;
(c) (i) issue, deliver, pledge or sell, or authorize
the issuance, delivery or sale of, any Allied World Shares,
Equity Equivalents or shares of capital stock of any Allied
World Subsidiary, other than the issuance of (A) any Allied
World Shares upon the exercise of Allied World Stock-Based
Awards that are outstanding on the date of this Agreement in
accordance with the terms of the Allied World Stock Plans on the
date of this Agreement and (B) any capital stock of any
Allied World Subsidiary to Allied World or any other Allied
World Subsidiary or (ii) amend any term of any Allied World
Shares or Equity Equivalent (in each case, whether by merger,
consolidation or otherwise);
(d) incur any capital expenditures or any obligations or
liabilities in respect thereof, except for (i) those
contemplated by the capital expenditure budget set forth in
Section 5.2(d) of the Allied World Disclosure
Schedule and (ii) any unbudgeted capital expenditures not
to exceed $1,000,000 individually or $2,500,000 in the aggregate;
(e) acquire (by merger, consolidation, acquisition of stock
or assets or otherwise), directly or indirectly, any assets,
securities, properties, interests or businesses, other than
(i) supplies, equipment and investment securities or other
assets in bona fide transactions, on arms-length terms in
the ordinary course of business of Allied World and its
Subsidiaries in a manner that is consistent with past practice
and/or
(ii) acquisitions with a purchase price net of the total of
assumed liabilities (including all operating liabilities,
reserves and indebtedness) that does not exceed $5,000,000
individually or $10,000,000 in the aggregate;
(f) sell, lease, sublease, exchange or otherwise transfer,
or create or incur any Lien, other than a Permitted Lien, on,
any of Allied Worlds or any of its Subsidiaries
assets, securities, properties, interests or businesses, or
grant any option with respect to any of the foregoing, other
than (i) in bona fide transactions, on arms-length
terms in the ordinary course of business consistent with past
practice, including in respect of letter of credit facilities
and/or
(ii) other sales of assets, securities, properties,
interests or businesses with a sale price or carrying value net
of the total of assumed liabilities (including all operating
liabilities, reserves and indebtedness) that does not exceed
$5,000,000 individually or $10,000,000 in the aggregate;
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(g) other than in connection with actions permitted by
Section 5.2(d) or Section 5.2(e), make
any loans, advances or capital contributions to, or investments
in, any other Person, other than in the ordinary course of
business consistent with past practice or loans, advances or
capital contributions to, or investments in, wholly owned
Subsidiaries of Allied World;
(h) create, incur, assume, suffer to exist or otherwise be
liable with respect to any indebtedness for borrowed money or
guarantees thereof (including reimbursement obligations with
respect to letters of credit), other than (i) in
replacement of existing or maturing debt, (ii) guarantees
relating to business written by any wholly owned Subsidiary
(whether directly or indirectly) of Allied World in the ordinary
course of Allied Worlds and its Subsidiaries
insurance or reinsurance business consistent with past practice
and (iii) draw-downs pursuant to existing credit facilities
and letters of credit in support of Allied Worlds and its
Subsidiaries insurance or reinsurance business consistent
with past practice;
(i) (i) with respect to any director, officer or employee
of Allied World or any of its Subsidiaries whose annual base
salary exceeds $275,000, (A) grant or increase any
severance or termination pay to (or amend any existing severance
pay or termination arrangement) or (B) enter into any
employment, deferred compensation or other similar agreement (or
amend any such existing agreement), (ii) increase benefits
payable under any existing severance or termination pay
policies, (iii) establish, adopt or amend (except as
required by applicable Law) any collective bargaining, bonus,
profit-sharing, thrift, pension, retirement, deferred
compensation, stock option, restricted stock or other benefit
plan or arrangement; provided, that Allied World may, to
the extent appropriate, adjust the performance goals for, or
convert, all Allied World Stock Options and Allied World
Stock-Based Awards that vest upon the achievement of performance
criteria in the manner agreed to by Transatlantic and Allied
World within 15 Business Days following the date hereof (or such
later time as may be agreed to by the parties) to appropriately
reflect the Merger with respect to performance periods that will
not have ended prior to the Effective Time, or
(iv) increase compensation, bonus or other benefits payable
to any employee of Allied World or any of its Subsidiaries,
except, with respect to any director, officer or employee of
Allied World or any of its Subsidiaries whose annual base salary
does not exceed $275,000, for increases in the ordinary course
of business consistent with past practice;
(j) change Allied Worlds methods of accounting,
except as required by concurrent changes in GAAP or SAP, as
agreed to by its independent public accountants;
(k) settle, or offer or propose to settle, any material
litigation, investigation, arbitration, proceeding or other
claim involving or against Allied World or any of its
Subsidiaries, except (i) where the amount paid in
settlement or compromise, in each case, does not exceed
$1,000,000, (ii) arising from ordinary course claims for
insurance or reinsurance (but excluding material litigation
relating to such claims) that are handled pursuant to Allied
Worlds normal claims handling process consistent with past
practice or (iii) where the amount paid in settlement does
not exceed the amount reserved for such claim in the financial
statements set forth in the Allied World SEC Documents;
(l) (i) make or change any material Tax election,
(ii) change any annual tax accounting period,
(iii) adopt or change any method of tax accounting except
as required by applicable Law, (iv) materially amend any
Tax Returns, (v) enter into any material closing agreement,
(vi) settle any material Tax claim, audit or assessment or
(vii) surrender any right to claim a material Tax refund,
offset or other reduction in Tax liability;
(m) amend or modify in any material respect or terminate
(excluding terminations upon expiration of the term thereof in
accordance with their terms) any Allied World Material Contract
or waive, release or assign any material rights, claims or
benefits of it or its Subsidiaries under any Allied World
Material Contract, or enter into any Contract or agreement that
would have been an Allied World Material Contract had it been
entered into prior to this Agreement, except in the ordinary
course of business consistent with past practice;
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(n) adopt a plan of complete or partial liquidation,
dissolution, merger, consolidation, restructuring,
recapitalization or other reorganization of Allied World or any
material Allied World Subsidiary (other than the
Merger); and
(o) agree, resolve or commit to (i) do any action
restricted by this Section 5.2 or (ii) accept
any restriction that would prevent Allied World or any of its
Subsidiaries from taking any action required by this
Section 5.2.
5.3 Transatlantic
Forbearances. During the period from the date of
this Agreement to the Effective Time, except as set forth in
Section 5.3 of the Transatlantic Disclosure Schedule
and except as required by Law or the rules and regulations of
the SEC or the NYSE or as expressly contemplated or permitted by
this Agreement, Transatlantic will not, and will not permit any
of the Transatlantic Subsidiaries to, without the prior written
consent of Allied World (which shall not be unreasonably
withheld, conditioned or delayed):
(a) amend its Organizational Documents (whether by merger,
consolidation or otherwise);
(b) (i) split, combine or reclassify any shares of its
capital stock, or propose to split, combine or reclassify, any
of its share capital, or issue or authorize or propose the
issuance or authorization of any other securities in respect of,
or in lieu of or in substitution for, shares of its share
capital, (ii) declare, set aside or pay any dividend or
other distribution (whether in cash, stock or property or any
combination thereof) in respect of its capital stock, except
dividends paid by a direct or indirect wholly owned Subsidiary
of Transatlantic to Transatlantic or to any of
Transatlantics other direct or indirect wholly owned
Subsidiaries (to the extent that any such dividends do not
result in any Subsidiary of Transatlantic breaching or otherwise
violating any applicable regulatory capital requirements or
becoming subject to any additional regulatory oversight or
reporting requirements) or (iii) redeem, repurchase or
otherwise acquire or offer to redeem, repurchase, or otherwise
acquire any shares of Transatlantics (or any of its
Subsidiaries) share capital or any securities convertible
into or exercisable for any shares of Transatlantics (or
any of its Subsidiaries) share capital, other than
repurchases, redemptions or acquisitions by Transatlantic or any
wholly owned Subsidiary of Transatlantic of share capital or
such other securities, as the case may be, of any other wholly
owned Subsidiary of Transatlantic;
(c) (i) issue, deliver, pledge or sell, or authorize
the issuance, delivery or sale of, any shares of any
Transatlantic Common Stock, Equity Equivalents or capital stock
of any Transatlantic Subsidiary, other than the issuance of
(A) any shares of Transatlantic Common Stock upon the
exercise of Transatlantic Stock-Based Awards that are
outstanding on the date of this Agreement in accordance with the
terms of Transatlantic Stock Plans on the date of this Agreement
and (B) any capital stock of any Transatlantic Subsidiary
to Transatlantic or any other Subsidiary of Transatlantic or
(ii) amend any term of any Transatlantic Common Stock or
Equity Equivalent (in each case, whether by merger,
consolidation or otherwise);
(d) incur any capital expenditures or any obligations or
liabilities in respect thereof, except for (i) those
contemplated by the capital expenditure budget set forth in
Section 5.3(d) of the Transatlantic Disclosure
Schedule and (ii) any unbudgeted capital expenditures not
to exceed $1,000,000 individually or $2,500,000 in the aggregate;
(e) acquire (by merger, consolidation, acquisition of stock
or assets or otherwise), directly or indirectly, any assets,
securities, properties, interests or businesses, other than
(i) supplies, equipment and investment securities or other
assets in bona fide transactions, on arms-length terms in
the ordinary course of business of Transatlantic and its
Subsidiaries in a manner that is consistent with past practice
and/or
(ii) acquisitions with a purchase price net of the total of
assumed liabilities (including all operating liabilities,
reserves and indebtedness) that does not exceed $5,000,000
individually or $10,000,000 in the aggregate;
(f) sell, lease, sublease, exchange or otherwise transfer,
or create or incur any Lien, other than a Permitted Lien, on,
any of Transatlantics or any of its Subsidiaries
assets, securities, properties, interests or businesses, or
grant any option with respect to any of the foregoing other than
(i) in bona fide transactions, on arms-length terms
in the ordinary course of business consistent with past
practice,
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including in respect of letter of credit facilities
and/or
(ii) other sales of assets, securities, properties,
interests or businesses with a sale price or carrying value net
of the total of assumed liabilities (including all operating
liabilities, reserves and indebtedness) that does not exceed
$5,000,000 individually or $10,000,000 in the aggregate;
(g) other than in connection with actions permitted by
Section 5.3(d) or Section 5.3(e), make
any loans, advances or capital contributions to, or investments
in, any other Person, other than in the ordinary course of
business consistent with past practice or loans, advances or
capital contributions to, or investments in, wholly owned
Subsidiaries of Transatlantic;
(h) create, incur, assume, suffer to exist or otherwise be
liable with respect to any indebtedness for borrowed money or
guarantees thereof (including reimbursement obligations with
respect to letters of credit), other than (i) in
replacement of existing or maturing debt, (ii) guarantees
relating to business written by any wholly owned Subsidiary
(whether directly or indirectly) of Transatlantic in the
ordinary course of Transatlantics and its
Subsidiaries reinsurance business consistent with past
practice and (iii) draw-downs pursuant to existing credit
facilities and letters of credit in support of
Transatlantics and its Subsidiaries reinsurance
business consistent with past practice;
(i) (i) with respect to any director, officer or
employee of Transatlantic or any of its Subsidiaries whose
annual base salary exceeds $275,000, (A) grant or increase
any severance or termination pay to (or amend any existing
severance pay or termination arrangement) or (B) enter into
any employment, deferred compensation or other similar agreement
(or amend any such existing agreement), (ii) increase
benefits payable under any existing severance or termination pay
policies, (iii) establish, adopt or amend (except as
required by applicable Law) any collective bargaining, bonus,
profit-sharing, thrift, pension, retirement, deferred
compensation, stock option, restricted stock or other benefit
plan or arrangement or (iv) increase compensation, bonus or
other benefits payable to any employee of Transatlantic or any
of its Subsidiaries, except, with respect to any director,
officer or employee of Transatlantic or any of its Subsidiaries
whose annual base salary does not exceed $275,000, for increases
in the ordinary course of business consistent with past practice;
(j) change Transatlantics methods of accounting,
except as required by concurrent changes in GAAP or SAP, as
agreed to by its independent public accountants;
(k) settle, or offer or propose to settle, any material
litigation, investigation, arbitration, proceeding or other
claim involving or against Transatlantic or any of its
Subsidiaries, except (i) where the amount paid in
settlement or compromise, in each case, does not exceed
$1,000,000, (ii) arising from ordinary course claims for
reinsurance (but excluding material litigation relating to such
claims) that are handled pursuant to Transatlantics normal
claims handling process consistent with past practice or
(iii) where the amount paid in settlement does not exceed
the amount reserved for such claim in the financial statements
set forth in the Transatlantic SEC Documents;
(l) (i) make or change any material Tax election,
(ii) change any annual tax accounting period,
(iii) adopt or change any method of tax accounting except
as required by applicable Law, (iv) materially amend any
Tax Returns, (v) enter into any material closing agreement,
(vi) settle any material Tax claim, audit or assessment or
(vii) surrender any right to claim a material Tax refund,
offset or other reduction in Tax liability;
(m) amend or modify in any material respect or terminate
(excluding terminations upon expiration of the term thereof in
accordance with their terms) any Transatlantic Material Contract
or waive, release or assign any material rights, claims or
benefits of it or its Subsidiaries under any Transatlantic
Material Contract, or enter into any Contract or agreement that
would have been a Transatlantic Material Contract had it been
entered into prior to this Agreement, except in the ordinary
course of business consistent with past practice;
(n) adopt a plan of complete or partial liquidation,
dissolution, merger, consolidation, restructuring,
recapitalization or other reorganization of Transatlantic or any
material Transatlantic Subsidiary (other than the
Merger); and
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(o) agree, resolve or commit to (i) do any action
restricted by this Section 5.3 or (ii) accept
any restriction that would prevent Transatlantic or any of its
Subsidiaries from taking any action required by this
Section 5.3.
5.4 Control of Other Partys
Business. Nothing contained in this Agreement
will give Allied World, directly or indirectly, the right to
control Transatlantic or any of the Transatlantic Subsidiaries
or direct the business or operations of Transatlantic or any of
the Transatlantic Subsidiaries prior to the Effective Time.
Nothing contained in this Agreement will give Transatlantic,
directly or indirectly, the right to control Allied World or any
of the Allied World Subsidiaries or direct the business or
operations of Allied World or any of the Allied World
Subsidiaries prior to the Effective Time. Prior to the Effective
Time, each of Allied World and Transatlantic will exercise,
consistent with the terms and conditions of this Agreement,
complete control and supervision over its respective operations
and the operations of its respective Subsidiaries. Nothing in
this Agreement, including any of the actions, rights or
restrictions set forth herein, will be interpreted in such a way
as to place Transatlantic or Allied World in violation of any
applicable Law.
5.5 No Solicitation.
(a) Allied World shall not, and shall cause the Allied
World Subsidiaries and each officer or director of Allied World
or any Allied World Subsidiary not to, and shall use its
reasonable best efforts to cause each controlled Affiliate and
any employee, agent, consultant or representative (including any
financial or legal advisor or other representative) of Allied
World, any of the Allied World Subsidiaries or any such
controlled Affiliate not to, and on becoming aware of it, shall
use its best efforts to stop any such Person from continuing to,
directly or indirectly, (i) solicit, initiate or knowingly
encourage or facilitate (including by way of furnishing
information) or take any other action designed to facilitate any
inquiries or proposals regarding, or that would reasonably be
expected to lead to, any merger, share exchange, amalgamation,
consolidation, sale of assets, sale of shares of capital stock
(including by way of a tender offer or exchange offer) or
similar transactions involving Allied World or any of the Allied
World Subsidiaries that, if consummated, would constitute a
Competing Transaction (any of the foregoing inquiries or
proposals being referred to herein as an Allied World
Acquisition Proposal), (ii) solicit, initiate,
knowingly encourage or participate in any discussions or
negotiations regarding, or furnish to any Person any information
in connection with, or otherwise cooperate in any way with, or
knowingly facilitate in any way any effort by, any Person in
connection with, any Allied World Acquisition Proposal or
(iii) enter into any letter of intent, memorandum of
understanding, agreement in principle, acquisition agreement,
merger agreement, option agreement, joint venture agreement,
partnership agreement or other agreement regarding, or that is
intended to result in, or would reasonably be expected to lead
to, any Allied World Acquisition Proposal (an Allied
World Acquisition Agreement).
(b) Transatlantic shall not, and shall cause the
Transatlantic Subsidiaries and each officer or director of
Transatlantic or any Transatlantic Subsidiary not to, and shall
use its reasonable best efforts to cause each controlled
Affiliate and any employee, agent, consultant or representative
(including any financial or legal advisor or other
representative) of Transatlantic, any of the Transatlantic
Subsidiaries or any such controlled Affiliate not to, and on
becoming aware of it, shall use its best efforts to stop any
such Person from continuing to, directly or indirectly,
(i) solicit, initiate or knowingly encourage or facilitate
(including by way of furnishing information) or take any other
action designed to facilitate any inquiries or proposals
regarding, or that would reasonably be expected to lead to, any
merger, share exchange, amalgamation, consolidation, sale of
assets, sale of shares of capital stock (including by way of a
tender offer or exchange offer) or similar transactions
involving Transatlantic or any of the Transatlantic Subsidiaries
that, if consummated, would constitute a Competing Transaction
(any of the foregoing inquiries or proposals being referred to
herein as a Transatlantic Acquisition
Proposal and, together with any Allied World
Acquisition Proposal, each an Acquisition
Proposal), (ii) solicit, initiate, knowingly
encourage or participate in any discussions or negotiations
regarding, or furnish to any Person any information in
connection with, or otherwise cooperate in any way with, or
knowingly facilitate in any way any effort by, any Person in
connection with, any Transatlantic Acquisition Proposal or
(iii) enter into any letter of intent, memorandum of
understanding, agreement in principle, acquisition agreement,
merger agreement, option agreement, joint venture agreement,
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partnership agreement or other agreement regarding, or that is
intended to result in, or would reasonably be expected to lead
to, any Transatlantic Acquisition Proposal (a
Transatlantic Acquisition Agreement).
(c) As used in this Agreement, Competing
Transaction means, with respect to Allied World or
Transatlantic, as the case may be (for this purpose, the
Target Party), any of (i) a transaction,
including any tender offer, exchange offer or share exchange,
pursuant to which any third Person (or group) other than the
other party to this Agreement (the Non-Target
Party) or such third Persons Affiliates, or the
stockholders of such third Person, directly or indirectly,
acquires or would acquire beneficial ownership (as defined in
Rule 13d-3
under the Exchange Act) of 10% or more of the outstanding shares
of common stock or ordinary shares, as applicable, of the Target
Party or of the outstanding voting power of the Target Party (or
options, rights or warrants to purchase, or securities
convertible into or exchangeable for, such common stock or
ordinary shares or other securities representing such voting
power), whether from the Target Party or pursuant to a tender
offer or exchange offer or otherwise, (ii) a merger,
amalgamation, consolidation or business combination pursuant to
which any third Person or group of Persons (other than the
Non-Target Party or its Affiliates) party thereto, or the
stockholders of such third Person or Persons, beneficially owns
or would beneficially own 10% or more of the outstanding shares
of common stock or ordinary shares, as applicable, or the
outstanding voting power of the Target Party, or, if applicable,
any surviving entity or the parent entity resulting from any
such transaction, immediately upon consummation thereof,
(iii) a recapitalization of Target Party or any of its
Subsidiaries or any transaction similar to a transaction
referred to in clause (ii) involving the Target Party or
any of its Subsidiaries pursuant to which any third Person or
group of Persons (other than the Non-Target Party or its
Affiliates) party thereto, or its stockholders, beneficially
owns or would beneficially own 10% or more of the outstanding
shares of common stock or ordinary shares, as applicable, or the
outstanding voting power of the Target Party or such Subsidiary
or, if applicable, the parent entity resulting from any such
transaction immediately upon consummation thereof or
(iv) any transaction pursuant to which any third Person or
group of Persons (other than the Non-Target Party or its
Affiliates) directly or indirectly (including by way of merger,
consolidation, share exchange, amalgamation, other business
combination, partnership, joint venture or otherwise) acquires
or would acquire control of assets (including for this purpose
the equity securities of, or other ownership interest in,
Subsidiaries of the Target Party and securities of the entity
surviving any merger or business combination involving any of
the Subsidiaries of the Target Party) of the Target Party or any
of its Subsidiaries representing 10% or more of consolidated
revenues, net income, or EBITDA for the last 12 full calendar
months or the fair market value of all the assets of the Target
Party and its Subsidiaries, taken as a whole, immediately prior
to such transaction; provided, however, that no
transaction involving solely the acquisition of capital stock or
assets of any Allied World Subsidiary by Allied World, or of any
Transatlantic Subsidiary by Transatlantic, will be deemed to be
a Competing Transaction. Wherever the term group is
used in this Agreement, it is used as defined in
Rule 13d-3
under the Exchange Act.
(d) The Target Party shall notify the Non-Target Party
promptly (but in no event later than 24 hours) after
receipt of any Acquisition Proposal, or any material
modification of or material amendment to any Acquisition
Proposal, or any inquiry or request for non-public information
relating to the Target Party or any of its Subsidiaries or for
access to the properties, books or records of the Target Party
or any of its Subsidiaries by any Person that is reasonably
likely to lead to or contemplate an Acquisition Proposal. Such
notice to the Non-Target Party shall be made orally and in
writing and shall indicate the identity of the Person or Persons
making the Acquisition Proposal or inquiry or requesting
non-public information or access to the properties, books or
records of the Target Party or any of its Subsidiaries, and a
copy of the Acquisition Proposal or, if not in writing, a
written summary in reasonable detail of the material terms of
any such Acquisition Proposal, inquiry or request or
modification or amendment to an Acquisition Proposal. The Target
Party shall (i) keep the Non-Target Party fully informed,
on a current basis, of any material changes in the status of,
and any material changes or modifications in the terms of, any
such Acquisition Proposal, inquiry or request and, if requested
by the Non-Target Party, counsel for the Target Party shall
consult with counsel for the Non-Target Party once per day, at
mutually agreeable times, regarding such status and any such
changes or modifications, and (ii) provide to the
Non-Target Party as soon as practicable after receipt or
delivery thereof with copies of all correspondence and other
written material sent or provided to the Target Party from any
third party in connection with any Acquisition Proposal or sent
or provided by the Target Party to any third
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party in connection with any Acquisition Proposal;
provided, however, that any material written
material or material correspondence shall be sent or provided
pursuant to clause (ii) within 24 hours after
receipt or delivery thereof. Neither Allied World nor
Transatlantic shall enter into any agreement on or after the
date hereof that would prevent such party from providing any
information required by this Section 5.5 to the
other party.
(e) Notwithstanding anything to the contrary in this
Section 5.5, at any time prior to obtaining the
Allied World Requisite Stockholder Vote or the Transatlantic
Requisite Stockholder Vote, as applicable, the Target Party may
furnish or cause to be furnished information to, and enter or
cause to be entered into discussions with, and only with, a
Person (and its representatives) who has made a bona fide
written Acquisition Proposal that was not solicited on or after
the date of this Agreement and that did not otherwise result
from a breach of Section 5.5(a) or
Section 5.5(b), as applicable, if the Target
Partys Board of Directors (the Target
Board) has (i) determined in good faith (after
consultation with its outside legal counsel and financial
advisor or advisors) that (A) such Acquisition Proposal
constitutes or is reasonably likely to lead to a Superior
Proposal and (B) the failure to enter into discussions
regarding the Acquisition Proposal would result in a breach of
its fiduciary duties under applicable Law, (ii) provided at
least three Business Days notice to the Non-Target Party
of its intent to furnish information to or enter into
discussions with such Person in accordance with this
Section 5.5(e), and (iii) obtained from such
Person an executed confidentiality agreement containing terms
that are determined in good faith by the Target Party to be
substantially similar to and not less favorable to the Target
Party, in the aggregate, than those contained in the
Confidentiality Agreement (it being understood that such
confidentiality agreement and any related agreements shall not
include any provision calling for any exclusive right to
negotiate with such Person or having the effect of prohibiting
the Target Party from satisfying its obligations under this
Agreement). Unless such information has been previously provided
to the Non-Target Party, all information that is provided by the
Target Party to the Person making such Acquisition Proposal
shall be provided to the Non-Target Party. During the three
Business Day period set forth in clause (ii), the
Non-Target Party shall have the right to make a presentation to
the Target Board.
(f) As used in this Agreement, Superior
Proposal means a bona fide written Acquisition
Proposal made by a third Person (or group of Persons) (and not
obtained in breach of this Agreement, including, without
limitation, this Section 5.5) to consummate a
merger, amalgamation, consolidation, business combination or
other similar transaction involving the Target Party pursuant to
which the stockholders of the Target Party immediately preceding
such transaction would hold less than 50% of the outstanding
shares of common stock or ordinary shares, as applicable, of, or
less than 50% of the outstanding voting power of, the Target
Party, any surviving entity or the parent entity resulting from
any such transaction immediately upon consummation thereof that
the Target Board (after consultation with its outside legal
counsel and its financial advisor or advisors) determines in
good faith to be more favorable to the Target Partys
stockholders than the Merger, taking into account all relevant
factors, including value and other financial considerations,
legal and regulatory considerations and any conditions to, and
expected timing and risks of, completion, as well as any changes
to the terms of the Merger proposed by the Non-Target Party in
response to such Superior Proposal.
(g) Except as permitted by this Section 5.5(g),
neither the Target Board nor any committee thereof shall
(i) (A) withdraw (or modify or qualify in any manner
adverse to the Non-Target Party) the approval, recommendation or
declaration of advisability by the Target Board or any such
committee of this Agreement, the Restated Articles and the
Merger or any of the other transactions contemplated hereby,
(B) adopt, approve, recommend, endorse or otherwise declare
advisable the adoption of any Acquisition Proposal or
(C) resolve, agree or publicly propose to take any such
actions (each such action set forth in this
Section 5.5(g)(i) being referred to herein as an
Adverse Recommendation Change) or
(ii) cause or permit the Target Party to enter into, or
resolve, agree or propose publicly to do so with respect to, any
Allied World Acquisition Agreement (in the case of Allied World)
or Transatlantic Acquisition Agreement (in the case of
Transatlantic) (other than a confidentiality agreement as
referred to in Section 5.5(e)). Notwithstanding
anything to the contrary in this Section 5.5, at any
time prior to obtaining the Allied World Requisite Stockholder
Vote (in the case of Allied World) or the Transatlantic
Requisite Stockholder Vote (in the case of Transatlantic) the
Target Board may, if the Target Board determines in good faith
that the failure to do so would result in a breach of its
fiduciary duties under applicable Law, taking into account all
adjustments to the terms of this Agreement that may be
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offered by the Non-Target Party pursuant to this
Section 5.5(g), make an Adverse Recommendation
Change; provided, however, that the Target Party
may not make an Adverse Recommendation Change, unless
(1) the Target Party promptly notifies the Non-Target Party
in writing at least three Business Days before taking that
action of its intention to do so, and specifying the reasons
therefor, including the terms and conditions of, and the
identity of any Person making any Acquisition Proposal, and
contemporaneously furnishing a copy of any relevant Allied World
Acquisition Agreement (in the case of Allied World) or
Transatlantic Acquisition Agreement (in the case of
Transatlantic) and any other relevant transaction documents (it
being understood and agreed that any amendment to the financial
terms or any other material term of such Acquisition Proposal
shall require a new written notice by the Target Party and a new
three Business Day period) and (2) prior to the expiration
of such three Business Day period, in the case of an Acquisition
Proposal, the Non-Target Party does not make a proposal to
adjust the terms and conditions of this Agreement that the
Target Board determines in good faith to be at least as
favorable as the Acquisition Proposal after giving effect to,
among other things, the payment of the Termination Fee set forth
in Section 6.6, such that the Target Board
determines such action is no longer required by its fiduciary
duties to the stockholders of the Target Party under applicable
Law. During the three Business Day period prior to its effecting
an Adverse Recommendation Change, the Target Party shall, and
shall cause its financial and legal advisors to, negotiate with
the Non-Target Party in good faith (to the extent the Non-Target
Party seeks to negotiate) regarding any revisions to the terms
of the transactions contemplated by this Agreement proposed by
the Non-Target Party. The Target Party shall not submit to the
vote of its stockholders any Acquisition Proposal, or, except as
permitted herein, propose to do so.
(h) (i) Nothing contained in this
Section 5.5 shall prohibit the Target Party or its
Subsidiaries from taking and disclosing to its stockholders a
position required by
Rule 14e-2(a)
or
Rule 14d-9
promulgated under the Exchange Act and (ii) no disclosure
that the Allied World Board or the Transatlantic Board may
determine (after consultation with counsel) that it or Allied
World or Transatlantic, as applicable, is required to make under
applicable Law shall constitute a violation of this Agreement;
provided, however, that in any event neither the
Allied World Board nor the Transatlantic Board shall make an
Adverse Recommendation Change except in accordance with
Section 5.5(g). Any disclosure by the
Target Party relating to an Acquisition Proposal shall be deemed
to be an Adverse Recommendation Change by the Target Party,
unless the Target Board reaffirms its recommendation and
declaration of advisability with respect to this Agreement in
such disclosure.
(i) Each of Allied World and Transatlantic and their
respective Subsidiaries shall immediately cease and cause to be
terminated any existing discussions or negotiations with any
Persons (other than the other party to this Agreement) conducted
heretofore with respect to any Acquisition Proposal, and shall
use reasonable best efforts to cause all Persons, other than the
other party hereto, who have been furnished confidential
information regarding such party in connection with the
solicitation of or discussions regarding an Acquisition Proposal
within the twelve (12) months prior to the date of this
Agreement promptly to return or destroy such information.
(j) It is understood that any violation of the restrictions
set forth in this Section 5.5 by any director,
officer, employee, controlled Affiliate, agent or representative
(including financial or legal advisor or other retained
representative) of either party or any of its Subsidiaries or
controlled Affiliates shall be deemed to be a breach of this
Section 5.5 by such party.
ARTICLE VI.
ADDITIONAL
AGREEMENTS
6.1 Preparation of the
Form S-4
and the Joint Proxy Statement; Stockholders Meetings.
(a) Transatlantic and Allied World shall jointly prepare
and shall use their reasonable best efforts to cause to be filed
with the SEC, as promptly as practicable, and in no event later
than 40 Business Days following the date of this Agreement, a
joint proxy statement and the
Form S-4,
in which the joint proxy statement will be included as a
prospectus (the Joint Proxy
Statement/Prospectus), and each of Transatlantic
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and Allied World shall use its reasonable best efforts to have
the
Form S-4
declared effective under the Securities Act as promptly as
practicable after such filing. Each of Allied World and
Transatlantic shall furnish all information concerning such
Person and its Affiliates to the other, and provide such other
assistance, as may be reasonably requested in connection with
the preparation, filing and distribution of the
Form S-4
and Joint Proxy Statement/Prospectus. The
Form S-4
and Joint Proxy Statement/Prospectus shall include all
information reasonably requested by such other party to be
included therein. Each of Allied World and Transatlantic shall
promptly notify the other upon the receipt of any comments from
the SEC or any request from the SEC for amendments or
supplements to the
Form S-4
or Joint Proxy Statement/Prospectus and shall provide the other
with copies of all correspondence between it and its
Representatives, on one hand, and the SEC, on the other hand.
Each of Allied World and Transatlantic shall use its reasonable
best efforts to respond as promptly as practicable to any
comments from the SEC with respect to the
Form S-4
or Joint Proxy Statement/Prospectus. Notwithstanding the
foregoing, prior to filing the
Form S-4
(or any amendment or supplement thereto) or mailing the Joint
Proxy Statement/Prospectus (or any amendment or supplement
thereto) or responding to any comments of the SEC with respect
thereto, each of Allied World and Transatlantic (i) shall
provide the other an opportunity to review and comment on such
document or response (including the proposed final version of
such document or response) and (ii) shall include in such
document or response all comments reasonably proposed by the
other. Each of Allied World and Transatlantic shall advise the
other, promptly after receipt of notice thereof, of the time of
effectiveness of the
Form S-4,
the issuance of any stop order relating thereto or the
suspension of the qualification of Allied World Shares
constituting Merger Consideration for offering or sale in any
jurisdiction, and each of Allied World and Transatlantic shall
use its reasonable best efforts to have any such stop order or
suspension lifted, reversed or otherwise terminated. Allied
World shall also take any other action required to be taken
under the Securities Act, the Exchange Act, any applicable
foreign or state securities or blue sky laws and the
rules and regulations thereunder in connection with the Merger,
the issuance of the Merger Consideration and the issuance of
Allied World Shares under the Transatlantic Stock Plans.
Transatlantic shall furnish all information concerning
Transatlantic and the holders of the Transatlantic Common Stock
and rights to acquire Transatlantic Common Stock pursuant to the
Transatlantic Stock Plans as may be reasonably requested in
connection with any such action.
(b) If, prior to the Effective Time, any event occurs with
respect to Transatlantic or any Transatlantic Subsidiary, or any
change occurs with respect to other information supplied by
Transatlantic for inclusion in the Joint Proxy
Statement/Prospectus or the
Form S-4,
which is required to be described in an amendment of, or a
supplement to, the Joint Proxy Statement/Prospectus or the
Form S-4,
Transatlantic shall promptly notify Allied World of such event,
and Transatlantic and Allied World shall cooperate in the prompt
filing with the SEC of any necessary amendment or supplement to
the Joint Proxy Statement/Prospectus and the
Form S-4
and, as required by Law, in disseminating the information
contained in such amendment or supplement to
Transatlantics stockholders and Allied Worlds
stockholders. Nothing in this Section 6.1(b) shall
limit the obligations of any party under
Section 6.1(a).
(c) If, prior to the Effective Time, any event occurs with
respect to Allied World or any Allied World Subsidiary, or any
change occurs with respect to other information supplied by
Allied World for inclusion in the Joint Proxy
Statement/Prospectus or the
Form S-4,
which is required to be described in an amendment of, or a
supplement to, the Joint Proxy Statement/Prospectus or the
Form S-4,
Allied World shall promptly notify Transatlantic of such event,
and Allied World and Transatlantic shall cooperate in the prompt
filing with the SEC of any necessary amendment or supplement to
the Joint Proxy Statement/Prospectus and the
Form S-4
and, as required by Law, in disseminating the information
contained in such amendment or supplement to
Transatlantics stockholders and Allied Worlds
stockholders. Nothing in this Section 6.1(c) shall
limit the obligations of any party under
Section 6.1(a).
(d) Transatlantic shall, as soon as practicable, but in no
event more than five (5) Business Days, following the
effectiveness of the
Form S-4
under the Securities Act, duly call, give notice of, and as soon
as practicable convene and hold the Transatlantic Stockholders
Meeting, which shall be held concurrently with the Allied World
Stockholders Meeting. Transatlantic shall use its reasonable
best efforts to (i) cause the Joint Proxy
Statement/Prospectus to be mailed to Transatlantics
stockholders and to hold the Transatlantic
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Stockholders Meeting as soon as practicable after the
Form S-4
is declared effective under the Securities Act and
(ii) solicit the Transatlantic Requisite Stockholder Vote.
Transatlantic shall, through the Transatlantic Board, recommend
to its stockholders that they give the Transatlantic Requisite
Stockholder Vote and shall include such recommendation in the
Joint Proxy Statement/Prospectus, except to the extent that the
Transatlantic Board shall have made an Adverse Recommendation
Change as permitted by Section 5.5(g). Transatlantic
agrees that its obligations pursuant to this
Section 6.1 shall not be affected by the
commencement, public proposal, public disclosure or
communication to Transatlantic of any Competing Transaction or
by the making of any Adverse Recommendation Change by the
Transatlantic Board.
(e) Allied World shall, as soon as practicable, but in no
event more than five (5) Business Days, following the
effectiveness of the
Form S-4
under the Securities Act, duly call, give notice of, and as soon
as practicable convene and hold the Allied World Stockholders
Meeting, which shall be held concurrently with the Transatlantic
Stockholders Meeting. Allied World shall use its reasonable best
efforts to (i) cause the Joint Proxy Statement/Prospectus
to be mailed to Allied Worlds stockholders as promptly as
practicable after the
Form S-4
is declared effective under the Securities Act and to hold the
Allied World Stockholders Meeting as soon as practicable after
the
Form S-4
becomes effective and (ii) solicit the Allied World
Requisite Stockholder Vote. Allied World shall, through the
Allied World Board, recommend to its stockholders that they give
the Allied World Requisite Stockholder Vote and shall include
such recommendation in the Joint Proxy Statement/Prospectus,
except to the extent that the Allied World Board shall have made
an Adverse Recommendation Change as permitted by
Section 5.5(g). Allied World agrees that its
obligations pursuant to this Section 6.1 shall not
be affected by the commencement, public proposal, public
disclosure or communication to Allied World of any Competing
Transaction or by the making of any Adverse Recommendation
Change by the Allied World Board.
6.2 Access to Information;
Confidentiality. Upon reasonable notice and
subject to applicable Law, each of Transatlantic and Allied
World shall, and shall cause each of its respective Subsidiaries
to, afford to the other party and to the Representatives of such
other party reasonable access during the period prior to the
Effective Time to all their respective properties, books,
Contracts, commitments, personnel and records and, during such
period, each of Transatlantic and Allied World shall, and shall
cause each of its respective Subsidiaries to, furnish promptly
to the other party (a) a copy of each report, schedule,
registration statement and other document filed by it during
such period pursuant to the requirements of federal or state
securities Laws or Insurance Laws (other than such documents
that such party is not permitted to disclose under applicable
Law) and (b) all other information concerning its business,
properties and personnel as such other party may reasonably
request; provided, however, that either party may
withhold any document or information (i) that is subject to
the terms of a confidentiality agreement with a third party
entered into prior to the date of this Agreement or entered into
after the date of this Agreement in the ordinary course of
business (provided that the withholding party shall use
commercially reasonable efforts to obtain the required consent
of such third party to provide such access or disclosure),
(ii) the disclosure of which would violate any Law or
fiduciary duty (provided that the withholding party shall
use commercially reasonable efforts to make appropriate
substitute arrangements to permit reasonable disclosure not in
violation of any Law or fiduciary duty) or (iii) that is
subject to any attorney-client privilege (provided that
the withholding party shall use commercially reasonable efforts
to allow for such access or disclosure to the maximum extent
that does not result in a loss of attorney-client privilege).
Furthermore, the parties acknowledge that with respect to the
Sensitive Information (as defined in the
Confidentiality Agreement), the Confidentiality Agreement
imposes additional restrictions as to the manner in which such
information will be exchanged by the parties. Without limiting
the generality of the foregoing, each of Allied World and
Transatlantic shall, within two Business Days of a request by
the other party therefor, provide to such other party the
information described in
Rule 14a-7(a)(2)(ii)
under the Exchange Act. All information exchanged pursuant to
this Section 6.2 shall be subject to the
confidentiality agreement, dated March 27, 2011, between
Allied World and Transatlantic (as supplemented and amended from
time to time, the Confidentiality Agreement).
No investigation pursuant to this Section 6.2 or
information provided, made available or delivered to
Transatlantic or Allied World pursuant to this
Section 6.2 or otherwise shall affect any
representations or warranties of Allied World or Transatlantic
or conditions or rights of Allied World or Transatlantic
contained in this Agreement.
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6.3 Required Actions.
(a) Each of the parties shall use its reasonable best
efforts to take, or cause to be taken, all actions, and do, or
cause to be done, and assist and cooperate with the other
parties in doing, all things necessary to consummate and make
effective, as soon as reasonably possible, the Merger and the
other transactions contemplated by this Agreement in accordance
with the terms hereof; provided, however, that
nothing in this Section 6.3 shall prohibit either
party from taking any action expressly contemplated by
Section 5.5.
(b) In connection with and without limiting
Section 6.3(a), subject to the terms and conditions
of this Agreement, each party will use its reasonable best
efforts to take, or cause to be taken, all actions, to file, or
cause to be filed, all documents and to do, or cause to be done,
all things necessary, proper or advisable to consummate the
transactions contemplated by this Agreement, including preparing
and filing as promptly as practicable all documentation to
effect all necessary filings, consents, waivers, approvals,
authorizations, permits or orders from all third parties and
Governmental Entities, including those required to satisfy the
conditions set forth in Section 7.1(d) and
Section 7.1(f), so as to enable the Closing to occur
as soon as reasonably practicable. To the extent necessary in
order to accomplish the foregoing, Allied World and
Transatlantic shall jointly propose, negotiate, commit to and
effect, by consent decree, hold separate order or otherwise, the
holding separate, sale, divestiture or any other disposition of,
or prohibition or limitation on, (A) the ownership or
operation by Allied World, Transatlantic or any of their
respective Subsidiaries of any portion of the business,
properties or assets of Allied World, Transatlantic or any of
their respective Subsidiaries, (B) the ability of Allied
World to acquire or hold, or exercise full right of ownership
of, any shares of the capital stock of the Allied World
Subsidiaries or Transatlantic or the Transatlantic Subsidiaries,
including the right to vote, or (C) Allied World or any of
its Subsidiaries effectively controlling the business or
operations of Allied World and the Allied World Subsidiaries or
Transatlantic and the Transatlantic Subsidiaries;
provided, however, that neither Transatlantic nor
Allied World shall be required pursuant to this
Section 6.3(b) to propose, commit to or effect any
action that is not conditioned upon the consummation of the
Merger. If the actions taken by Transatlantic and Allied World
pursuant to the immediately preceding sentence do not result in
the conditions set forth in Section 7.1(d) and
Section 7.1(f) being satisfied, then each of
Transatlantic and Allied World shall jointly (to the extent
practicable) initiate
and/or
participate in any proceedings, whether judicial or
administrative, in order to (i) oppose or defend against
any action or proceeding by any Governmental Entity or other
Person to challenge, prevent or enjoin the consummation of the
Merger or any of the other transactions contemplated by this
Agreement and (ii) take such action as is necessary to
overturn any regulatory action or proceeding by any Governmental
Entity or other Person to challenge or block, in whole or in
part, consummation of the Merger or any of the other
transactions contemplated by this Agreement, including by
defending any suit, action or other legal proceeding brought by
any Governmental Entity or other Person in order to avoid the
entry of, or to have vacated, overturned or terminated,
including by appeal if necessary, any Injunction or other
prohibition resulting from any suit, action or other legal
proceeding that would cause any condition set forth in
Section 7.1(d) or Section 7.1(f) not to
be satisfied, provided that Transatlantic and Allied
World shall cooperate with one another in connection with, and
shall jointly control, all proceedings related to the foregoing.
(c) In connection with and without limiting the generality
of the foregoing, each of Transatlantic and Allied World shall:
(i) make or cause to be made, in consultation and
cooperation with the other and as promptly as practicable after
the date of this Agreement (but in any event, with respect to
clause (A) below, within fifteen (15) Business Days
following the date of this Agreement), (A) an appropriate
filing of a Notification and Report Form pursuant to the HSR Act
relating to the Merger, (B) any required filings under the
Antitrust Laws of Brazil and Italy within fifteen
(15) Business Days following the date of this Agreement,
and (C) all other necessary registrations, declarations,
notices and filings relating to the Merger with any other
Governmental Entities under any other antitrust, competition,
trade regulation or similar Laws, including in those
jurisdictions set forth in Section 7.1(d) of the
Allied World Disclosure Schedule and Section 7.1(d)
of the Transatlantic Disclosure Schedule under the heading
Antitrust Approvals;
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(ii) use its reasonable best efforts to furnish to the
other all assistance, cooperation and information required for
any such registration, declaration, notice or filing and in
order to achieve the effects set forth in
Section 6.3(b);
(iii) keep the other apprised of the status of its filings,
registrations and submissions with any Governmental Entity and
give the other reasonable prior notice of any such registration,
declaration, notice or filing and, to the extent reasonably
practicable, of any communication with any Governmental Entity
regarding the Merger (including with respect to any of the
actions referred to in Section 6.3(b)), and permit
the other to review and discuss in advance, and consider in good
faith the views of, and secure the participation of, the other
in connection with, any such registration, declaration, notice,
filing or communication;
(iv) respond as promptly as practicable under the
circumstances to any inquiries received from any Governmental
Entity or any other authority enforcing applicable antitrust,
competition, trade regulation or similar Laws for additional
information or documentation in connection with antitrust,
competition, trade regulation or similar matters;
(v) without limiting the generality of
Section 6.3(c)(iv), (A) use its reasonable best
efforts to achieve Substantial Compliance as promptly as
practicable with any request for additional information or
documentary material issued by a Governmental Entity under
15 U.S.C. Sect. 18a(e) and in conjunction with the
transactions contemplated by this Agreement (a Second
Request), (B) certify Substantial Compliance with
any Second Request as promptly as practicable after the date of
such Second Request, but in no event later than
December 15, 2011, (C) take all actions necessary to
assert, defend and support its certification of Substantial
Compliance with such Second Request and (D) not extend any
waiting period under the HSR Act or enter into any agreement
with such Governmental Entities or other authorities to delay,
or otherwise not to consummate as soon as practicable, any of
the transactions contemplated by this Agreement except with the
prior written consent of the other parties hereto, which consent
may be withheld in the sole discretion of the non-requesting
party; and
(vi) unless prohibited by applicable Law or by the
applicable Governmental Entity, (A) to the extent
reasonably practicable, not participate in or attend any
meeting, or engage in any substantive conversation with any
Governmental Entity in respect of the Merger (including with
respect to any of the actions referred to in
Section 6.3(c)) without the other, (B) to the
extent reasonably practicable, give the other reasonable prior
notice of any such meeting or conversation, (C) in the
event one party is prohibited by applicable Law or by the
applicable Governmental Entity from participating or attending
any such meeting or engaging in any such conversation, keep such
party reasonably apprised with respect thereto,
(D) cooperate in the filing of any substantive memoranda,
white papers, filings, correspondence or other written
communications explaining or defending this Agreement and the
Merger, articulating any regulatory or competitive argument,
and/or
responding to requests or objections made by any Governmental
Entity, and (E) furnish the other party with copies of all
correspondence, filings and communications (and memoranda
setting forth the substance thereof) between it and its
Affiliates and their respective Representatives on the one hand,
and any Governmental Entity or members of any Governmental
Entitys staff, on the other hand, with respect to this
Agreement and the Merger.
(d) Transatlantic shall give prompt notice to Allied World,
and Allied World shall give prompt notice to Transatlantic, of
(i) any representation or warranty made by it contained in
this Agreement that is qualified as to materiality becoming
untrue or inaccurate in any respect or any such representation
or warranty that is not so qualified becoming untrue or
inaccurate in any material respect or (ii) the failure by
it to comply with or satisfy in any material respect any
covenant, condition or agreement to be complied with or
satisfied by it under this Agreement; provided,
however, that no such notification shall affect the
representations, warranties, covenants or agreements of the
parties or the conditions to the obligations of the parties
under this Agreement; provided further, that a
failure to comply with this Section 6.3(d) will not
constitute the failure of any condition set forth in
Article VII to be satisfied, unless the underlying
inaccuracy or breach would independently result in the failure
of a condition set forth in Article VII to be
satisfied.
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(e) Immediately following the execution and delivery of
this Agreement by each of the parties hereto, Allied World, as
sole stockholder of Merger Sub, will adopt this Agreement.
(f) Each of Transatlantic and Allied World shall use its
reasonable best efforts to cause the Allied World Shares which
constitute Merger Consideration to be listed on the NYSE as of
the Effective Time.
6.4 Actions with Respect to Certain Existing
Indebtedness.
(a) Allied World Credit
Facilities. Prior to the Effective Time,
Allied World shall either (i) terminate the Allied World
Secured Credit Facility and Allied World Unsecured Credit
Facility or (ii) use its commercially reasonable efforts to
obtain, on or before the Effective Time, the necessary consents
(the Requisite Lender Consents) of lenders
party to (A) the Allied World Secured Credit Facility and
(B) the Allied World Unsecured Credit Facility, in each
case, to allow the Allied World Secured Credit Facility and the
Allied World Unsecured Credit Facility, as applicable, to remain
in effect after the Effective Time with no default or event of
default thereunder resulting from the Merger or the consummation
of the other transactions contemplated hereby, with no
(x) reduction of the outstanding amounts or lending or
other financing commitments thereunder or (y) shortening of
any maturity thereunder; provided, however, that
nothing contained in this Section 6.4(a) shall
permit or require Allied World to accept any terms or conditions
with respect to the Allied World Secured Credit Facility or
Allied World Unsecured Credit Facility, as applicable, that are
not commercially reasonable (giving effect to the then-current
economic environment). If applicable, Allied World shall deliver
to Transatlantic drafts of all agreements to be entered into
with its lenders in connection with obtaining the Requisite
Lender Consents and shall keep Transatlantic informed in all
material respects of the status of Allied Worlds efforts
to obtain the Requisite Lender Consents. Transatlantic shall use
commercially reasonable efforts to cooperate with Allied World
to obtain the Requisite Lender Consents to the extent reasonably
requested by Allied World.
(b) Supplemental Indenture. To the
extent required, concurrently with the Closing, Allied World
shall cause the Surviving Corporation to (i) issue and
cause to be executed by the requisite parties a supplemental
indenture (the Supplemental Indenture)
pursuant to Section 901(1) of that certain Indenture, dated
as of December 14, 2005, between Transatlantic and The Bank
of New York, as supplemented by the First Supplemental
Indenture, dated as of December 14, 2005, between
Transatlantic and The Bank of New York and the Second
Supplemental Indenture, dated as of November 23, 2009,
between Transatlantic and The Bank of New York Mellon (as
supplemented, the Transatlantic Indenture)
and (ii) comply with the applicable provisions of the
Transatlantic Indenture, including the delivery of any opinion
of counsel required thereunder.
6.5 Indemnification and Directors and Officers
Insurance.
(a) Allied World agrees that all rights to indemnification,
advancement of expenses and exculpation from liabilities for
acts or omissions occurring prior to the Effective Time now
existing in favor of the current or former directors or officers
of Transatlantic and the Transatlantic Subsidiaries (each, an
Indemnified Party) shall be assumed by Allied
World and shall survive the Merger and continue in full force
and effect in accordance with their terms.
(b) At or prior to the Effective Time, Allied World shall
purchase a tail directors and officers
liability insurance policy for Transatlantic, the Transatlantic
Subsidiaries and their respective current and former directors
and officers who are currently covered by the directors
and officers liability insurance coverage currently
maintained by Transatlantic, in a form reasonably acceptable to
Transatlantic, that shall provide Transatlantic, the
Transatlantic Subsidiaries and such directors and officers with
coverage for six years following the Effective Time of not less
than the existing coverage and have other terms not less
favorable to the insured persons than the directors and
officers liability insurance coverage currently maintained
by Transatlantic; provided, however, that in no
event shall Allied World be required to expend for such policy
an amount in excess of 250% of the annual aggregate premiums
currently paid by Allied World for such insurance (the
Maximum Premium). Allied World shall maintain
such policy in full force and effect, and continue to honor the
obligations thereunder. If such insurance coverage cannot be
obtained at all, or can only be obtained at an annual premium in
excess of the Maximum Premium, Allied World will cause to be
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maintained the most advantageous policies of directors and
officers insurance obtainable for an annual premium equal
to the Maximum Premium.
(c) The provisions of this Section 6.5 will
survive the Effective Time and are intended to be for the
benefit of, and will be enforceable by, each Indemnified Party
and his or her heirs and representatives. Allied World shall pay
or cause to be paid (as incurred) all expenses, including
reasonable fees and expenses of counsel, that an Indemnified
Party may incur in enforcing the indemnity and other obligations
provided for in this Section 6.5 (subject to
reimbursement if the Indemnified Party is subsequently
determined not to be entitled to indemnification under
Section 6.5(a)).
(d) If Allied World or any of its successors or assigns
(i) consolidates with or merges into any other Person and
is not the continuing or surviving corporation or entity of such
consolidation or merger or (ii) transfers or conveys all or
substantially all of its properties and assets to any Person,
then, and in each such case, to the extent necessary, proper
provision will be made so that the successors and assigns of
Allied World, as the case may be, will assume the obligations
set forth in this Section 6.5.
6.6 Fees and Expenses.
(a) Except as provided in this Section 6.6, all
costs and expenses incurred in connection with this Agreement
and the transactions contemplated by this Agreement will be paid
by the party incurring such expense; provided,
however, that Allied World and Transatlantic shall share
equally (i) all fees and expenses in relation to the
printing and filing of the
Form S-4
and the printing, filing and distribution of the Joint Proxy
Statement/Prospectus and (ii) any filing fees required in
connection with the Merger pursuant to the HSR Act or any other
Antitrust Law, other than, in the case of clause (i) or
clause (ii), attorneys and accountants and
expert fees and other costs and expenses.
(b) In the event that this Agreement is terminated:
(i) by Allied World pursuant to
Section 8.1(f); or
(ii) by Transatlantic pursuant to
Section 8.1(g),
then, the non-terminating party shall reimburse the terminating
party for all of their reasonable
out-of-pocket
fees and expenses (including all fees and expenses of counsel,
accountants, investment bankers, experts and consultants)
incurred by or on behalf of such terminating party in connection
with or related to the authorization, preparation,
investigation, negotiation, execution and performance of this
Agreement and the transactions contemplated hereby (the
Expense Reimbursement), up to a maximum
amount of $35,000,000; provided that in the event this
Agreement is terminated by Allied World pursuant to
Section 8.1(f) on account of a breach of
Section 5.5 or Section 6.1(d) or by
Transatlantic pursuant to Section 8.1(g) on account
of a breach of Section 5.5 or
Section 6.1(e), then the non-terminating party
shall, in addition to the Expense Reimbursement, pay the
terminating party a fee equal to the Alternate Termination Fee;
provided, further that the payment by either party
of the Expense Reimbursement
and/or the
Alternate Termination Fee pursuant to this
Section 6.6(b) shall not relieve such party of any
subsequent obligation to pay the Termination Fee pursuant to
Section 6.6(e)(iv) or
Section 6.6(f)(iv), as applicable, except to the
extent set-off of such amounts is permitted as indicated in the
last sentence of Section 6.6(e) or
Section 6.6(f), as applicable. The fees provided for
in this Section 6.6(b) shall be paid by wire
transfer of same day funds to an account designated by the
recipient thereof within two Business Days after such
termination.
(c) In the event that this Agreement is terminated by
Transatlantic or Allied World pursuant to
Section 8.1(d), then, Transatlantic will pay Allied
World (x) a fee equal to $35,000,000 (the
Alternate Termination Fee) and (y) the
Expense Reimbursement, by wire transfer of same day funds to an
account designated by Allied World, within two Business Days
after such termination; provided that (i) if
Transatlantic or Allied World shall have the right to terminate
this Agreement pursuant to Section 8.1(c), no such
Alternate Termination Fee or Expense Reimbursement shall be due
or payable and (ii) the payment by Transatlantic of the
Alternate Termination Fee or Expense Reimbursement pursuant to
this Section 6.6(c) shall not relieve Transatlantic
of any subsequent obligation to pay the Termination Fee pursuant
to Section 6.6(e)(ii), except to the extent set-off
of such amounts is permitted as indicated in the last sentence
of Section 6.6(e).
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(d) In the event that this Agreement is terminated by
Transatlantic or Allied World pursuant to
Section 8.1(c), then, Allied World will pay
Transatlantic (x) the Alternate Termination Fee and
(y) the Expense Reimbursement, by wire transfer of same day
funds to an account designated by Transatlantic, within two
Business Days after such termination; provided that
(i) if Transatlantic or Allied World shall have the right
to terminate this Agreement pursuant to
Section 8.1(d), no such Alternate Termination Fee or
Expense Reimbursement shall be due or payable and (ii) the
payment by Allied World of the Alternate Termination Fee or
Expense Reimbursement pursuant to this
Section 6.6(d) shall not relieve Allied World of any
subsequent obligation to pay the Termination Fee pursuant to
Section 6.6(f)(ii), except to the extent set-off of
such amounts is permitted as indicated in the last sentence of
Section 6.6(f).
(e) In the event that this Agreement is terminated:
(i) by Allied World pursuant to Section 8.1(h);
(ii) by Transatlantic or Allied World pursuant to
Section 8.1(d) and (x) a proposal for a
Competing Transaction has been made to Transatlantic or its
stockholders or such a proposal (whether or not conditional) or
an intention to make such a proposal has been publicly announced
or has otherwise become publicly known after the date of this
Agreement and prior to the Transatlantic Stockholders Meeting,
and (y) within twelve (12) months after such
termination, Transatlantic or any of its Subsidiaries enters
into any definitive agreement in respect of any Competing
Transaction, or recommends or submits a Competing Transaction to
its stockholders for adoption, or a transaction in respect of a
Competing Transaction is consummated, which, in each case, need
not be the Competing Transaction that shall have been made,
publicly announced or publicly made known prior to termination
hereof; provided, however, for purposes of this
clause (ii), any reference in the definition of Competing
Transaction to 10% shall be deemed to be a reference to 50%;
(iii) by Transatlantic or Allied World pursuant to
Section 8.1(e) and (x) a proposal for a
Competing Transaction has been made to Transatlantic or its
stockholders or such a proposal (whether or not conditional) or
an intention to make such a proposal has been publicly announced
or has otherwise become publicly known after the date of this
Agreement and prior to the End Date, (y) the Transatlantic
Stockholders Meeting did not occur at least five Business Days
prior to the End Date and (z) within twelve
(12) months after such termination, Transatlantic or any of
its Subsidiaries enters into any definitive agreement in respect
of any Competing Transaction, or recommends or submits a
Competing Transaction to its stockholders for adoption, or a
transaction in respect of a Competing Transaction is
consummated, which, in each case, need not be the Competing
Transaction that shall have been made, publicly announced or
publicly made known prior to termination hereof;
provided, however, for purposes of this clause
(iii), any reference in the definition of Competing
Transaction to 10% shall be deemed to be a reference to
50%; or
(iv) by Allied World pursuant to Section 8.1(f)
and (x) a proposal for a Competing Transaction has been
made to Transatlantic or its stockholders or such a proposal
(whether or not conditional) or an intention to make such a
proposal has been publicly announced or has otherwise become
publicly known after the date of this Agreement and prior to the
date of termination (except in the event of a termination on
account of a breach of Section 5.5 or
Section 6.1(d), in which case a proposal for the
Competing Transaction may be made or the intention to make such
a proposal may be publicly announced or otherwise publicly known
prior to or after the date of termination) and (y) within
twelve (12) months after such termination, Transatlantic or
any of its Subsidiaries enters into any definitive agreement in
respect of any Competing Transaction, or recommends or submits a
Competing Transaction to its stockholders for adoption, or a
transaction in respect of a Competing Transaction is
consummated, which, in each case, need not be the Competing
Transaction that shall have been made, publicly announced or
publicly made known prior to termination hereof;
provided, however, for purposes of this clause
(iv), any reference in the definition of Competing
Transaction to 10% shall be deemed to be a reference to 50%,
then, Transatlantic will pay Allied World a fee equal to
$115,000,000 (the Termination Fee), less the
amount of any Expense Reimbursement
and/or
Alternate Termination Fee previously paid by Transatlantic to
Allied World, by wire transfer of same day funds to an account
designated by Allied
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World, in the case of a termination referred to in
Section 6.6(e)(ii), Section 6.6(e)(iii)
or Section 6.6(e)(iv), upon the execution of the
definitive agreement, and in the case of a termination by Allied
World referred to in Section 6.6(e)(i), within two
Business Days after such termination.
(f) In the event that this Agreement is terminated:
(i) by Transatlantic pursuant to Section 8.1(i);
(ii) by Allied World or Transatlantic pursuant to
Section 8.1(c) and (x) a proposal for a
Competing Transaction has been made to Allied World or its
stockholders or such a proposal (whether or not conditional) or
an intention to make such a proposal has been publicly announced
or has otherwise become publicly known after the date of this
Agreement and prior to the Allied World Stockholders Meeting,
and (y) within twelve (12) months after such
termination, Allied World or any of its Subsidiaries enters into
any definitive agreement in respect of any Competing
Transaction, or recommends or submits a Competing Transaction to
its stockholders for adoption, or a transaction in respect of a
Competing Transaction is consummated, which, in each case, need
not be the Competing Transaction that shall have been made,
publicly announced or publicly made known prior to termination
hereof; provided, however, for purposes of this
clause (ii), unless a Competing Transaction described in
clauses (x) and (y) is made and consummated by the
same Person (or any controlled Affiliate thereof), any reference
in the definition of Competing Transaction to 10% shall be
deemed to be a reference to 50%;
(iii) by Allied World or Transatlantic pursuant to
Section 8.1(e) and (x) a proposal for a
Competing Transaction has been made to Allied World or its
stockholders or such a proposal (whether or not conditional) or
an intention to make such a proposal has been publicly announced
or has otherwise become publicly known after the date of this
Agreement and prior to the End Date, (y) the Allied World
Stockholders Meeting did not occur at least five Business Days
prior to the End Date and (z) within twelve
(12) months after such termination, Allied World or any of
its Subsidiaries enters into any definitive agreement in respect
of any Competing Transaction, or recommends or submits a
Competing Transaction to its stockholders for adoption, or a
transaction in respect of a Competing Transaction is
consummated, which, in each case, need not be the Competing
Transaction that shall have been made, publicly announced or
publicly made known prior to termination hereof;
provided, however, for purposes of this clause
(iii), any reference in the definition of Competing
Transaction to 10% shall be deemed to be a reference to
50%; or
(iv) by Transatlantic pursuant to
Section 8.1(g) and (x) a proposal for a
Competing Transaction has been made to Allied World or its
stockholders or such a proposal (whether or not conditional) or
an intention to make such a proposal has been publicly announced
or has otherwise become publicly known after the date of this
Agreement and prior to the date of termination (except in the
event of a termination on account of a breach of
Section 5.5 or Section 6.1(e), in which
case a proposal for the Competing Transaction may be made or the
intention to make such a proposal may be publicly announced or
otherwise publicly known prior to or after the date of
termination) and (y) within twelve (12) months after
such termination, Allied World or any of its Subsidiaries enters
into any definitive agreement in respect of any Competing
Transaction, or recommends or submits a Competing Transaction to
its stockholders for adoption, or a transaction in respect of a
Competing Transaction is consummated, which, in each case, need
not be the Competing Transaction that shall have been made,
publicly announced or publicly made known prior to termination
hereof; provided, however, for purposes of this
clause (iv), any reference in the definition of Competing
Transaction to 10% shall be deemed to be a reference to 50%,
then, Allied World will pay Transatlantic the Termination Fee,
less the amount of any Expense Reimbursement
and/or
Alternate Termination Fee previously paid by Allied World to
Transatlantic, by wire transfer of same day funds to an account
designated by Transatlantic, in the case of a termination
referred to in Section 6.6(f)(ii),
Section 6.6(f)(iii) or
Section 6.6(f)(iv), upon the execution of the
definitive agreement, and in the case of a termination by
Transatlantic referred to in Section 6.6(f)(i),
within two Business Days after such termination.
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(g) Each party acknowledges that the agreements contained
in this Section 6.6 are an integral part of the
transactions contemplated by this Agreement and that, without
these agreements, the other party would not enter into this
Agreement. Accordingly, if a party fails promptly to pay the
amounts due pursuant to this Section 6.6 and, in
order to obtain such payment, the other party commences a suit
that results in a judgment against the non-paying party for the
amounts set forth in this Section 6.6, the
non-paying party will pay to the other party interest, from the
date such payment was required to be made, on the amounts set
forth in this Section 6.6 at a rate per annum equal
to the three-month LIBOR (as reported in The Wall Street
Journal (Northeast edition) or, if not reported therein, in
another authoritative source selected by the party entitled to
such amounts) on the date such payment was required to be made
(or if no quotation for three-month LIBOR is available for such
date, on the next preceding date for which such a quotation is
available) plus 250 basis points. The parties acknowledge
and agree that the neither the Termination Fee nor the Alternate
Termination Fee shall constitute either a penalty or liquidated
damages, and the right of a party to receive, or the receipt of,
the Termination Fee or the Alternate Termination Fee, as
applicable, shall not limit or otherwise affect such
partys right to specific performance as provided in
Section 9.10, such partys rights as set forth
in Section 8.2 or Section 9.7 or any
other remedies that may be available for breaches of this
Agreement, including breaches of Section 5.5 of this
Agreement.
6.7 Transaction
Litigation. Transatlantic shall give Allied World
the opportunity to participate in the defense or settlement of
any stockholder litigation against Transatlantic
and/or its
directors relating to the Merger and the other transactions
contemplated by this Agreement, and no such settlement shall be
agreed to without the prior written consent of Allied World,
which consent shall not be unreasonably withheld, conditioned or
delayed. Allied World shall give Transatlantic the opportunity
to participate in the defense or settlement of any stockholder
litigation against Allied World
and/or its
directors relating to the Merger and the other transactions
contemplated by this Agreement, and no such settlement shall be
agreed to without the prior written consent of Transatlantic,
which consent shall not be unreasonably withheld, conditioned or
delayed. For purposes of this paragraph, participate
means that the non-litigating party will be kept apprised of
proposed strategy and other significant decisions with respect
to the litigation by the litigating party, consistent with the
common interest of Allied World and Transatlantic in these
matters and the applicable privileges and protections provided
therein, and the non-litigating party may offer comments or
suggestions with respect to the litigation, but will not be
afforded any decision making power or other authority over the
litigation except for the settlement consent set forth above.
6.8 Section 16 Matters. Prior
to the Effective Time, Allied World, Transatlantic and Merger
Sub each shall take all such steps as may be required to cause
(a) any dispositions of Transatlantic Common Stock
(including derivative securities with respect to Transatlantic
Common Stock) resulting from the Merger and the other
transactions contemplated by this Agreement, by each individual
who will be subject to the reporting requirements of
Section 16(a) of the Exchange Act with respect to
Transatlantic immediately prior to the Effective Time to be
exempt under
Rule 16b-3
promulgated under the Exchange Act and (b) any acquisitions
of Allied World Shares (including derivative securities with
respect to Allied World Shares) resulting from the Merger and
the other transactions contemplated by this Agreement, by each
individual who may become subject to the reporting requirements
of Section 16(a) of the Exchange Act with respect to Allied
World to be exempt under
Rule 16b-3
promulgated under the Exchange Act.
6.9 Governance Matters.
(a) Board of Directors. Allied
World shall take all necessary action to cause, effective at the
Effective Time, (i) the size of the Allied World Board to
be increased so as to consist of 11 members and (ii) the
Allied World Board to be comprised of (A) four Independent
Transatlantic Directors, (B) Mr. Richard S. Press (or
if he is not a member of the Transatlantic Board immediately
prior to the Effective Time, another Independent Transatlantic
Director), (C) Mr. Michael C. Sapnar (or if he is not
a member of the Transatlantic Board immediately prior to the
Effective Time, another director of Transatlantic immediately
prior to the Effective Time selected by Transatlantic),
(D) four Independent Allied World Directors, and
(E) Mr. Scott A. Carmilani (or if he is not a member
of the Allied World Board immediately prior to the Effective
Time, another director of Allied World immediately prior to the
Effective Time selected by Allied World), with the six members
set forth in clauses (A) through (C) and the five
members set forth in clauses (D) and (E), respectively, to
be
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divided into the three (3) classes of Allied World
directors as nearly equal as possible (Class I,
Class II and Class III), as set forth on
Section 6.9(a) of the Transatlantic Disclosure
Schedule (the Reconstituted Allied World
Board).
(b) Allied World Board Written
Consent. At the Effective Time, Allied World
and Transatlantic shall take all necessary action to cause the
Reconstituted Allied World Board to deliver a duly executed
written consent which shall approve the following (the
Reconstituted Allied World Board Written
Consent):
(i) the election of Mr. Press as non-executive
Chairman of the Reconstituted Allied World Board for a one-year
term, unless he is not a member of the Transatlantic Board
immediately prior to the Effective Time, in which case the
non-executive Chairman to be elected for such one-year term
shall be another Independent Transatlantic Director;
(ii) the continuation of Mr. Carmilani as the
President and Chief Executive Officer of Allied World, unless he
is not the President and Chief Executive Officer of Allied World
immediately prior to the Effective Time;
(iii) the appointment of Mr. Sapnar to serve as the
President and Chief Executive Officer of Global Reinsurance of
Allied World, unless he is not the Chief Operating Officer of
Transatlantic immediately prior to the Effective Time;
(iv) the appointment of the persons listed on
Section 6.9(b)(iv) of the Transatlantic Disclosure
Schedule to the indicated positions and offices of Allied World
set forth opposite their names, unless, with respect to a person
listed on Section 6.9(b)(iv) of the Transatlantic
Disclosure Schedule, such person is not an officer of either
Transatlantic or Allied World, as the case may be, immediately
prior the Effective Time;
(v) that the Allied World Board have six board committees:
the Audit Committee, the Compensation Committee, the Enterprise
Risk Committee, the Executive Committee, the Investment
Committee and the Nominating & Corporate Governance
Committee;
(vi) that, for a period of one year from the Closing Date,
the Executive Committee shall be comprised of Mr. Carmilani
(or if he is not a member of the Allied World Board immediately
prior to the Effective Time, another member of the Allied World
Board selected by Allied World prior to the Effective Time), one
Independent Allied World Director selected by Allied World prior
to the Effective Time, and two Independent Transatlantic
Directors selected by Transatlantic prior to the Effective Time,
and be chaired by Mr. Carmilani (or if he is not a member
of the Allied World Board immediately prior to the Effective
Time, another Independent Allied World Director selected by
Allied World prior to the Effective Time);
(vii) that, for a period of one year from the Closing Date,
each of the Investment Committee and Nominating &
Corporate Governance Committee shall be comprised of two
Independent Allied World Directors selected by Allied World
prior to the Effective Time and two Independent Transatlantic
Directors selected by Transatlantic prior to the Effective Time,
and be chaired by one of the Independent Allied World Directors
selected by Allied World prior to the Effective Time;
(viii) that, for a period of one year from the Closing
Date, each of the Audit Committee, Compensation Committee and
Enterprise Risk Committee shall be comprised of two Independent
Allied World Directors selected by Allied World prior to the
Effective Time and two Independent Transatlantic Directors
selected by Transatlantic prior to the Effective Time, and be
chaired by one of the Independent Transatlantic Directors
selected by Transatlantic prior to the Effective Time;
(ix) that in connection with the annual general meeting of
Allied Worlds shareholders in 2012, the Reconstituted
Allied World Board shall propose to increase the size of the
Allied World Board by one member and shall nominate for election
at such meeting, a new director to fill the resulting vacancy,
who shall become the non-executive Chairman of the Allied World
Board effective as of the first anniversary of the Closing Date;
and that such person nominated for election at such meeting
shall (A) have been approved by the Reconstituted Allied
World Board, (B) have been recommended by the
Nominating &
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Governance Committee of the Reconstituted Allied World Board,
(C) have substantial insurance industry expertise, and
(D) not have been a member of the Transatlantic Board or
the Allied World Board immediately prior to the date of this
Agreement; and further that Allied World shall duly call, give
notice of, convene and hold its annual general meeting of
shareholders in 2012 no later than June 30, 2012; and
(x) the adoption of the organizational regulations in the
form of Exhibit D hereto as the organizational
regulations of Allied World, effective as of the Effective Time.
(c) Non-Executive
Chairman. Mr. Press has delivered to
Allied World, simultaneously with the date hereof, an executed
letter in the form set forth on Section 6.9(c) of
the Transatlantic Disclosure Schedule.
(d) Transatlantic Chief Executive
Officer. Robert F. Orlich will retire as
President and Chief Executive Officer of Transatlantic
immediately prior to the Effective Time.
(e) Headquarters. Following the
Effective Time, the corporate headquarters for Allied World will
be in Zug, Switzerland.
(f) Vesting. Any Independent
Transatlantic Director or Independent Allied World Director who
ceases to be a director of the Reconstituted Allied World Board
prior to the end of his or her term shall have immediate vesting
of all of his or her unvested Allied World Stock-Based Awards.
6.10 Retention Program and Employee
Waivers. Prior to the Effective Time, Allied
World shall use its reasonable best efforts to deliver to
Transatlantic agreements, in form and substance reasonably
satisfactory to Transatlantic, executed by each person listed on
Schedule 6.10 of the Allied World Disclosure
Schedule, providing that (a) any change in status or
reduction of duties directly resulting from the transactions
contemplated by this Agreement shall not constitute good
reason for purposes of determining each such persons
entitlement to severance benefits or the acceleration of any
vesting or other rights, and (b) the transactions
contemplated by this Agreement will not, standing alone, result
in the acceleration of any vesting or other rights for each such
person; provided, that in the event that the waiver of any
nonqualified deferred compensation (as defined in
Section 409A of the Code) would result in the imposition of
any penalty tax pursuant to Section 409A of the Code, such
waiver shall not be effective unless the Reconstituted Allied
World Board, in its sole discretion, provides for a
gross-up of
any such penalty taxes incurred by such person as a result of
such waiver. Transatlantic and Allied World agree to use their
reasonable best efforts to, (A) within 15 Business Days of
the date hereof, individually (after consultation with the
other, but each on terms and in amounts determined in its sole
discretion) implement a retention program to assure the
continued employment of certain key employees of Transatlantic
and Allied World, as the case may be, which retention program
may provide for, among other things, (i) a guarantee to
such key employees of a continued level of compensation for a
time period following the Closing, (ii) a retention award,
that may be cash or stock-based, that will vest over a time
period following the Closing, and (iii) a waiver, to the
extent applicable, by such key employees to certain rights they
may have to severance benefits or the acceleration of any
vesting or other rights as a result of the transactions
contemplated hereby and the integration of Allied World and
Transatlantic after the Closing, and (B) prior to the
Closing, jointly develop an approach to the use of employment
agreements that will be substantially consistent for the senior
management of the combined company.
6.11 Transatlantic Common Stock
Purchase. On or immediately following the date
hereof, Allied World shall enter into a binding contract (the
Stock Purchase Contract) with a third party
broker to purchase a total of 45,000 shares of
Transatlantic Common Stock in the open market for Allied
Worlds account (the Transatlantic Common Stock
Purchase). The Transatlantic Common Stock Purchase
will begin on the second trading day following the receipt of
both the Allied World Requisite Stockholder Vote and the
Transatlantic Requisite Stockholder Vote, and, if necessary,
will continue on each of the two subsequent trading days
thereafter, under the ordinary principles of best execution at
the then-prevailing market price. Allied World shall not revoke,
amend, grant a waiver or otherwise modify the terms of the Stock
Purchase Contract, without the prior written consent of
Transatlantic (not to be unreasonably withheld, delayed or
conditioned).
6.12 Cantonal Tax Ruling. Allied
World shall use reasonable best efforts in obtaining, and
Transatlantic shall use reasonable best efforts in supporting
Allied World in obtaining, on behalf of Allied
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World, prior to the Effective Time, a tax ruling from the
Cantonal Tax Administration of the Canton of Zug providing that
the Merger does not result in income Taxes for Allied World
(and, in particular, the recording of the newly issued Allied
World Shares in the Merger is not subject to income Taxes) (the
Cantonal Tax Ruling). Allied World shall
promptly provide Transatlantic with all information and
documents necessary in connection with obtaining the Cantonal
Tax Ruling and in furtherance thereof shall promptly inform
Transatlantic of any developments which may affect the ruling
process.
6.13 Commercial Register
Ruling. Allied World shall use reasonable best
efforts in obtaining, and Transatlantic shall use reasonable
best efforts in supporting Allied World in obtaining, on behalf
of Allied World, prior to the Effective Time, a ruling from the
Commercial Register of the Canton of Zug confirming that the
Commercial Register will register a capital increase of Allied
World (the Commercial Register Ruling).
Allied World shall promptly provide Transatlantic with all
information and documents necessary in connection with obtaining
the Commercial Register Ruling and in furtherance thereof shall
promptly inform Transatlantic of any developments which may
affect the ruling process.
ARTICLE VII.
CONDITIONS
PRECEDENT
7.1 Conditions to Each Partys Obligation to
Effect the Merger. The respective obligations of
the parties to effect the Merger shall be subject to the
satisfaction, or waiver by each of the parties, at or prior to
the Effective Time of the following conditions:
(a) Allied World Requisite Stockholder
Vote. The Allied World Requisite Stockholder
Vote shall have been obtained.
(b) Transatlantic Requisite Stockholder
Vote. The Transatlantic Requisite Stockholder
Vote shall have been obtained.
(c) Listing. The Allied World
Shares to be issued in the Merger and in respect of
Transatlantic Rollover Options and Converted Transatlantic
Stock-Based Awards, shall have been authorized for listing on
the NYSE, subject to official notice of issuance.
(d) Regulatory
Approvals. (i) Any applicable waiting
period (and any extension thereof) applicable to the Merger
under the HSR Act shall have expired or been earlier terminated;
(ii) all consents of Governmental Entities set forth in
Section 7.1(d) of the Allied World Disclosure
Schedule and Section 7.1(d) of the Transatlantic
Disclosure Schedule shall have been obtained and shall be in
full force and effect at the Closing; and (iii) all filings
with Governmental Entities set forth in
Section 7.1(d) of the Allied World Disclosure
Schedule and Section 7.1(d) of the Transatlantic
Disclosure Schedule shall have been made and any applicable
waiting period thereunder shall have expired or been terminated,
as the case may be (all such expirations, terminations, consents
and filings collectively, the Requisite Regulatory
Approvals). All other consents of, or filings with, or
terminations or expirations of waiting periods imposed by, any
Governmental Entity, including under applicable Antitrust Laws
and Insurance Laws, shall have been obtained, shall have been
made or shall have terminated or expired, as the case may be,
except where the failure to obtain or make such consents or
filings, or the failure of such waiting periods to terminate or
expire, would not reasonably be expected to be materially
adverse to Allied World and its Subsidiaries and Transatlantic
and its Subsidiaries, taken as a whole (after giving effect to
the Merger).
(e) Form S-4. The
Form S-4
shall have become effective under the Securities Act, and no
stop order suspending the effectiveness of the
Form S-4
shall have been issued and no proceedings for that purpose shall
have been initiated or be threatened by the SEC.
(f) No Injunctions or
Restraints. No statute, rule, regulation,
executive order, decree, temporary restraining order,
preliminary or permanent Injunction or other order enacted,
entered, promulgated, enforced or issued by any Governmental
Entity, or other legal restraint or prohibition shall be in
effect preventing, the consummation of the Merger and the
transactions contemplated by this Agreement.
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(g) Governance Matters. The Allied
World Board Election Stockholder Approval shall have been
obtained and not revoked and the Reconstituted Allied World
Board Written Consent shall have been duly and fully executed,
shall be in full force and effect and shall have been delivered
to the corporate secretary of Allied World.
(h) Commercial Register
Ruling. The Commercial Register Ruling shall
have been obtained.
(i) Transatlantic Common Stock
Purchase. The Transatlantic Common Stock
Purchase shall have been consummated.
7.2 Conditions to Obligations of Allied
World. The obligation of Allied World to effect
the Merger is also subject to the satisfaction, or waiver by
Allied World, at or prior to the Effective Time of the following
conditions:
(a) Representations and
Warranties. (i) Each of the
representations and warranties of Transatlantic set forth in
Section 4.2, Section 4.3 and
Section 4.21 of this Agreement shall be true and
correct in all material respects on the date of this Agreement,
and as of the Closing Date, as if made at and as of such date
(except to the extent that any such representation or warranty
speaks as of an earlier date, in which case such representation
or warranty shall be true and correct as of such earlier date),
and (ii) the other representations and warranties of
Transatlantic set forth in this Agreement shall be true and
correct in all respects on the date of this Agreement, and as of
the Closing Date, as if made at and as of such date (except to
the extent that any such representation or warranty speaks as of
an earlier date, in which case such representation or warranty
shall be true and correct as of such earlier date), except where
the failure of such representations and warranties to be so true
and correct (without giving effect to any limitation as to
materiality or Transatlantic Material Adverse
Effect set forth therein), individually or in the
aggregate, has not had, and would not reasonably be expected to
have, a Transatlantic Material Adverse Effect, and Allied World
shall have received a certificate signed on behalf of
Transatlantic by the Chief Executive Officer or the Chief
Financial Officer of Transatlantic to the foregoing effects.
(b) Performance of Obligations of
Transatlantic. Transatlantic shall have
performed in all material respects all material obligations
required to be performed by it under this Agreement at or prior
to the Closing Date, and Allied World shall have received a
certificate signed on behalf of Transatlantic by the Chief
Executive Officer or the Chief Financial Officer of
Transatlantic to such effect.
7.3 Conditions to Obligations of
Transatlantic. The obligation of Transatlantic to
effect the Merger is also subject to the satisfaction, or waiver
by Transatlantic, at or prior to the Effective Time, of the
following conditions:
(a) Representations and
Warranties. (i) Each of the
representations and warranties of Allied World set forth in
Section 3.2, Section 3.3 and
Section 3.21 of this Agreement shall be true and
correct in all material respects on the date of this Agreement,
and as of the Closing Date, as if made at and as of such date
(except to the extent that any such representation or warranty
speaks as of an earlier date, in which case such representation
or warranty shall be true and correct as of such earlier date),
and (ii) the other representations and warranties of Allied
World set forth in this Agreement shall be true and correct in
all respects on the date of this Agreement, and as of the
Closing Date, as if made at and as of such date (except to the
extent that any such representation or warranty speaks as of an
earlier date, in which case such representation or warranty
shall be true and correct as of such earlier date), except where
the failure of such representations and warranties to be so true
and correct (without giving effect to any limitation as to
materiality or Allied World Material Adverse
Effect set forth therein), individually or in the
aggregate, has not had, and would not reasonably be expected to
have, an Allied World Material Adverse Effect, and Transatlantic
shall have received a certificate signed on behalf of Allied
World by the Chief Executive Officer or the Chief Financial
Officer of Allied World to the foregoing effects.
(b) Performance of Obligations of Allied
World. Allied World shall have performed in
all material respects all material obligations required to be
performed by it under this Agreement at or prior to the Closing
Date, and Transatlantic shall have received a certificate signed
on behalf of Allied World by the Chief Executive Officer or the
Chief Financial Officer of Allied World to such effect.
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ARTICLE VIII.
TERMINATION
AND AMENDMENT
8.1 Termination. This Agreement may
be terminated at any time prior to the Effective Time, whether
before or after receipt of the Allied World Requisite
Stockholder Vote or the Transatlantic Requisite Stockholder
Vote, by action taken or authorized by the Board of Directors of
the terminating party or parties:
(a) by mutual consent of Allied World and Transatlantic in
a written instrument, if the Board of Directors of each so
determines;
(b) by either the Allied World Board or the Transatlantic
Board, if any Governmental Entity of competent jurisdiction
shall have issued a final and nonappealable Order permanently
enjoining or otherwise prohibiting the consummation of the
transactions contemplated by this Agreement, except that no
party may terminate this Agreement pursuant to this
Section 8.1(b) if such partys breach of its
obligations under this Agreement proximately contributed to the
occurrence of such Order;
(c) by either the Allied World Board or the Transatlantic
Board, if the Allied World Stockholder Requisite Vote shall not
have been obtained at an Allied World Stockholders Meeting or
any adjournment or postponement thereof at which the vote was
taken;
(d) by either the Allied World Board or the Transatlantic
Board, if the Transatlantic Stockholder Requisite Vote shall not
have been obtained at a Transatlantic Stockholders Meeting or
any adjournment or postponement thereof at which the vote was
taken;
(e) by either the Allied World Board or the Transatlantic
Board, if the Merger shall not have been consummated on or
before January 31, 2012, subject to extension by the mutual
agreement of Allied World and Transatlantic (the End
Date); provided, however, that no party
may terminate this Agreement pursuant to this
Section 8.1(e) if such partys breach of its
obligations under this Agreement proximately contributed to the
failure of the Closing to occur by the End Date;
(f) by the Allied World Board, if there shall have been a
breach of any of the covenants or agreements or any inaccuracy
of any of the representations or warranties set forth in this
Agreement on the part of Transatlantic, which breach or
inaccuracy, either individually or in the aggregate, would
result in, if occurring or continuing on the Closing Date, the
failure of the conditions set forth in
Section 7.2(a) or (b), unless such failure is
reasonably capable of being cured, and Transatlantic is
continuing to use its reasonable best efforts to cure such
failure, by the End Date;
(g) by the Transatlantic Board, if there shall have been a
breach of any of the covenants or agreements or any inaccuracy
of any of the representations or warranties set forth in this
Agreement on the part of Allied World, which breach or
inaccuracy, either individually or in the aggregate, would
result in, if occurring or continuing on the Closing Date, the
failure of the conditions set forth in
Section 7.3(a) or (b), unless such failure is
reasonably capable of being cured, and Allied World is
continuing to use its reasonable best efforts to cure such
failure, by the End Date;
(h) by the Allied World Board, in the event of an Adverse
Recommendation Change by Transatlantic; or
(i) by the Transatlantic Board, in the event of an Adverse
Recommendation Change by Allied World.
8.2 Effect of Termination. In the
event of termination of this Agreement by either Allied World or
Transatlantic in accordance with Section 8.1, this
Agreement shall forthwith become void and have no effect, and
none of Allied World, Merger Sub, Transatlantic, any of their
respective Subsidiaries or Affiliates or any of the officers or
directors of any of the foregoing shall have any liability of
any nature whatsoever under this Agreement, or in connection
with the transactions contemplated by this Agreement, except
that Section 3.21, Section 4.21,
Section 6.6, and Article IX (other than
Section 9.14) shall survive any termination of this
Agreement; provided, however, that nothing
contained in this Section 8.2 shall relieve any
party hereto from any liability for any willful breach of a
representation or warranty or any willful breach of any covenant
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contained in this Agreement. No termination of this Agreement
shall affect the obligations of the parties contained in the
Confidentiality Agreement, all of which obligations shall
survive termination of this Agreement in accordance with their
terms.
8.3 Amendment. Subject to
compliance with applicable Law, this Agreement may be amended by
Allied World, Merger Sub and Transatlantic, by action taken or
authorized by their respective Boards of Directors, at any time
before or after the Transatlantic Requisite Stockholder Vote or
the Allied World Requisite Stockholder Vote; provided,
however, that after the Transatlantic Requisite
Stockholder Vote or the Allied World Requisite Stockholder Vote
has been obtained, there may not be, without further approval of
the stockholders of Transatlantic or Allied World, any amendment
of this Agreement that changes the amount or the form of the
consideration to be delivered under this Agreement to the
holders of Transatlantic Common Stock, or which by applicable
Law otherwise requires the further approval of such
stockholders. This Agreement may not be amended except by an
instrument in writing signed on behalf of each of the parties.
8.4 Extension; Waiver. At any time
prior to the Effective Time, Allied World (on behalf of itself
and Merger Sub) and Transatlantic may, to the extent legally
allowed, (a) extend the time for the performance of any of
the obligations or other acts of the other party, (b) waive
any inaccuracies in the representations and warranties contained
in this Agreement, and (c) waive compliance with any of the
agreements or conditions contained in this Agreement. Any
agreement on the part of a party to any such extension or waiver
will be valid only if set forth in a written instrument signed
by an authorized officer on behalf of such party, but such
extension or waiver or failure to insist on strict compliance
with an obligation, covenant, agreement or condition will not
operate as a waiver of, or estoppel with respect to, any
subsequent or other failure.
ARTICLE IX.
GENERAL
PROVISIONS
9.1 Nonsurvival of Representations and
Warranties. None of the representations,
warranties, covenants or agreements in this Agreement or in any
instrument delivered pursuant to this Agreement shall survive
the Effective Time, other than those covenants or agreements of
the parties which by their terms apply, or are to be performed
in whole or in part, after the Effective Time.
9.2 Notices. All notices and other
communications hereunder shall be in writing and shall be deemed
duly given (a) on the date of delivery if delivered
personally, or if by facsimile, upon written confirmation of
receipt by facsimile, (b) on the first Business Day
following the date of dispatch if delivered utilizing a
next-day
service by a recognized
next-day
courier or (c) on the earlier of confirmed receipt or the
fifth Business Day following the date of mailing if delivered by
registered or certified mail, return receipt requested, postage
prepaid. All notices hereunder shall be delivered to the
addresses set forth below, or pursuant to such other
instructions as may be designated in writing by the party to
receive such notice:
(a) if to Allied World or Merger Sub, to:
Allied World Assurance Company Holdings, AG
Lindenstrasse 8
6340 Baar, Zug
Switzerland
Phone:
41-41-768-1080
Facsimile:
(441) 295-5753
Attention: General Counsel
with a copy (which shall not constitute notice) to:
Willkie Farr & Gallagher LLP
787 Seventh Avenue
New York, NY 10019
Phone: (212) 728-8000
Facsimile: (212) 728-9763
Attention: Steven A. Seidman, Esq.
Jeffrey Hochman, Esq.
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(b) if to Transatlantic, to:
Transatlantic Holdings, Inc.
80 Pine Street
New York, New York 10005
Phone:
(212) 365-2200
Facsimile:
(212) 365-2360
Attention: General Counsel
with a copy (which shall not constitute notice) to:
Gibson, Dunn & Crutcher LLP
200 Park Avenue
New York, NY 10166
Phone:
(212) 351-4000
Facsimile:
(212) 351-4035
Attention: Lois Herzeca, Esq.
9.3 Definitions. Capitalized terms
used in this Agreement shall have the respective meanings
ascribed thereto in the sections of this Agreement set forth
next to such terms on Annex A hereto. For purposes of this
Agreement:
Affiliate of any Person means another
Person that directly or indirectly, through one or more
intermediaries, controls, is controlled by, or is under common
control with, such first Person.
Allied World Board Election Stockholder
Approval means the election of all the members of
the Allied World Board specified in Section 6.9(a)
at the Allied World Stockholders Meeting with the affirmative
vote of at least 50% of the votes cast at a meeting where
holders of at least 50% of the total outstanding Allied World
Shares are represented and voting.
Allied World Capital Stock means the
Allied World Shares and the Participation Certificates.
Allied World Material Adverse Effect
means any change, state of facts, circumstance, event or
effect that, individually or in the aggregate, is materially
adverse to (A) the financial condition, properties, assets,
liabilities, obligations (whether accrued, absolute, contingent
or otherwise), businesses or results of operations of Allied
World and the Allied World Subsidiaries, taken as a whole,
excluding any such change, state of facts, circumstance, event
or effect to the extent caused by or resulting from (i) the
execution, delivery and announcement of this Agreement and the
transactions contemplated hereby, including (x) any loss
of, or adverse change in, the relationship of Allied World or
any Allied World Subsidiary with its customers, employees,
brokers, agents or other producers, suppliers, financing
sources, business partners or regulators caused by the identity
of Transatlantic or any Transatlantic Subsidiary as a party to
the transactions contemplated by this Agreement or
(y) compliance with the terms of this Agreement,
(ii) changes in economic, market, business, regulatory or
political conditions generally in the United States, Bermuda,
Switzerland or any other jurisdiction in which Allied World and
the Allied World Subsidiaries operate or in the United States or
global financial markets, (iii) changes, circumstances or
events generally affecting the property and casualty insurance
or reinsurance industry in the geographic areas in which Allied
World and the Allied World Subsidiaries operate,
(iv) changes, circumstances or events resulting in
liabilities under property catastrophe insurance agreements to
which Allied World or any Allied World Subsidiary is a party,
including any effects resulting from any earthquake, hurricane,
tornado, windstorm, terrorist act, act of war or other natural
or man-made disaster, (v) the commencement, occurrence,
continuation of any war or armed hostilities, (vi) changes
in any Law following the date hereof, (vii) changes in GAAP
or SAP following the date hereof (or local equivalents in the
applicable jurisdiction) prescribed by the applicable insurance
regulatory authority, including accounting and financial
reporting pronouncements by the SEC, the National Association of
Insurance
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Commissioners and the Financial Accounting Standards Board,
(viii) any change or announcement of a potential change in
Allied Worlds or any Allied World Subsidiaries
credit or claims paying rating or A.M. Best Company rating
or the ratings of any of Allied World or any Allied World
Subsidiaries businesses or securities (provided
that this exception shall not prevent or otherwise affect a
determination that any changes, state of facts, circumstances,
events or effects underlying a change described in this
clause (viii) has resulted in, or contributed to, an
Allied World Material Adverse Effect), (ix) a suspension in
trading or a change in the trading prices of Allied World
Capital Stock (provided that this exception shall not
prevent or otherwise affect a determination that any changes,
state of facts, circumstances, events or effects underlying a
change described in this clause (ix) has resulted in, or
contributed to, an Allied World Material Adverse Effect),
(x) the failure to meet any revenue, earnings or other
projections, forecasts or predictions for any period ending
after the date of this Agreement (provided that this
exception shall not prevent or otherwise affect a determination
that any state of facts, circumstances, events or effects
underlying a failure described in this clause (x) has
resulted in, or contributed to, an Allied World Material Adverse
Effect), or (xi) any action or failure to act expressly
required to be taken by a party pursuant to the terms of this
Agreement, except in the case of the foregoing clauses
(ii), (iii), (iv), and (v) to the
extent those changes, state of facts, circumstances, events, or
effects have a materially disproportionate effect on Allied
World and the Allied World Subsidiaries taken as a whole
relative to other companies of similar size operating in the
property and casualty insurance industry in similar geographic
areas to those in which Allied World and the Allied World
Subsidiaries operate,
and/or
(B) the ability of such party to perform its obligations
under this Agreement.
Allied World Permits means all
governmental licenses, authorizations, permits, certificates,
registrations, consents, franchises, variances, exemptions,
Orders and approvals required to own, lease and operate Allied
World and its Subsidiaries respective properties and to
carry on their respective businesses as currently conducted.
Allied World RSU means the restricted
stock units and performance units of Allied World issued
pursuant to the Allied World Stock Plans.
Allied World Secured Credit Facility
means that certain Credit Agreement, dated as of
November 27, 2007, as amended by the First Amendment to
Credit Agreement dated as of February 25, 2010 and the
Second Amendment to Credit Agreement dated as of
November 30, 2010, among the Prior Allied World Parent,
Allied World Assurance Company, Ltd, Allied World, the Lenders
party thereto, Bank of America, N.A. and Wells Fargo Bank,
National Association.
Allied World Stock-Based Award means
Allied World Shares and other compensatory awards denominated in
Allied World Shares subject to a risk of forfeiture to, or right
of repurchase by, Allied World, including, for the avoidance of
doubt, Allied World RSUs, Allied World Stock Options,
performance-based awards granted under the Allied World Stock
Plans and rights to subscribe for Allied World Shares under
Allied Worlds 2008 Amended and Restated Employee Share
Purchase Plan.
Allied World Stock Option means any
option to purchase Allied World Shares granted under any Allied
World Stock Plan.
Allied World Stock Plans means the
equity-based compensation plans identified in
Section 9.3 of the Allied World Disclosure Schedule.
Allied World Unsecured Credit Facility
means that certain Credit Agreement, dated as of
November 27, 2007, as amended by the First Amendment to
Credit Agreement dated as of February 25, 2010 and the
Second Amendment to Credit Agreement dated as of
November 30, 2010, among the Prior Allied World Parent,
Allied World Assurance Company, Ltd, Allied World, the Lenders
party thereto, Bank of America, N.A. and Wells Fargo Bank,
National Association.
Antitrust Law means the HSR Act and
the Laws of Turkey, Germany, United Kingdom, Portugal, Spain,
Israel, Taiwan, Australia, New Zealand, Canada, Brazil, Italy,
and Saudi Arabia that are designed or intended to prohibit,
restrict or regulate actions having the purpose or effect of
monopolization or restraint of trade or lessening of competition
through merger or acquisition. Antitrust Law shall include
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the European Community Council Regulation No. 139/2004
if the parties agree to filing a request to the European
Commission to assert exclusive jurisdiction over the approval of
the Merger within the European Union in lieu of separate EU
Member State filings, and that filing request is not opposed by
any of the applicable Member States.
Business Day means any day other than
(i) a Saturday or a Sunday or (ii) a day on which
banking and savings and loan institutions are authorized or
required by Law to be closed in New York City or Zug,
Switzerland.
Contract means all oral or written
contracts, agreements, commitments, arrangements, leases and
other instruments to which any Person is a party.
Environmental Law means any foreign,
federal, state or local law, treaty, statute, rule, regulation,
Order, ordinance, decree, Injunction, judgment, governmental
restriction or any other requirement of Law (including common
law) regulating or relating to the protection of human health
from exposure to any hazardous substance, natural resource
damages or the protection of the environment, including Laws
relating to the protection of wetlands, pollution, contamination
or the use, generation, management, handling, transport,
treatment, disposal, storage, release or threatened release of
hazardous substances.
Equity Equivalents of any Person means
(x) any securities convertible into or exchangeable for, or
any warrants or options or other rights to acquire, any capital
stock, voting securities or equity interests of such Person,
(y) any warrants or options or other rights to acquire from
such Person, or any other obligation of such Person to issue,
deliver or sell, or cause to be issued, delivered or sold, any
capital stock, voting securities or other equity interests in
such Person or (z) any rights that are linked in any way to
the price of any capital stock of, or to the value of or of any
part of, or to any dividends or distributions paid on any
capital stock of, such Person.
Exchange Act means the Securities
Exchange Act of 1934, as amended.
Forfeitures and Cashless Settlements
by any Person means (x) the forfeiture or satisfaction
of Stock-Based Awards of such Person, (y) the acceptance by
such Person of shares of common stock of such Person as payment
for the exercise price of Stock Options of such Person and
(z) the acceptance by such Person of shares of common stock
of such Person for withholding Taxes incurred in connection with
the exercise of Stock Options of such Person or the vesting or
satisfaction of Stock-Based Awards of such Person, in each case,
in accordance with past practice of such Person and the terms of
the applicable award agreements.
GAAP means United States generally
accepted accounting principles, consistently applied.
Governmental Entity means any nation
or government, any state, agency, commission, or other political
subdivision thereof, any insurance regulatory authority, any
self-regulatory authority, or any entity (including a court) of
competent jurisdiction properly exercising executive,
legislative, judicial or administration functions of the
government.
Independent Director of any
corporation means a director of such corporation who qualifies
as an independent director under the listing standards of the
principal market on which the common stock of such corporation
is listed or quoted for trading and does not possess an interest
in any transaction for which disclosure would be required
pursuant to Rule 404(a) of
Regulation S-K.
Independent Allied World Director
means each of the Independent Directors of Allied World
serving as a director of Allied World immediately prior to the
Effective Time who is selected by Allied World to serve as a
director of Allied World immediately following the Effective
Time.
Independent Transatlantic Director
means each of the Independent Directors of Transatlantic
serving as a director of Transatlantic immediately prior to the
Effective Time who is selected by Transatlantic to serve as a
director of Allied World immediately following the Effective
Time.
Injunction means any Order, injunction
or decree issued by any court or agency of competent
jurisdiction or other legal restraint or prohibition.
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Insurance Law means all Laws, rules
and regulations applicable to the business of insurance or the
regulation of insurance holding companies, whether domestic or
foreign, and all applicable orders and directives of
Governmental Entities and market conduct recommendations
resulting from market conduct examinations of Insurance
Regulators.
Insurance Regulators means all
Governmental Entities regulating the business of insurance under
the Insurance Laws.
Intellectual Property means:
(a) trademarks, service marks, logos, trade names and trade
dress, and all goodwill associated with the foregoing,
(b) domain names, (c) copyrights, copyrightable works,
software and computer programs, (d) patents, inventions,
discoveries, proprietary methods and processes, (e) trade
secrets, (f) know-how, (g) proprietary information,
(h) all registrations and applications for registration of
any of the foregoing, and (i) all similar proprietary
rights.
knowledge of Allied World or
knowledge when used in reference to
Allied World means the actual knowledge of those individuals
listed in Section 9.3 of the Allied World Disclosure
Schedule.
knowledge of Transatlantic or
knowledge when used in reference to
Transatlantic means the actual knowledge of those individuals
listed in Section 9.3 of the Transatlantic
Disclosure Schedule.
Law means any statute, law, ordinance,
rule or regulation (domestic or foreign) issued, promulgated or
entered into by or with any Governmental Entity.
Order means any order, writ,
Injunction, decree, judgment or stipulation issued, promulgated
or entered into by or with any Governmental Entity.
Organizational Documents means, with
respect to any Person, its articles of incorporation, memorandum
of association, bylaws or other similar organizational documents.
Permitted Liens means (a) any
Liens for Taxes or other governmental charges not yet due and
payable or the amount of which is being contested in good faith
by appropriate proceedings, (b) carriers,
warehousemens, mechanics, materialmens,
repairmens, workmens, landlords or other
similar Liens, (c) pledges or deposits in the ordinary
course of business and on a basis consistent with past practice
in connection with workers compensation, unemployment
insurance or other social security legislation,
(d) non-monetary Liens that do not, individually or in the
aggregate, materially impair the continued or contemplated use
or operation of the property to which they relate,
(e) statutory Liens arising by operation of Law with
respect to a liability incurred in the ordinary course of
business on a basis consistent with past practice which is not
yet due or payable or which is being contested in good faith by
appropriate proceedings, (f) immaterial easements, rights
of way or other similar matters or restrictions or exclusions
that would be shown by a current title report or other similar
report and that do not, individually or in the aggregate,
materially impair the continued or contemplated use or operation
of the property to which they relate, (g) transfer
restrictions imposed by applicable securities laws and
(h) Liens listed in Section 9.3 of the Allied
World Disclosure Schedule or Section 9.3 of the
Transatlantic Disclosure Schedule, as applicable.
Person means any natural person, firm,
corporation, partnership, company, limited liability company,
trust, joint venture, association, Governmental Entity or other
entity.
Representatives means, with respect to
any party, collectively, each of such partys Subsidiaries,
each of such partys and its Subsidiaries respective
officers, directors and employees, investment bankers, financial
advisors, attorneys, accountants or other advisor, agent,
consultant, representative of such party or any of its
controlled Affiliates.
SAP means statutory accounting
principals prescribed or permitted by the domiciliary state
insurance department of the applicable Allied World P/C
Subsidiary or Transatlantic P/C Subsidiary, as the case may be.
Securities Act means the Securities
Act of 1933, as amended.
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Share Issuance means the issuance
pursuant to the
Form S-4
by Allied World of Allied World Shares as Merger Consideration.
Stock-Based Awards means the
Transatlantic Stock-Based Awards and the Allied World
Stock-Based Awards.
Stock Options means the Transatlantic
Stock Options and the Allied World Stock Options.
Substantial Compliance means
substantial compliance as such term is used in the
HSR Act.
Tax means all income, gross receipts,
franchise, sales, use, ad valorem, property, payroll,
withholding, excise, severance, transfer, employment, estimated,
alternative or add-on minimum, value added, stamp, occupation,
premium, environmental and windfall profits taxes, and other
taxes, charges, fees, levies, imposts, customs, duties, licenses
or other assessments, together with any interest, additions to
tax, and any penalties.
Tax Return means any statement,
report, return, information return or claim for refund relating
to Taxes (including any elections, declarations, schedules or
attachments thereto), including, if applicable, any combined or
consolidated return for any group of entities that includes
Allied World or any of its Subsidiaries, or Transatlantic or any
of its Subsidiaries.
Taxing Authority means, with respect
to any Tax, the Governmental Entity that imposes such Tax, and
the agency (if any) charged with the collection of such Tax for
such Governmental Entity.
Transatlantic Material Adverse Effect
means any change, state of facts, circumstance, event or
effect that, individually or in the aggregate, is materially
adverse to (A) the financial condition, properties, assets,
liabilities, obligations (whether accrued, absolute, contingent
or otherwise), businesses or results of operations of
Transatlantic and the Transatlantic Subsidiaries, taken as a
whole, excluding any such change, state of facts, circumstance,
event or effect to the extent caused by or resulting from
(i) the execution, delivery and announcement of this
Agreement and the transactions contemplated hereby, including
(x) any loss of, or adverse change in, the relationship of
Transatlantic or any Transatlantic Subsidiary with its
customers, employees, brokers, agents or other producers,
suppliers, financing sources, business partners or regulators
caused by the identity of Allied World or any Allied World
Subsidiary as a party to the transactions contemplated by this
Agreement or (y) compliance with the terms of this
Agreement, (ii) changes in economic, market, business,
regulatory or political conditions generally in the United
States or any other jurisdiction in which Transatlantic or any
Transatlantic Subsidiary operates or in the United States or
global financial markets, (iii) changes, circumstances or
events generally affecting the property and casualty reinsurance
industry in the geographic areas in which Transatlantic and the
Transatlantic Subsidiaries operate, (iv) changes,
circumstances or events resulting in liabilities under property
catastrophe reinsurance agreements to which Transatlantic or any
Transatlantic Subsidiary is a party, including any effects
resulting from any earthquake, hurricane, tornado, windstorm,
terrorist act, act of war or other natural or man-made disaster,
(v) the commencement, occurrence, continuation of any war
or armed hostilities, (vi) changes in any Law following the
date hereof, (vii) changes in GAAP or SAP following the
date hereof (or local equivalents in the applicable
jurisdiction) prescribed by the applicable insurance regulatory
authority, including accounting and financial reporting
pronouncements by the SEC, the National Association of Insurance
Commissioners and the Financial Accounting Standards Board,
(viii) any change or announcement of a potential change in
Transatlantics or any Transatlantic Subsidiaries
credit or claims paying rating or A.M. Best Company rating
or the ratings of any of Transatlantic or any Transatlantic
Subsidiaries businesses or securities (provided
that this exception shall not prevent or otherwise affect a
determination that any changes, state of facts, circumstances,
events or effects underlying a change described in this
clause (viii) has resulted in, or contributed to, a
Transatlantic Material Adverse Effect), (ix) a suspension
of trading or a change in the trading prices of Transatlantic
Common Stock (provided that this exception shall not
prevent or otherwise affect a determination that any changes,
state of facts, circumstances, events or effects underlying a
change described in this clause (ix) has resulted in, or
contributed to, a Transatlantic Material Adverse Effect),
(x) the failure to meet any revenue, earnings or other
projections, forecasts or predictions for any period
A-67
ending after the date of this Agreement (provided that
this exception shall not prevent or otherwise affect a
determination that any state of facts, circumstances, events or
effects underlying a failure described in this clause (x)
has resulted in, or contributed to, a Transatlantic Material
Adverse Effect), or (xi) any action or failure to act
expressly required to be taken by a party pursuant to the terms
of this Agreement, except in the case of the foregoing
clauses (ii), (iii), (iv), and (v)
to the extent those changes, state of facts, circumstances,
events, or effects have a materially disproportionate effect on
Transatlantic and the Transatlantic Subsidiaries taken as a
whole relative to other companies of similar size operating in
the property and casualty reinsurance industry in similar
geographic areas to those in which Transatlantic and the
Transatlantic Subsidiaries operate,
and/or
(B) the ability of such party to perform its obligations
under this Agreement.
Transatlantic Permits means all
governmental licenses, authorizations, permits, certificates,
registrations, consents, franchises, variances, exemptions,
Orders and approvals required to own, lease and operate
Transatlantic and its Subsidiaries respective properties
and to carry on their respective businesses as currently
conducted.
Transatlantic Restricted Shares means
the restricted stock of Transatlantic issued pursuant to the
Transatlantic Stock Plans.
Transatlantic RSU means the restricted
stock units of Transatlantic issued pursuant to the
Transatlantic Stock Plans.
Transatlantic SAR means the stock
appreciation rights of Transatlantic issued pursuant to the
Transatlantic Stock Plans.
Transatlantic Stock-Based Award means
shares of Transatlantic Common Stock and other compensatory
awards denominated in shares of Transatlantic Common Stock
subject to a risk of forfeiture to, or right of repurchase by,
Transatlantic, including, for the avoidance of doubt, all
Transatlantic Restricted Shares, Transatlantic RSUs,
Transatlantic SARs, and Transatlantic Stock Options.
Transatlantic Stock Option means any
option to purchase Transatlantic Common Stock granted under any
Transatlantic Stock Plan.
Transatlantic Stock Plans means the
equity-based compensation plans identified in
Section 9.3 of the Transatlantic Disclosure Schedule.
9.4 Interpretation. When a
reference is made in this Agreement to a Section, Article or
Exhibit such reference shall be to a Section, Article or Exhibit
of this Agreement, unless otherwise indicated. The table of
contents and headings contained in this Agreement or in any
Exhibit are for convenience of reference purposes only and shall
not affect in any way the meaning or interpretation of this
Agreement. All words used in this Agreement will be construed to
be of such gender or number as the circumstances require. Any
capitalized terms used in any Exhibit but not otherwise defined
therein shall have the meaning set forth in this Agreement. All
Exhibits annexed hereto or referred to herein are hereby
incorporated in and made a part of this Agreement as if set
forth herein. The word including and words of
similar import when used in this Agreement will mean
including, without limitation, unless otherwise
specified. All references to dollars or
$ or US$ in this Agreement refer to the
lawful currency of the United States and all references to
CHF in this Agreement refer to the lawful currency
of Switzerland. The words made available shall
include, without limitation, those documents or information made
available in an electronic dataroom or website or in a physical
dataroom, in each case, to which the intended recipient or its
representatives had access, or such item was otherwise available
on the SECs public website (www.sec.gov).
9.5 Severability. Whenever
possible, each provision or portion of any provision of this
Agreement shall be interpreted in such manner as to be effective
and valid under applicable Law, but if any provision or portion
of any provision of this Agreement is held to be invalid,
illegal or unenforceable in any respect under any applicable Law
or rule in any jurisdiction, such invalidity, illegality or
unenforceability shall not affect any other provision or portion
of any provision in such jurisdiction, and this Agreement shall
be reformed,
A-68
construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provision or portion of any provision
had never been contained herein.
9.6 Counterparts. This Agreement
may be executed in two or more counterparts, all of which shall
be considered one and the same instrument and shall become
effective when one or more counterparts have been signed by each
of the parties and delivered to the other party. This Agreement
may be executed by facsimile or electronic transmission
signature and a facsimile or electronic transmission signature
shall constitute an original for all purposes.
9.7 Entire Agreement; No Third-Party
Beneficiaries. This Agreement (including the
Exhibits and Annexes hereto), taken together with the
Transatlantic Disclosure Schedule and the Allied World
Disclosure Schedule, and the Confidentiality Agreement,
(a) constitute the entire agreement, and supersedes all
prior agreements (other than the Confidentiality Agreement) and
understandings, both written and oral, among the parties with
respect to the Merger and the other transactions contemplated by
this Agreement and (b) is not intended to confer upon any
Person other than the parties any rights or remedies other than
as specifically provided in Section 6.5.
9.8 Governing Law. This Agreement
and all disputes or controversies arising out of or relating to
this Agreement or the transactions contemplated hereby shall be
governed by, and construed in accordance with, the internal laws
of the State of Delaware, without regard to the laws of any
other jurisdiction that might be applied because of the
conflicts of laws principles of the State of Delaware.
9.9 Assignment; Successors; Tax Treatment.
(a) Except as provided in Section 9.9(b),
neither this Agreement nor any of the rights, interests or
obligations under this Agreement may be assigned or delegated,
in whole or in part, by operation of law or otherwise, by any
party without the prior written consent of the other parties,
and any such assignment without such prior written consent shall
be null and void. Subject to the preceding sentence, this
Agreement will be binding upon, inure to the benefit of, and be
enforceable by, the parties and their respective successors and
assigns.
(b) It is contemplated that Merger Sub will be owned by a
corporate subsidiary (Newco Holdings) that is
itself wholly-owned by Allied World at least in part through one
or more other wholly-owned corporate subsidiaries. Allied World
may assign its obligations to deliver Allied World Shares and
cash set forth in Section 2.2(a) to Newco Holdings.
Any such assignment shall not relieve Allied World of its
obligations under this Agreement.
(c) The parties intend the Merger to be treated for United
States federal income Tax purposes as a fully taxable purchase
of Transatlantic Common Stock by Newco Holdings and not qualify
as a reorganization within the meaning of Section 368(a) of
the Code (without regard to Section 367 of the Code) and to
file all U.S. Tax Returns consistent with such treatment.
9.10 Specific Enforcement. The
parties agree that irreparable damage would occur in the event
that any of the provisions of this Agreement were not performed
in accordance with their specific terms or were otherwise
breached. Accordingly, each of the parties shall be entitled to
specific performance of the terms hereof, including an
Injunction or Injunctions to prevent breaches of this Agreement
and to enforce specifically the terms and provisions of this
Agreement in the Court of Chancery of the State of Delaware,
provided that if jurisdiction is not then available in
the Court of Chancery of the State of Delaware, then in any
federal court located in the State of Delaware, this being in
addition to any other remedy to which such party is entitled at
law or in equity. The parties further agree not to assert that a
remedy of specific enforcement is unenforceable, invalid,
contrary to Law or inequitable for any reason, nor to object to
a remedy of specific performance on the basis that a remedy of
monetary damages would provide an adequate remedy for any such
breach. Each party further acknowledges and agrees that the
agreements contained in this Section 9.10 are an
integral part of the transactions contemplated by this Agreement
and that, without these agreements, the other party would not
enter into this Agreement. Each party further agrees that no
other party hereto or any other Person shall be required to
obtain, furnish or post any bond or similar instrument in
connection with or as a condition to obtaining any remedy
referred to in this Section 9.10, and each party
A-69
hereto irrevocably waives any right it may have to require the
obtaining, furnishing or posting of any such bond or similar
instrument.
9.11 Submission to
Jurisdiction. Each of the parties irrevocably
agrees that any legal action or proceeding arising out of or
relating to this Agreement brought by any party or its
Affiliates against any other party or its Affiliates shall be
brought and determined in the Court of Chancery of the State of
Delaware, provided that if jurisdiction is not then
available in the Court of Chancery of the State of Delaware,
then any such legal action or proceeding may be brought in any
federal court located in the State of Delaware. Each of the
parties hereby irrevocably submits to the jurisdiction of the
aforesaid courts for itself and with respect to its property,
generally and unconditionally, with regard to any such action or
proceeding arising out of or relating to this Agreement and the
transactions contemplated hereby. Each of the parties agrees not
to commence any action, suit or proceeding relating thereto
except in the courts described above in Delaware, other than
actions in any court of competent jurisdiction to enforce any
judgment, decree or award rendered by any such court in Delaware
as described herein. Each of the parties further agrees that
notice as provided herein shall constitute sufficient service of
process and the parties further waive any argument that such
service is insufficient. Each of the parties hereby irrevocably
and unconditionally waives, and agrees not to assert, by way of
motion or as a defense, counterclaim or otherwise, in any action
or proceeding arising out of or relating to this Agreement or
the transactions contemplated hereby, (a) any claim that it
is not personally subject to the jurisdiction of the courts in
Delaware as described herein for any reason, (b) that it or
its property is exempt or immune from jurisdiction of any such
court or from any legal process commenced in such courts
(whether through service of notice, attachment prior to
judgment, attachment in aid of execution of judgment, execution
of judgment or otherwise) and (c) that (i) the suit,
action or proceeding in any such court is brought in an
inconvenient forum, (ii) the venue of such suit, action or
proceeding is improper or (iii) this Agreement, or the
subject matter hereof, may not be enforced in or by such courts.
9.12 Waiver of Jury Trial. EACH OF
THE PARTIES TO THIS AGREEMENT HEREBY IRREVOCABLY WAIVES ALL
RIGHT TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR
COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE
TRANSACTIONS CONTEMPLATED HEREBY.
9.13 No Presumption Against Drafting
Party. Each of Allied World, Merger Sub and
Transatlantic acknowledges that each party to this Agreement has
been represented by counsel in connection with this Agreement
and the transactions contemplated by this Agreement.
Accordingly, any rule of law or any legal decision that would
require interpretation of any claimed ambiguities in this
Agreement against the drafting party has no application and is
expressly waived.
9.14 Publicity. Except
(a) with respect to any Adverse Recommendation Change made
in accordance with the terms of this Agreement and (b) with
respect to disclosures that are consistent with prior
disclosures made in compliance with this
Section 9.14 or any communications plan or strategy
previously agreed on by the parties, Allied World and
Transatlantic shall consult with each other before issuing, and
give each other the opportunity to review and comment upon, any
press release or other public statements with respect to the
transactions contemplated by this Agreement, including the
Merger, and shall not issue any such press release or make any
such public statement prior to such consultation, except as such
party may reasonably conclude may be required by applicable Law,
court process or by obligations pursuant to any listing
agreement with any national securities exchange or national
securities quotation system. The parties agree that all formal
employee communication programs or announcements with respect to
the transactions contemplated by this Agreement shall be in
forms mutually agreed to by the parties (such agreement not to
be unreasonably withheld, conditioned or delayed);
provided, however, that no further mutual
agreement shall be required with respect to any such programs or
announcements that are consistent with prior programs or
announcements made in compliance with this
Section 9.14. The parties agree that the initial
press release to be issued with respect to the transactions
contemplated by this Agreement shall be in the form heretofore
agreed to by the parties.
A-70
IN WITNESS WHEREOF, Allied World, Transatlantic and Merger Sub
have caused this Agreement to be executed by their respective
officers thereunto duly authorized as of the date first above
written.
ALLIED WORLD ASSURANCE COMPANY HOLDINGS, AG
|
|
|
|
By:
|
/s/ Scott
A. Carmilani
Name: Scott
A. Carmilani
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|
|
|
|
Title:
|
President and Chief Executive Officer
|
|
|
|
|
By:
|
/s/ Wesley
D. Dupont
Name: Wesley
D. Dupont
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|
|
|
|
Title:
|
Executive Vice President, General Counsel
|
and Corporate Secretary
GO SUB, LLC
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|
|
|
By:
|
Ocean Holdings (U.S.) Inc., its Sole and Managing Member
|
|
|
By:
|
/s/ Wesley
D. Dupont
Name: Wesley
D. Dupont
|
TRANSATLANTIC HOLDINGS, INC.
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|
|
|
By:
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/s/ Gary
A. Schwartz
Name: Gary
A. Schwartz
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|
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|
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Title:
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Senior Vice President and
General Counsel
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A-71
ANNEX A
DEFINED
TERMS
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|
|
|
|
Section
|
Defined Term
|
|
Number
|
|
Acquisition Proposal
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|
5.5(b)
|
Adverse Recommendation Change
|
|
5.5(g)
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Affiliate
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|
9.3
|
Agreement
|
|
Preamble
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Allied World
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|
Preamble
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Allied World Acquisition Agreement
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|
5.5(a)
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Allied World Acquisition Proposal
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|
5.5(a)
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Allied World Agents
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|
3.31(e)
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Allied World Articles
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|
3.1(a)(ii)
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Allied World Articles Amendment
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|
1.5(b)
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Allied World Articles Amendment Stockholder Approval
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|
3.3(a)
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Allied World Benefit Plan
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|
3.16(a)
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Allied World Board
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|
3.2(a)(i)
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Allied World Board Election Stockholder Approval
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|
9.3
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Allied World Board Recommendation
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3.3(a)
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Allied World Bylaws
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|
3.1(a)(ii)
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Allied World Capital Stock
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|
9.3
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Allied World Disclosure Schedule
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|
Article III
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Allied World Equity Award Shares
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|
3.2(a)(i)
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Allied World ERISA Affiliate
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3.16(d)
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Allied World Insurance Approvals
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3.4
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Allied World Leased Real Properties
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3.13
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Allied World Material Adverse Effect
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|
9.3
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Allied World Material Contract
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3.20(a)
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Allied World Measurement Shares
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3.2(a)(i)
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Allied World Outstanding Shares
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3.2(a)(i)
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Allied World P/C Subsidiary
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3.24
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Allied World Permits
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9.3
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Allied World Real Property Leases
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|
3.13
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Allied World Reinsurance Contracts
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3.27(a)
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Allied World Requisite Stockholder Vote
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3.3(a)
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Allied World Risk-Based Capital Reports
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|
3.30
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Allied World RSU
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9.3
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Allied World SEC Documents
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|
3.6(a)
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Allied World Secured Credit Facility
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|
9.3
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Allied World Share Issuance Stockholder Approval
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|
3.3(a)
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Allied World Shares
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2.1(a)(iii)
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Allied World Statutory Statements
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3.25(a)
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Allied World Stock Option
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9.3
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A-72
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|
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Section
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Defined Term
|
|
Number
|
|
Allied World Stock Plans
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|
9.3
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Allied World Stock-Based Award
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|
9.3
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Allied World Stockholders Meeting
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3.3(a)
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Allied World Subsidiary
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3.2(c)
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Allied World Unsecured Credit Facility
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9.3
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Alternate Termination Fee
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|
6.6(c)
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Antitrust Law
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|
9.3
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Bankruptcy and Equity Exception
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|
3.3(b)
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Book-Entry Shares
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|
2.2(a)
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Business Day
|
|
9.3
|
Certificate of Merger
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|
1.3
|
Certificates
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|
2.2(a)
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Closing
|
|
1.2
|
Closing Date
|
|
1.2
|
Code
|
|
2.3(a)(i)
|
Commercial Register Ruling
|
|
6.13
|
Competing Transaction
|
|
5.5(c)
|
Confidentiality Agreement
|
|
6.2
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Contract
|
|
9.3
|
Converted Transatlantic Stock-Based Award
|
|
2.3(a)(ii)
|
DB
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|
3.14
|
Delaware Law
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|
1.1
|
Effective Time
|
|
1.3
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End Date
|
|
8.1(e)
|
Environmental Law
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|
9.3
|
Equity Equivalents
|
|
9.3
|
ERISA
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|
3.16(a)
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Exchange Act
|
|
9.3
|
Exchange Agent
|
|
2.2(a)
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Exchange Fund
|
|
2.2(a)
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Exchange Ratio
|
|
2.1(a)(iii)
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Expense Reimbursement
|
|
6.6(b)
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FCPA
|
|
3.6(e)
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Forfeitures and Cashless Settlement
|
|
9.3
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Form S-4
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|
3.8
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GAAP
|
|
9.3
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Governmental Entity
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|
9.3
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Grant Date
|
|
3.2(a)(iii)
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HSR Act
|
|
3.4
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Indemnified Party
|
|
6.5(a)
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Independent Director
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9.3
|
A-73
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|
|
|
|
Section
|
Defined Term
|
|
Number
|
|
Independent Allied World Director
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|
9.3
|
Independent Transatlantic Director
|
|
9.3
|
Injunction
|
|
9.3
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Insurance Contracts
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|
3.31(a)
|
Insurance Law
|
|
9.3
|
Insurance Regulators
|
|
9.3
|
Intellectual Property
|
|
9.3
|
IRS
|
|
3.16(a)
|
Joint Proxy Statement/Prospectus
|
|
6.1(a)
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knowledge of Allied World
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|
9.3
|
knowledge of Transatlantic
|
|
9.3
|
Law
|
|
9.3
|
Liens
|
|
3.1(b)(ii)
|
Maximum Premium
|
|
6.5(b)
|
Measurement Date
|
|
3.2(a)(i)
|
Merger
|
|
1.1
|
Merger Consideration
|
|
2.1(a)(iii)
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Merger Sub
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|
Preamble
|
Merger Sub Common Stock
|
|
2.1(a)(i)
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Merger Sub Member Approval
|
|
3.3(a)
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Moelis
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|
4.14
|
Moelis Fairness Opinion
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|
4.14
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Newco Holdings
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|
9.9(b)
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Non-Target Party
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|
5.5(c)
|
NYSE
|
|
2.2(e)
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Order
|
|
9.3
|
Organizational Documents
|
|
9.3
|
Participation Certificate
|
|
3.2(a)(ii)
|
Partner Agent
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|
9.3
|
Partner Agent Agreement
|
|
9.3
|
PBGC
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|
3.16(d)
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Permitted Liens
|
|
9.3
|
Person
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|
9.3
|
Prior Allied World Parent
|
|
Article III
|
Reconstituted Allied World Board
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|
6.9(a)
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Reconstituted Allied World Board Written Consent
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|
6.9(b)
|
Redomestication
|
|
3.33
|
Representatives
|
|
9.3
|
Requisite Lender Consents
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|
6.4(a)
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Requisite Regulatory Approvals
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|
7.1(d)
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Restated Articles
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|
1.5(b)
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A-74
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|
|
|
|
Section
|
Defined Term
|
|
Number
|
|
SAP
|
|
9.3
|
SEC
|
|
Article III
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Second Request
|
|
6.3(c)(v)
|
Securities Act
|
|
9.3
|
Share Issuance
|
|
9.3
|
SOX
|
|
3.6(d)
|
Stock Options
|
|
9.3
|
Stock-Based Awards
|
|
9.3
|
Subsidiaries
|
|
3.2(c)
|
Subsidiary
|
|
3.2(c)
|
Substantial Compliance
|
|
9.3
|
Superior Proposal
|
|
5.5(f)
|
Supplemental Indenture
|
|
6.4(b)
|
Surviving Corporation
|
|
1.1
|
Target Board
|
|
5.5(e)
|
Target Party
|
|
5.5(c)
|
Tax
|
|
9.3
|
Tax Return
|
|
9.3
|
Taxing Authority
|
|
9.3
|
Termination Fee
|
|
6.6(e)
|
Transatlantic
|
|
Preamble
|
Transatlantic Acquisition Agreement
|
|
5.5(b)
|
Transatlantic Acquisition Proposal
|
|
5.5(b)
|
Transatlantic Agents
|
|
4.31(b)
|
Transatlantic Benefit Plan
|
|
4.16(a)
|
Transatlantic Board
|
|
2.3(a)
|
Transatlantic Board Recommendation
|
|
4.3(a)
|
Transatlantic Bylaws
|
|
4.1(b)
|
Transatlantic Charter
|
|
4.1(b)
|
Transatlantic Common Stock
|
|
2.1(a)(ii)
|
Transatlantic Disclosure Schedule
|
|
Article IV
|
Transatlantic ERISA Affiliate
|
|
4.16(d)
|
Transatlantic Indenture
|
|
6.4(b)
|
Transatlantic Insurance Approvals
|
|
4.4
|
Transatlantic Insurance Intermediaries
|
|
4.32
|
Transatlantic Leased Real Properties
|
|
4.13
|
Transatlantic Material Adverse Effect
|
|
9.3
|
Transatlantic Material Contract
|
|
4.20(a)
|
Transatlantic P/C Subsidiary
|
|
4.24
|
Transatlantic Permits
|
|
9.3
|
Transatlantic Preferred Stock
|
|
4.2(a)(i)
|
A-75
|
|
|
|
|
Section
|
Defined Term
|
|
Number
|
|
Transatlantic Real Property Leases
|
|
4.13
|
Transatlantic Reinsurance Contracts
|
|
4.27(a)
|
Transatlantic Requisite Stockholder Vote
|
|
4.3(a)
|
Transatlantic Restricted Shares
|
|
9.3
|
Transatlantic Risk-Based Capital Reports
|
|
4.30
|
Transatlantic Rollover Option
|
|
2.3(a)(i)
|
Transatlantic RSU
|
|
9.3
|
Transatlantic SAR
|
|
9.3
|
Transatlantic SEC Documents
|
|
4.6(a)
|
Transatlantic Statutory Statements
|
|
4.25(a)
|
Transatlantic Stock Option
|
|
9.3
|
Transatlantic Stock Plans
|
|
9.3
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Transatlantic Stock-Based Award
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9.3
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Transatlantic Stockholders Meeting
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4.3(a)
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Transatlantic Subsidiary
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3.2(c)
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A-76
Annex B
Board of Directors
Allied World Assurance Company Holdings, AG
Lindenstrasse 8
6340 Baar
Zug, Switzerland
June 12, 2011
Lady and Gentlemen:
Deutsche Bank Securities Inc. (Deutsche Bank) has
acted as financial advisor to Allied World Assurance Company
Holdings, AG (Parent) in connection with the
Agreement and Plan of Merger (the Merger Agreement),
to be entered into among Parent, GO Sub, LLC, a subsidiary of
Parent (Merger Sub), and Transatlantic Holdings,
Inc. (the Company), which provides, among other
things, for the merger of Merger Sub with and into the Company,
as a result of which the Company will become a wholly owned
subsidiary of Parent (the Transaction). As set forth
more fully in the Merger Agreement, as a result of the
Transaction, each share of common stock, par value $1.00 per
share, of the Company (the Company Common Stock)
(other than dissenting shares and shares owned directly or
indirectly by the Company or Parent) will be converted into the
right to receive 0.88 ordinary shares (the Exchange
Ratio), par value CHF15.00 per share (as may be adjusted
in connection with the par value reduction as approved by
Parents shareholders at Parents 2011 annual general
meeting) (the Parent Shares), of Parent.
You have requested our opinion as to the fairness of the
Exchange Ratio, from a financial point of view, to Parent.
In connection with our role as financial advisor to the Board of
Directors of Parent, and in arriving at our opinion, we reviewed
certain publicly available financial and other information
concerning the Company and Parent, including certain statutory
statements filed by the insurance subsidiaries of both the
Company and Parent. We also reviewed certain internal analyses,
financial forecasts and other information relating to the
Company and Parent prepared by management of the Company and
Parent, respectively, and certain analyses and financial
forecasts relating to the Company prepared by management of
Parent. We have also reviewed certain reports regarding the
Companys reserves for losses and loss adjustment expenses
prepared for Parent by third party actuaries. We have also held
discussions with certain senior officers and other
representatives and advisors of the Company and Parent regarding
the businesses and prospects of the Company and Parent,
respectively, and of Parent after giving effect to the
Transaction, including certain cost savings and operating
synergies jointly projected by the managements of the Company
and Parent to result from the Transaction. In addition, Deutsche
Bank has reviewed the reported prices and trading activity for
both the Parent Shares and the Company Common Stock, and,
(i) to the extent publicly available, compared certain
financial and stock market information for Parent and the
Company with similar information for certain other companies we
considered relevant whose securities are publicly traded,
(ii) to the extent publicly available, reviewed the
financial terms of certain recent business combinations which we
deemed relevant, (iii) reviewed a draft dated June 10,
2011 of the Merger Agreement, and (iv) performed such other
studies and analyses and considered such other factors as we
deemed appropriate.
Deutsche Bank has not assumed responsibility for independent
verification of, and has not independently verified, any
information, whether publicly available or furnished to it,
concerning the Company or Parent, including, without limitation,
any financial information considered in connection with the
rendering of its opinion. Accordingly, for purposes of its
opinion, Deutsche Bank has, with your permission, assumed and
relied upon the accuracy and completeness of all such
information. Deutsche Bank has not conducted a physical
inspection of any of the properties or assets, and has not
prepared or obtained any independent evaluation or appraisal of
any of the assets or liabilities (including, without limitation,
any contingent, derivative or off-balance-sheet assets and
liabilities), of the Company or Parent or any of their
respective subsidiaries, nor have we evaluated the solvency or
fair value of the Company or Parent under any state or
federal law relating to bankruptcy, insolvency or similar
matters. With respect to the financial forecasts, including,
without limitation, the analyses and forecasts of the amount and
timing of certain cost savings, operating efficiencies, revenue
effects, financial synergies and other strategic benefits
projected by Parent to be achieved as a result of the
Transaction (collectively, the Synergies), made
available to Deutsche Bank and used in its analyses, Deutsche
Bank has assumed with your permission that they have been
reasonably prepared on bases reflecting the best currently
available estimates and judgments of the management of the
Company and Parent as to the matters covered thereby. In
rendering its opinion, Deutsche Bank expresses no view as to the
reasonableness of such forecasts and projections, including,
without limitation, the Synergies, or the assumptions on which
they are based. Deutsche Banks opinion is necessarily
based upon economic, market and other conditions as in effect
on, and the information made available to it as of, the date
hereof. We expressly disclaim any undertaking or obligation to
advise any person of any change in any fact or matter affecting
our opinion of which we become aware after the date hereof.
For purposes of rendering its opinion, Deutsche Bank has assumed
with your permission that, in all respects material to its
analysis, the Transaction will be consummated in accordance with
its terms, without any material waiver, modification or
amendment of any term, condition or agreement. Deutsche Bank has
also assumed that all material governmental, regulatory,
contractual or other approvals and consents required in
connection with the consummation of the Transaction will be
obtained and that in connection with obtaining any necessary
governmental, regulatory, contractual or other approvals and
consents, no restrictions, terms or conditions will be imposed
that would be material to our analysis. We are not legal,
regulatory, tax or accounting experts and have relied on the
assessments made by Parent and its advisors with respect to such
issues. In particular, we have assumed, with your permission,
that the Company will be the acquirer in the Transaction for
accounting purposes. We also are not experts in the evaluation
of reserves for losses and loss adjustment expenses and were not
requested to, and we did not, make any actuarial determinations
or evaluations or attempt to evaluate actuarial assumptions. We
made no analysis of, and express no view with respect to, the
adequacy of the Companys or Parents loss and loss
adjustment expense reserves. Representatives of Parent have
informed us, and we have further assumed, that the final terms
of the Merger Agreement will not differ materially from the
terms set forth in the drafts we have reviewed.
This opinion has been approved and authorized for issuance by a
Deutsche Bank fairness opinion review committee, is addressed
to, and for the use and benefit of, the Board of Directors of
Parent in connection with and for the purposes of its evaluation
of the Transaction and is not a recommendation to the
stockholders of Parent as to how they should vote with respect
to the Transaction, the amendment of Parents Articles of
Association or the issuance of Parent Shares in the Transaction,
in each case as contemplated by the Merger Agreement. This
opinion is limited to the fairness, from a financial point of
view of the Exchange Ratio to Parent and does not address any
other terms of the Transaction or the Merger Agreement, is
subject to the assumptions, limitations, qualifications and
other conditions contained herein and is necessarily based on
the economic, market and other conditions, and information made
available to us, as of the date hereof. You have not asked us
to, and this opinion does not, address the fairness of the
Transaction, or any consideration received in connection
therewith, to the holders of any class of securities, creditors
or other constituencies of Parent, nor does it address the
fairness of the contemplated benefits of the Transaction. We
expressly disclaim any undertaking or obligation to advise any
person of any change in any fact or matter affecting our opinion
of which we become aware after the date hereof. Deutsche Bank
expresses no opinion as to the merits of the underlying decision
by Parent to engage in the Transaction or the relative merits of
the Transaction as compared to any alternative transactions or
business strategies. In addition, we do not express any view or
opinion as to the fairness, financial or otherwise, of the
amount or nature of any compensation payable to or to be
received by any of the officers, directors, or employees of any
parties to the Transaction, or any class of such persons,
relative to the Exchange Ratio. This opinion does not in any
manner address the prices at which Parents ordinary shares
or other securities will trade following the announcement or
consummation of the Transaction.
Deutsche Bank will be paid a fee for its services as financial
advisor to Parent in connection with the Transaction, a portion
of which is contingent upon delivery of this opinion and a
substantial portion of which is contingent upon consummation of
the Transaction. Parent has also agreed to reimburse Deutsche
Bank for
B-2
its expenses, and to indemnify Deutsche Bank against certain
liabilities, in connection with its engagement. We are an
affiliate of Deutsche Bank AG (together with its affiliates, the
DB Group). One or more members of the DB Group have,
from time to time, provided investment banking, commercial
banking (including extension of credit) and other financial
services to Parent, the Company or their respective affiliates
for which it has received compensation, including having acted
as a book-running manager in a public offering of senior notes
by Parent, acting as a lender of Parents senior credit
facility and acting as an asset manager for certain investment
portfolios of the Company. DB Group may also provide investment
and commercial banking services to Parent the Company and their
respective affiliates in the future, for which we would expect
the DB Group to receive compensation. In the ordinary course of
business, members of the DB Group may actively trade in the
securities and other instruments and obligations of Parent and
the Company (or their respective affiliates) for their own
accounts and for the accounts of their customers. Accordingly,
the DB Group may at any time hold a long or short position in
such securities, instruments and obligations. In addition, as of
the date hereof, Deutsche Bank and affiliates own approximately
250,000 shares of Company Common Stock.
Based upon and subject to the foregoing assumptions,
limitations, qualifications and conditions, it is Deutsche
Banks opinion as investment bankers that, as of the date
hereof, the Exchange Ratio is fair, from a financial point of
view, to Parent.
This letter is provided to the Board of Directors of the Company
in connection with and for the purposes of its evaluation of the
Transaction. This opinion may not be disclosed, summarized,
referred to, or communicated (in whole or in part) to any other
person for any purpose whatsoever except with our prior written
approval, provided that this opinion may be reproduced in full
in any proxy or information statement required by the Securities
and Exchange Commission to be mailed by the Company to its
stockholders in connection with the Transaction.
Very truly yours,
/s/ DEUTSCHE
BANK SECURITIES INC.
DEUTSCHE BANK SECURITIES INC.
B-3
Annex C
Board of Directors
Transatlantic Holdings, Inc.
80 Pine Street
New York, New York 10005
Members of the Board of Directors:
June 12, 2011
You have requested our opinion as to the fairness from a
financial point of view to the holders of common stock, par
value $1.00 per share (the Company Common
Stock), of Transatlantic Holdings, Inc. (the
Company) of the Exchange Ratio (as defined
below) pursuant to the terms and subject to the conditions set
forth in the Agreement and Plan of Merger, dated as of
June 12, 2011 (the Agreement) to be
entered into by the Company, Allied World Assurance Company
Holdings, AG (Allied World) and GO Sub, LLC,
a wholly-owned subsidiary of Allied World (the Merger
Sub). As more fully described in the Agreement, Merger
Sub will be merged with and into the Company (the
Transaction) and each issued and outstanding
share of Company Common Stock will be converted into the right
to receive 0.880 (the Exchange Ratio)
ordinary shares, par value CHF 15.00 per share, of Allied World
(the Allied World Shares).
We have acted as your financial advisor in connection with the
Transaction and will receive a fee for our services, a
significant portion of which is contingent upon the consummation
of the Transaction. We will also receive a fee upon delivery of
this opinion. In addition, the Company has agreed to indemnify
us for certain liabilities arising out of our engagement. Our
affiliates, employees, officers and partners may at any time own
securities of the Company and Allied World.
Our opinion does not address the Companys underlying
business decision to effect the Transaction or the relative
merits of the Transaction as compared to any alternative
business strategies or transactions that might be available to
the Company and does not constitute a recommendation to any
stockholder of the Company as to how such stockholder should
vote with respect to the Transaction or any other matter. We
have not been asked to, nor do we, offer any opinion as to the
material terms of the Agreement or the form of the Transaction.
We express no opinion as to what the value of Allied World
Shares will be when issued pursuant to the Transaction or the
prices at which such Allied World Shares will trade in the
future. We have assumed, with your consent, that the
representations and warranties of all parties to the Agreement
are true and correct, that each party to the Agreement will
perform all of the covenants and agreements required to be
performed by such party, that all conditions to the consummation
of the Transaction will be satisfied without waiver thereof and
that the Transaction will be consummated in a timely manner in
accordance with the terms described in the Agreement, without
any modifications or amendments thereto or any adjustment to the
Exchange Ratio. In rendering this opinion, we have also assumed,
with your consent, that the final executed form of the Agreement
does not differ in any material respect from the draft that we
have examined. We have also assumed, at your direction, that at
the closing of the Transaction the Allied World Shares to be
issued to Company stockholders pursuant to the Agreement will be
listed on the NYSE. We have not been authorized to solicit and
have not solicited indications of interest in a possible
transaction with the Company from any party.
In arriving at our opinion, we have, among other things:
(i) reviewed certain publicly available business and
financial information relating to the Company and Allied World
that we deemed relevant; (ii) reviewed certain internal
information relating to the business, including financial
forecasts, earnings, cash flow, assets, liabilities and
prospects of the Company, furnished to us by the Company;
(iii) reviewed certain internal information relating to the
business, including financial forecasts, earnings, cash flow,
assets, liabilities and prospects of Allied World, furnished to
us by Allied World; (iv) conducted discussions with members
of senior management and representatives of the Company and
Allied World concerning the matters described in clauses
(i) (iii) of this paragraph, as well as their
respective businesses and prospects before and after giving
effect to the Transaction; (v) reviewed publicly available
financial and stock market data, including valuation multiples,
for the Company and Allied World and compared them with those of
certain other companies in lines of business that we deemed
relevant; (vi) compared the proposed financial terms of the
Transaction with the financial terms of certain other
transactions that we deemed relevant; (vii) reviewed a
draft of the Agreement dated June 11, 2011;
(viii) participated in certain discussions and negotiations
among representatives of the Company and Allied World and their
financial and legal advisors and (ix) conducted such other
financial studies and analyses and took into account such other
information as we deemed appropriate.
In connection with our review, we have not assumed any
responsibility for independent verification of any of the
financial, legal, regulatory, tax, accounting and other
information supplied to, discussed with, or reviewed by us for
the purpose of this opinion and have, with your consent, relied
on such information being complete and accurate in all material
respects. In addition, with your consent we have not made any
independent evaluation or appraisal of any of the assets or
liabilities (contingent, derivative, off-balance-sheet, or
otherwise) of the Company or Allied World, nor have we been
furnished with any such evaluation or appraisal. We are not
experts in the evaluation of reserves for insurance losses and
loss adjustment expenses, and we have not made an independent
evaluation of the adequacy of reserves of the Company or Allied
World. In that regard, with your consent, we have made no
analysis of, and express no opinion as to, the adequacy of the
loss and loss adjustment expense reserves of, the value of
redundant reserves to, or the ability to achieve reserve
releases by, the Company or Allied World. We have not been
requested, and we have not undertaken, to make any independent
valuation of the Companys pending arbitration matters
concerning American International Group, Inc. and certain of its
subsidiaries, and for purposes of our analysis we have, at your
direction, assumed the Company will obtain a recovery in the
amount and at the time estimated by Company management. In
addition, with respect to the forecasted financial information
referred to above, we have assumed at your direction that it has
been reasonably prepared on a basis reflecting the best
currently available estimates and judgments of the management of
the Company and Allied World as to the future performance of
their respective companies and that such future financial
results will be achieved at the times and in the amounts
projected by management of the Company and Allied World.
Our opinion is necessarily based on economic, monetary, market
and other conditions as in effect on, and the information made
available to us as of, the date hereof. We have assumed, with
your consent, that all governmental, regulatory or other
consents and approvals necessary for the consummation of the
Transaction will be obtained without the imposition of any
delay, limitation, restriction, divestiture or condition that
would have an adverse effect on the Company or Allied World or
on the expected benefits of the Transaction.
This opinion is for the use and benefit of the Board of
Directors of the Company in its evaluation of the Transaction
and may not be disclosed to any person without our prior written
consent. In addition, you have not asked us to address, and this
opinion does not address, the fairness to, or any other
consideration of, the holders of any class of securities,
creditors or other constituencies of the Company, other than the
holders of Company Common Stock.
In addition, we do not express any opinion as to the fairness of
the amount or nature of any compensation to be received by any
of the Companys officers, directors or employees, or any
class of such persons, relative to the Exchange Ratio. This
opinion was approved by a Moelis & Company LLC
fairness opinion committee.
Based upon and subject to the foregoing, it is our opinion that,
as of the date hereof, the Exchange Ratio pursuant to the
Agreement is fair, from a financial point of view, to the
holders of Company Common Stock.
Very truly yours,
MOELIS & COMPANY LLC
C-2
Annex
D
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STATUTEN
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ARTICLES OF ASSOCIATION
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der
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of
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TransAllied Group Holdings, Ltd
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TransAllied Group Holdings, Ltd
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TransAllied Group Holdings, AG
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TransAllied Group Holdings, AG
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I. Firma, Sitz und Zweck der Gesellschaft
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I. Name, Domicile and Purpose of the Company
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Artikel 1 Firma, Sitz und Dauer der
Gesellschaft
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Article 1 Corporate Name, Registered Office and
Duration
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Unter der Firma
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Under the corporate name
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TransAllied Group Holdings, Ltd
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TransAllied Group Holdings, Ltd
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TransAllied Group Holdings, AG
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TransAllied Group Holdings, AG
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besteht eine Aktiengesellschaft gemäss Artikel 620 ff. OR
mit Sitz in Baar. Die Dauer der Gesellschaft ist
unbeschränkt.
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a Company exists pursuant to Article 620 et seq. of the Swiss
Code of Obligations (hereinafter CO) having its
registered office in Baar. The duration of the Company is
unlimited.
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Artikel 2 Zweck
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Article 2 Purpose
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a)
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Hauptzweck der Gesellschaft ist der Erwerb, das Halten und der
Verkauf von Beteiligungen an Unternehmen, insbesondere, jedoch
nicht ausschliesslich, solcher der Direkt- und
Rückversicherungsbranche.
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a)
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The main purpose of the Company is to acquire, hold, manage and
to sell equity participations, including in insurance and
reinsurance companies as well as in other companies.
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Die Gesellschaft kann Finanz- und Management-Transaktionen
ausführen. Sie kann Zweigniederlassungen und
Tochtergesellschaften im In- und Ausland errichten.
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The Company may carry out finance and management transactions
and set up branches and subsidiaries in Switzerland and abroad.
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Die Gesellschaft kann im In- und Ausland Grundstücke
erwerben, halten und veräussern.
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The Company may acquire, hold and sell real estate in
Switzerland and abroad.
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b)
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Die Gesellschaft kann alle Geschäfte tätigen, die
geeignet sind, den Zweck der Gesellschaft zu fördern und
mit dem Zweck im Zusammenhang stehen.
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b)
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The Company may engage in all types of transactions and may take
all measures that appear appropriate to promote the purpose of
the Company or that are related to the same.
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II. Aktienkapital und Aktien
Partizipationskapital
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II. Share Capital and Shares, Participation
Capital
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Artikel 3a Aktienkapital
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Article 3a Share Capital
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a)
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Das Aktienkapital der Gesellschaft beträgt CHF
[ ]
und ist eingeteilt in
[ ]
auf den Namen lautende Aktien im Nennwert von CHF 15.00 je
Aktie. Das Aktienkapital ist vollständig liberiert.
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a)
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The share capital of the Company amounts to CHF
[ ]
and is divided into
[ ]
registered shares with a par value of CHF 15.00 per share. The
share capital is fully paid-in.
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b)
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Auf Beschluss der Generalversammlung können jederzeit
Namenaktien in Inhaberaktien und Inhaberaktien in Namenaktien
umgewandelt werden.
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b)
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Upon resolution of the General Meeting of Shareholders,
registered shares may be converted into bearer shares and bearer
shares may be converted into registered shares, at any time.
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Artikel 3b Partizipationskapital
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Article 3b Participation Capital
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a)
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Das Partizipationskapital der Gesellschaft beträgt CHF
3035100 und ist eingeteilt in 202340
Partizipationsscheine lautend auf den Namen im Nennwert von CHF
15.00 je Partizipationsschein. Das Partizipationskapital ist
vollständig liberiert.
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a)
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The participation capital of the Company amounts to CHF
3,035,100 and is divided into 202,340 registered participation
certificates with a par value of CHF 15.00 per participation
certificate. The participation capital is fully paid-in.
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b)
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Partizipationsscheine haben dieselben Rechte auf Dividenden und
einen Liquidationsanteil wie Namenaktien.
Partizipationsscheine haben keine Stimm- oder andere
Mitwirkungsrechte in der Generalversammlung.
Wird das Aktienkapital und das Partizipationskapital
gleichzeitig im gleichen Verhältnis erhöht, haben die
Aktionäre nur Bezugsrechte auf Aktien und die Partizipanten
nur auf Partizipationsscheine. Bezugsrechte und
Vorwegzeichnungsrechte von Partizipanten sind ausgeschlossen,
wenn und soweit diese Rechte der Aktionäre ausgeschlossen
werden.
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b)
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The participation certificates have the same entitlement to
dividends and liquidation distributions as the registered
shares.
Participation certificates have no voting or other participation
rights in the General Meeting of Shareholders.
If the share capital and the participation capital are increased
at the same time and in the same proportion, shareholders may
subscribe only to shares and participants only to participation
certificates. Pre-emptive and advance subscription rights of
participants are excluded, if and to the extent such rights of
the shareholders are excluded.
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Änderungen dieses Artikels 3b lit. b) bedürfen
der Zustimmung der absoluten Mehrheit der an der
Partizipantenversammlung vertretenen Partizipationsscheine.
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Any amendment to this Article 3b paragraph b) requires the
consent of the participants holding the absolute majority of the
participation certificates represented at a meeting of the
participants.
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c)
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Auf Beschluss der Generalversammlung können jederzeit
Partizipationsscheine in Namenaktien umgewandelt werden, wobei
diese Umwandlung (sowie die Änderung dieses Artikles 3b
lit. c)) nur mit Zustimmung der Partizipanten, welche die
absolute Mehrheit der an der Partizipantenversammlung
vertretenen Partizipationsscheine halten, zulässig ist.
Eine solche Umwandlung bedarf einer Herabsetzung des
Partizipationskapitals unter gleichzeitiger Erhöhung des
Aktienkapitals.
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c)
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Upon resolution of the General Meeting of Shareholders, all or
any portion of the participation certificates may be converted
into registered shares, at any time, whereby any such conversion
(as well as any amendment to this Article 3b paragraph c))
requires the consent of the participants holding the absolute
majority of the participation certificates represented at a
meeting of the participants. Any such conversion requires a
decrease of the participation capital with a simultaneous
increase of the share capital.
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d)
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Die Gesellschaft ist im Rahmen des gesetzlich Zulässigen
berechtigt, mit Partizipanten Vereinbarungen über den
Rückkauf der Partizipationsscheine, insbesondere
Andienungsrechte (Put Optionen) der Partizipanten, im Austausch
gegen Bargeld oder Namenaktien (aus dem Eigenbestand oder
Namenaktien aus genehmigtem Kapital) im Verhältnis 1:1 zu
vereinbaren.
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d)
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As far as legally admissible the Company has, at any time, the
right to buy back, in particular by granting put rights, all or
any portion of the participation certificates in exchange for
cash, registered shares out of the treasury shares or registered
shares out of authorized share capital at an exchange ratio of
1:1.
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D-2
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e)
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Den Partizipanten wird, gleichzeitig mit und in der gleichen
Form wie den Aktionären, die Einberufung der
Generalversammlung zusammen mit den
Verhandlungsgegenständen und den Anträgen des
Verwaltungsrats sowie derjeniger Aktionäre, welche die
Traktandierung oder die Durchführung einer
Generalversammlung verlangt haben, bekannt gegeben. Jeder
Beschluss der Generalversammlung ist unverzüglich am
Gesellschaftssitz und allfälligen eingetragenen
Zweigniederlassungen zur Einsicht der Partizipanten aufzulegen.
Die Partizipanten sind in der Bekanntgabe darauf hinzuweisen.
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e)
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The summon of a General Meeting of Shareholders shall be
notified to the participants, together with the matters on the
agenda and the proposals of the Board of Directors and of those
shareholders who have demanded that a meeting be called or that
matters be included in the agenda, on the same date and in the
same manner as notified to the shareholders. Each resolution of
the General Meeting of Shareholders shall promptly be made
available for inspection by the participants at the
Companys registered office and registered branch offices
(if any). The participants shall be informed thereof in the
notice.
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Artikel 4 Bedingtes Aktienkapital für
Anleihensobligationen und ähnliche Instrumente der
Fremdfinanzierung
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Article 4 Conditional Share Capital for Bonds and
Similar Debt Instruments
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a)
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Das Aktienkapital der Gesellschaft wird im Maximalbetrag von CHF
15000000 durch Ausgabe von höchstens
1000000 vollständig zu liberierenden
Namenaktien mit einem Nennwert von CHF 15.00 je Aktie
erhöht, bei und im Umfang der Ausübung von Wandel-
und/oder Optionsrechten, welche im Zusammenhang mit von der
Gesellschaft oder ihren Tochtergesellschaften emittierten oder
noch zu emittierenden Anleihensobligationen, Notes oder
ähnlichen Obligationen oder Schuldverpflichtungen
eingeräumt wurden/werden, einschliesslich Wandelanleihen.
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a)
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The share capital of the Company shall be increased by an amount
not exceeding CHF 15,000,000 through the issue of a maximum of
1,000,000 registered shares, payable in full, each with a par
value of CHF 15.00 through the exercise of conversion
and/or
option or warrant rights granted in connection with bonds, notes
or similar instruments, issued or to be issued by the Company or
by subsidiaries of the Company, including convertible debt
instruments.
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D-3
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b)
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Das Bezugsrecht der Aktionäre ist für diese Aktien
ausgeschlossen. Das Vorwegzeichnungsrecht der Aktionäre
und, soweit vorhanden, dasjenige der Partizipanten in Bezug auf
neue Anleihensobligationen, Notes oder ähnlichen
Obligationen oder Schuldverpflichtungen kann durch Beschluss des
Verwaltungsrats zu folgenden Zwecken eingeschränkt oder
ausgeschlossen werden: Finanzierung und Refinanzierung des
Erwerbs von Unternehmen, Unternehmensteilen oder Beteiligungen,
von durch die Gesellschaft geplanten neuen Investitionen oder
bei der Emission von Options- und Wandelanleihen über
internationale Kapitalmärkte sowie im Rahmen von
Privatplatzierungen. Der Ausschluss des Vorwegszeichnungsrechts
ist ausschliesslich unter folgenden kumulativen Bedingungen
zulässig: (1) Die Instrumente müssen zu
Marktkonditionen emittiert werden, (2) die Frist,
innerhalb welcher die Options- und Wandelrechte ausgeübt
werden können, darf ab Zeitpunkt der Emission des
betreffenden Instruments bei Optionsrechten 10 Jahre und bei
Wandelrechten 20 Jahre nicht überschreiten
und (3) der Umwandlungs- oder Ausübungspreis
für die neuen Aktien hat mindestens dem Marktpreis zum
Zeitpunkt der Emission des betreffenden Instruments zu
entsprechen.
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b)
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Shareholders pre-emptive rights are excluded with respect
to these shares. Shareholders advance subscription rights
and, if existing, such rights of participants with regard to new
bonds, notes or similar instruments may be restricted or
excluded by decision of the Board of Directors in order to
finance or re-finance the acquisition of companies, parts of
companies or holdings, or new investments planned by the
Company, or in order to issue convertible bonds and warrants on
the international capital markets or through private placement.
If advance subscription rights are excluded, then (1) the
instruments are to be placed at market conditions, (2) the
exercise period is not to exceed ten years from the date of
issue for warrants and twenty years for conversion rights and
(3) the conversion or exercise price for the new shares is to be
set at least in line with the market conditions prevailing at
the date on which the instruments are issued.
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c)
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Der Erwerb von Namenaktien durch Ausübung von Wandel- und
Optionsrechten sowie sämtliche weiteren Übertragungen
von Namenaktien unterliegen den
Übertragungsbeschränkungen gemäss Artikel 8 der
Statuten.
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c)
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The acquisition of registered shares through the exercise of
conversion rights or warrants and any further transfers of
registered shares shall be subject to the restrictions specified
in Article 8 of the Articles of Association.
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Artikel 5 Bedingtes Aktienkapital für
Mitarbeiterbeteiligungen
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Article 5 Conditional Share Capital for Employee
Benefit Plans
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a)
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Das Aktienkapital der Gesellschaft wird im Maximalbetrag von CHF
[ ]
durch Ausgabe von höchstens
[ ]
vollständig zu liberierenden Namenaktien mit einem Nennwert
von CHF 15.00 je Aktie erhöht bei und im Umfang der
Ausübung von Optionen, welche Mitarbeitern der Gesellschaft
oder Tochtergesellschaften sowie Beratern, Direktoren oder
anderen Personen, welche Dienstleistungen für die
Gesellschaft oder ihre Tochtergesellschaften erbringen,
eingeräumt wurden/werden.
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a)
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The share capital of the Company shall be increased by an amount
not exceeding CHF
[ ]
through the issue from time to time of a maximum of
[ ]
registered shares, payable in full, each with a par value of CHF
15.00, in connection with the exercise of option rights granted
to any employee of the Company or a subsidiary, and any
consultant, director or other person providing services to the
Company or a subsidiary.
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D-4
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b)
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Bezüglich dieser Aktien ist das Bezugsrecht der
Aktionäre ausgeschlossen. Neue Aktien dieser Art
können unter dem aktuellen Marktpreis ausgegeben werden.
Der Verwaltungsrat bestimmt bei einer solchen Emission die
spezifischen Konditionen, inkl. den Preis der Aktien.
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b)
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Shareholders pre-emptive rights shall be excluded with
regard to the issuance of these shares. These new registered
shares may be issued at a price below the current market price.
The Board of Directors shall specify the precise conditions of
issue including the issue price of the shares.
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c)
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Der Erwerb von Namenaktien im Zusammenhang mit
Mitarbeiterbeteiligungen sowie sämtliche weiteren
Übertragungen von Namenaktien unterliegen den
Übertragungsbeschränkungen gemäss Artikel 8 der
Statuten.
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c)
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The acquisition of registered shares in connection with employee
participation and any further transfers of registered shares
shall be subject to the restrictions specified in Article 8 of
the Articles of Association.
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Artikel 5a Bedingtes Kapital für bestehende
Aktionärsoptionen
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Article 5a Conditional Capital for Existing
Shareholder Warrants
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a)
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Das Aktienkapital der Gesellschaft wird im Maximalbetrag von CHF
30000000 durch Ausgabe von höchstens
2000000 vollständig zu liberierenden
Namenaktien mit einem Nennwert von CHF 15.00 je Aktie
erhöht bei und im Umfang der Ausübung von Optionen,
welche American International Group, Inc. eingeräumt wurden.
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a)
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The share capital of the Company shall be increased by an amount
not exceeding CHF 30,000,000, through the issue from time to
time of a maximum of 2,000,000 registered shares payable in
full, each with a par value of CHF 15.00, in connection with the
exercise of shareholder warrants granted to American
International Group, Inc.
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b)
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Bezüglich dieser Aktien ist das Bezugsrecht der
Aktionäre bzw. Partizipanten ausgeschlossen. Neue Aktien
dieser Art können zum oder unter dem aktuellen Marktpreis
ausgegeben werden. Der Verwaltungsrat bestimmt bei einer solchen
Emission die spezifischen Konditionen, inkl. den Ausgabepreis
der Aktien.
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b)
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Shareholders and participants pre-emptive rights
shall be excluded with regard to the issuance of these shares.
These new registered shares may be issued at a price equal to or
below the current market price. The Board of Directors shall
specify the precise conditions of issue including the issue
price of the shares.
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c)
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Der Erwerb von Namenaktien im Zusammenhang mit
Aktionärsoptionen sowie sämtliche weiteren
Übertragungen von Namenaktien unterliegen den
Übertragungsbeschränkungen gemäss Artikel 8 der
Statuten.
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c)
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The acquisition of registered shares in connection with the
shareholder warrants and any further transfers of registered
shares shall be subject to the restrictions specified in Article
8 of the Articles of Association.
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Artikel 6 Genehmigtes Kapital zu allgemeinen
Zwecken
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Article 6 Authorized Share Capital for General
Purposes
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a)
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Der Verwaltungsrat ist ermächtigt, das Aktienkapital
jederzeit bis
[ ]
im Maximalbetrag von CHF
[ ]
durch Ausgabe von höchstens
[ ]
vollständig zu liberierenden Namenaktien mit einem Nennwert
von CHF 15.00 je Aktie zu erhöhen.
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a)
|
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The Board of Directors is authorized to increase the share
capital from time to time and at any time until [two years
from special meeting date] by an amount not exceeding CHF
[ ]
through the issue of up to
[ ]
fully paid up registered shares with a par value of CHF 15.00
each.
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b)
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Erhöhungen auf dem Weg der Festübernahme sowie
Erhöhungen in Teilbeträgen sind gestattet. Der
Ausgabebetrag, die Art der Einlage, der Zeitpunkt der
Dividendenberechtigung sowie die Zuweisung nicht ausgeübter
Bezugsrechte werden durch den Verwaltungsrat bestimmt.
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b)
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Increases through firm underwriting or in partial amounts are
permitted. The issue price, the date of dividend entitlement,
the type of consideration (including the contribution or
underwriting in kind) as well as the allocation of non exercised
pre-emptive rights shall be determined by the Board of
Directors.
|
D-5
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c)
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Der Verwaltungsrat ist ermächtigt, Bezugsrechte der
Aktionäre auszuschliessen und diese Dritten zuzuweisen,
wenn die neu auszugebenden Aktien zu folgenden Zwecken verwendet
werden: (1) Fusionen, Übernahmen von Unternehmen
oder Beteiligungen, Finanzierungen und Refinanzierungen solcher
Fusionen und Übernahmen sowie anderweitige
Investitionsvorhaben (unter Einschluss von
Privatplatzierungen), (2) Stärkung der
regulatorischen Kapitalbasis der Gesellschaft oder ihrer
Tochtergesellschaften (unter Einschluss von
Privatplatzierungen), (3) zur Erweiterung des
Aktionariats, (4) zum Zwecke der
Mitarbeiterbeteiligung oder (5) zum Umtausch von
Partizipationsscheinen sowie zum Rückkauf von
Partizipationsscheinen gemäss Artikel 3b lit. d) der
Statuten im Austausch gegen Namenaktien aus genehmigtem Kapital.
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c)
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The Board of Directors is authorized to exclude the pre-emptive
rights of the shareholders and to allocate them to third parties
in the event of the use of shares for the purpose of (1)
mergers, acquisitions of enterprises or participations,
financing
and/or
refinancing of such mergers and acquisitions and of other
investment projects (including by way of private placements);
(2) improving the regulatory capital position of the company or
its subsidiaries (including by way of private placements); (3)
broadening the shareholder constituency; (4) the participation
of employees; or (5) an exchange of participation certificates
as well as a buy-back of participation certificates in exchange
of registered shares according to Article 3b paragraph d) of the
Articles of Association out of authorized share capital.
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d)
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Die Zeichnung sowie der Erwerb von Namenaktien aus genehmigtem
Kapital zu allgemeinen Zwecken sowie sämtliche weiteren
Übertragungen von Namenaktien unterliegen den
Übertragungsbeschränkungen gemäss Artikel 8 der
Statuten.
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d)
|
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The subscription as well as the acquisition of registered shares
out of authorized share capital for general purposes and any
further transfers of registered shares shall be subject to the
restrictions specified in Article 8 of the Articles of
Association.
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Artikel 7 Form der Aktien, Bucheffekten
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Article 7 Form of Shares, Intermediated
Securities
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a)
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Die Gesellschaft kann ihre Namenaktien in der Form von
Einzelurkunden, Globalurkunden oder Wertrechte ausgeben und
jederzeit ohne Genehmigung der Aktionare eine bestehende Form in
eine andere Form von Namenaktien umwandeln. Ein Aktionär
oder eine Aktionärin hat keinen Anspruch auf Umwandlung
seiner oder ihrer Namenaktien in eine andere Form oder auf Druck
und Auslieferung von Urkunden. Mit der Zustimmung des
Aktionärs oder der Aktionärin kann die Gesellschaft
ausgestellte Urkunden, die bei ihr eingeliefert werden,
ersatzlos annullieren. Jeder Aktionar und jede Aktionarin
können jedoch von der Gesellschaft jederzeit die
Ausstellung einer Bescheinigung über die von ihm oder ihr
gemass Aktienregister gehaltenen Namenaktien verlangen.
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a)
|
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The Company may issue its registered shares in the form of
individual certificates, global certificates
and/or
uncertificated securities and convert one form into another form
of registered shares at any time and without the approval of the
shareholders. A shareholder has no entitlement to demand a
conversion of the form of the registered shares or the printing
and delivery of share certificates. With the consent of the
shareholder, the Company may cancel issued certificates which
are returned to it without replacement. Each shareholder may,
however, at any time request a written confirmation from the
Company of the registered shares held by such shareholder, as
reflected in the share register of the Company.
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b)
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Die Gesellschaft kann für die Namenaktien Bucheffekten
schaffen. Die Übertragung von Bucheffekten und die
Bestellung von Sicherheiten an Bucheffekten richten sich nach
den Bestimmungen des Bucheffektengesetzes. Die Gesellschaft kann
als Bucheffekten ausgestaltete Namenaktien aus dem
entsprechenden Verwahrungssystem zurückziehen.
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b)
|
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The Company may create intermediated securities for the
registered shares. The transfer of intermediated securities and
furnishing of collateral in intermediated securities must
conform with the regulations of the Intermediary-Held Securities
Act. The Company may withdraw registered shares issued as
intermediary-held securities from the respective custody system.
|
D-6
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c)
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Die Übertragung von Namenaktien, einschliesslich der daraus
entspringenden Rechte, richtet sich nach dem anwendbaren Recht
und diesen Statuten. Eine Übertragung durch Zession bedarf
zusätzlich der Anzeige an die Gesellschaft; die Bank,
welche abgetretene Namenaktien für die Aktionäre
verwaltet, kann von der Gesellschaft über die erfolgte
Zession benachrichtigt werden. Die Übertragungen
unterliegen den Beschränkungen von Artikel 8 der Statuten.
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c)
|
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Transfers of registered shares and the rights arising therefrom
are subject to the applicable law and these Articles of
Association. A transfer by way of assignment, in addition,
requires notice of the assignment to the Company; the bank which
handles the book entries of the assigned registered shares on
behalf of the shareholders may be notified by the Company of
such assignment. Transfers are subject to the limitations of
Article 8 of the Articles of Association.
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d)
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Für den Fall, dass die Gesellschaft Aktienzertifikate
druckt und ausgibt, müssen die Aktienzertifikate die
Unterschrift von zwei zeichnungsberechtigten Personen tragen.
Mindestens eine dieser Personen muss Mitglied des
Verwaltungsrats sein. Faksimile-Unterschriften sind erlaubt.
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d)
|
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If the Company prints and issues share certificates, such share
certificates shall bear the signature of two duly authorized
signatories of the Company, at least one of which shall be a
member of the Board of Directors. These signatures may be
facsimile signatures.
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e)
|
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Die vorstehenden Bestimmungen dieses Artikels 7 der Statuten
gelten mutatis mutandis auch für Partizipationsscheine.
|
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e)
|
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The foregoing provisions of this Article 7 of the Articles of
Association apply mutatis mutandis to participation certificates.
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Artikel 8 Aktienregister,
Partizipationsscheinregister und Beschränkungen der
Übertragbarkeit
|
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Article 8 Share Register, Participation
Certificate Register and Transfer Restrictions
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a)
|
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Für die Namenaktien und die Partizipationsscheine wird je
ein Register (Aktienbuch oder Partizipationsscheinregister)
geführt. Darin werden die Eigentümer und Nutzniesser
mit Namen und Vornamen, Wohnort, Adresse und
Staatsangehörigkeit (bei juristischen Personen mit Sitz)
eingetragen.
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a)
|
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Registered shares and participation certificates are registered
in a register (share register and participation certificate
register, respectively). The name of the owner or the
usufructuary shall be entered in either the share register or
the participation certificate register with his/her name,
address, domicile and citizenship (domicile in case of legal
entities).
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b)
|
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Zur Eintragung ins Aktienbuch als Aktionär mit Stimmrecht
ist die Zustimmung des Verwaltungsrats notwendig. Die Eintragung
als Aktionär mit Stimmrecht kann in den in Artikel 8 lit.
c), e), f) und g) der Statuten festgehaltenen
Fällen abgelehnt werden. Lehnt der Verwaltungsrat die
Eintragung des Erwerbers als Aktionär mit Stimmrecht ab,
benachrichtigt er diesen innerhalb von 20 Tagen seit dem Eingang
des Eintragungsgesuchs. Nicht anerkannte Erwerber werden als
Aktionäre ohne Stimmrecht ins Aktienbuch eingetragen. Die
entsprechenden Aktien gelten in der Generalversammlung als nicht
vertreten. Diese Regelung gilt mutatis mutandis auch für
Partizipationsscheine bzw. die Eintragung im
Partizipationsscheinregister.
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b)
|
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Entry in the share register of registered shares with voting
rights is subject to the approval of the Board of Directors.
Entry of registered shares with voting rights may be refused
based on the grounds set out in Article 8 paragraph c), e), f)
and g) of the Articles of Association. If the Board of Directors
refuses to register the acquirer as shareholder with voting
rights it shall notify the acquirer of such refusal within 20
days upon receipt of the application. Non-recognized acquirers
shall be entered in the share register as shareholders without
voting rights. The corresponding shares shall be considered as
not represented in the General Meeting of Shareholders.
|
D-7
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c)
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Eine natürliche oder juristische Person wird in dem Umfang
nicht als Aktionärin mit Stimmrecht im Aktienbuch
eingetragen, in welchem die von ihr direkt oder indirekt im
Sinne von Artikel 14 der Statuten gehaltene oder sonstwie
kontrollierte Beteiligung 10% oder mehr des im Handelsregister
eingetragenen Aktienkapitals beträgt. Dabei gelten
Personen, die durch Absprache, Kapital, Stimmkraft, Leitung,
Syndikat oder auf andere Weise miteinander verbunden sind, als
eine Person. Im Umfang, in welchem eine derartige Beteiligung
10% oder mehr des Aktienkapitals beträgt, werden die
entsprechenden Aktien ohne Stimmrecht ins Aktienbuch eingetragen.
|
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c)
|
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No individual or legal entity may, directly or through
Constructive Ownership (as defined in Article 14 of the Articles
of Association below) or otherwise control voting rights with
respect to 10% or more of the registered share capital recorded
in the Commercial Register. Those associated through capital,
voting power, joint management or in any other way, or joining
for the acquisition of shares, shall be regarded as one person.
The registered shares exceeding the limit of 10% shall be
entered in the share register as shares without voting rights.
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d)
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[reserviert]
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d)
|
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[reserved]
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e)
|
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Die oben erwähnte 10% Limite gilt auch bei der Zeichnung
oder dem Erwerb von Aktien, welche mittels Ausübung von
Options- oder Wandelrechten aus Namen- oder Inhaberpapieren oder
sonstigen von der Gesellschaft oder Dritten ausgestellten
Wertpapieren oder welche mittels Ausübung von erworbenen
Bezugsrechten aus Namen- oder Inhaberaktien gezeichnet oder
erworben werden oder welche durch Umwandlung von
Partizipationsscheinen in Namenaktien gemäss Artikel 3b
lit. c) der Statuten ausgegeben werden. Im Umfang, in
welchem eine daraus resultierende Beteiligung 10% oder mehr des
Aktienkapitals beträgt, werden die entsprechenden Aktien
ohne Stimmrecht ins Aktienbuch eingetragen.
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e)
|
|
The limit of 10% of the registered share capital also applies to
the subscription for, or acquisition of, registered shares by
exercising option or convertible rights arising from registered
or bearer securities or any other securities issued by the
Company or third parties, as well as by means of exercising
purchased pre-emptive rights arising from either registered or
bearer shares or which arise out of the conversion of
participation certificates into registered shares according to
Article 3b paragraph c) of the Articles of Association. The
registered shares exceeding the limit of 10% shall be entered in
the share register as shares without voting rights.
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f)
|
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Der Verwaltungsrat verweigert die Eintragung ins Aktienbuch als
Aktionär mit Stimmrecht oder entscheidet über die
Löschung eines bereits eingetragenen Aktionärs mit
Stimmrecht aus dem Aktienbuch, wenn der Erwerber auf sein
Verlangen hin nicht ausdrücklich erklärt, dass er die
Aktien im eigenen Namen und auf eigene Rechnung erworben hat.
|
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f)
|
|
The Board of Directors shall reject entry of registered shares
with voting rights in the share register or shall decide on
their cancellation when the acquirer or shareholder upon request
does not expressly state that he/she has acquired or holds the
shares in his/her own name and for his/her own account.
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g)
|
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Der Verwaltungsrat verweigert die Eintragung natürlicher
und juristischer Personen, welche Namenaktien für Dritte
halten und dies schriftlich gegenüber der Gesellschaft
erklären, als Treuhänder/Nominees mit
unbeschränktem Stimmrecht ins Aktienbuch oder entscheidet
über die Löschung aus dem Aktienbuch, wenn sie sich
nicht dazu verpflichten, gegenüber der Gesellschaft auf
deren schriftliches Verlangen hin jederzeit die Namen, Adressen
und Beteiligungsquoten derjenigen Personen offenzulegen,
für welche sie die Namenaktien halten.
|
|
g)
|
|
The Board of Directors shall reject entry of individuals and
legal entities who hold registered shares for third parties and
state this in writing to the Company, as nominees in the share
register with voting rights without limitation or shall decide
on their cancellation when the nominee does not undertake the
obligation to disclose at any time to the Company at its written
request the names, addresses and share holdings of each person
for whom such nominee is holding shares.
|
D-8
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h)
|
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Der Verwaltungsrat kann in besonderen Fällen Ausnahmen von
den obgenannten Beschränkungen (Artikel 8 lit. c), e),
f) und g) der Statuten) genehmigen. Sodann kann der
Verwaltungsrat nach Anhörung der betroffenen Personen deren
Eintragungen im Aktienbuch als Aktionäre rückwirkend
streichen, wenn diese durch falsche Angaben zustande gekommen
sind oder wenn die betroffene Person die Auskunft gemäss
Artikel 8 lit. f) der Statuten verweigert.
|
|
h)
|
|
The Board of Directors may in special cases approve exceptions
to the above regulations (Article 8 paragraph c), e), f) and g)
of the Articles of Association). The Board of Directors is in
addition authorized, after due consultation with the person
concerned, to delete with retroactive effect entries in the
share register which were effected on the basis of false
information
and/or to
delete entries in case the respective person refuses to make the
disclosers according to Article 8 paragraph f) of the Articles
of Association.
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i)
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Solange ein Erwerber nicht Aktionär mit Stimmrecht im Sinne
von Artikel 8 der Statuten geworden ist, kann er weder die
entsprechenden Stimmrechte noch die weiteren mit diesem in
Zusammenhang stehenden Rechte wahrnehmen.
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i)
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Until an acquirer becomes a shareholder with voting rights for
the shares in accordance with this Article 8 of the Articles of
Association, he/she may neither exercise the voting rights
connected with the shares nor other rights associated with the
voting rights.
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III. Organisation
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III. Organization
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A. Die Generalversammlung
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A. The General Meeting of Shareholders
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Artikel 9 Befugnisse
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Article 9 Authorities
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Die Generalversammlung ist das oberste Organ der Gesellschaft.
Sie hat die folgenden unübertragbaren Befugnisse:
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The General Meeting of Shareholders is the supreme corporate
body of the Company. It has the following non-transferable
powers:
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1.
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die Festsetzung und Änderung der Statuten;
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1.
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to adopt and amend the Articles of Association;
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2.
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die Wahl der Mitglieder des Verwaltungsrats und der
Revisionsstelle;
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2.
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to elect and remove the members of the Board of Directors and
the Auditors;
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3.
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die Genehmigung des Jahresberichts, der Jahresrechnung und der
Konzernrechnung sowie die Beschlussfassung über die
Verwendung des Bilanzgewinns, insbesondere die Festsetzung der
Dividende;
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3.
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to approve the statutory required annual report, the annual
accounts and the consolidated financial statements as well as to
pass resolutions regarding the allocation of profits as shown on
the balance sheet, in particular to determine the dividends;
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4.
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die Entlastung der Mitglieder des Verwaltungsrats; und
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4.
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to grant discharge to the members of the Board of Directors; and
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5.
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die Beschlussfassung über die Gegenstände, die der
Generalversammlung durch das Gesetz oder die Statuten
vorbehalten sind oder welche ihr vom Verwaltungsrat vorgelegt
werden.
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5.
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to pass resolutions regarding items which are reserved to the
General Meeting of Shareholders by law or by the Articles of
Association or which are presented to it by the Board of
Directors.
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Artikel 10 Generalversammlungen sowie deren
Einberufung
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Article 10 Meetings and Convening the Meeting
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a)
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Die ordentliche Generalversammlung findet alljährlich
innerhalb von sechs Monaten nach Abschluss des
Geschäftsjahres statt. Zeitpunkt und Ort, welcher im In-
oder Ausland sein kann, werden durch den Verwaltungsrat bestimmt.
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a)
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The ordinary General Meeting of Shareholders shall be held
annually within six months after the close of the business year
at such time and at such location, which may be within or
outside Switzerland, as determined by the Board of Directors.
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D-9
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b)
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Ausserordentliche Generalversammlungen werden gemäss den
gesetzlichen Bestimmungen durch Beschluss der
Generalversammlung, durch die Revisionsstelle oder den
Verwaltungsrat einberufen. Ausserdem müssen
ausserordentliche Generalversammlungen einberufen werden, wenn
stimmberechtigte Aktionäre, welche zusammen mindestens 10%
des Aktienkapitals vertreten, es verlangen.
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b)
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Extraordinary General Meetings of Shareholders may be called in
accordance with statutory provisions by resolution of the
General Meeting of Shareholders, the Auditors or the Board of
Directors, or by shareholders with voting powers, provided they
represent at least 10% of the share capital.
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Artikel 11 Einladung
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Article 11 Notice
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Die Einladung erfolgt mindestens 20 Tage vor der Versammlung
durch Publikation im Schweizerischen Handelsamtsblatt (SHAB).
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Notice of the General Meeting of Shareholders shall be given by
publication in the Swiss Official Gazette of Commerce (SOGC) at
least 20 days before the date of the meeting.
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Artikel 12 Traktanden
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Article 12 Agenda
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a)
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Der Verwaltungsrat nimmt die Traktandierung der
Verhandlungsgegenstände vor.
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a)
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The Board of Directors shall state the matters on the agenda.
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b)
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Ein oder mehrere mit Stimmrecht eingetragene Aktionäre
können, gemäss den gesetzlichen Bestimmungen, vom
Verwaltungsrat die Traktandierung eines Verhandlungsgegenstandes
verlangen. Das Begehren um Traktandierung ist schriftlich unter
Angabe der Verhandlungsgegenstände und der Anträge an
den Präsidenten des Verwaltungsrats mindestens 60 Tage vor
der Generalversammlung einzureichen.
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b)
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One or more registered shareholders may in compliance with the
legal requirements demand that matters be included in the
agenda. Such demands shall be in writing and shall specify the
items and the proposals and has to be submitted to the Chairman
up to 60 days before the date of the meeting.
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c)
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Über Anträge zu nicht gehörig angekündigten
Verhandlungsgegenständen, welche auch nicht im Zusammenhang
mit einem gehörig traktandierten Verhandlungsgegenstand
stehen, können keine Beschlüsse gefasst werden, ausser
in den gesetzlich vorgesehenen Fällen.
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c)
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No resolution shall be passed on matters proposed only at the
General Meeting of Shareholders and which have no bearing on any
of the proposed items of the agenda, apart from those exceptions
permitted by law.
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d)
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In der Einberufung der Versammlung werden die Traktanden und die
Anträge des Verwaltungsrats sowie derjenigen Aktionäre
bekanntgegeben, welche die Traktandierung oder die
Durchführung einer Generalversammlung verlangt haben.
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d)
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The notice of the meeting shall state the matters on the agenda
and the proposals of the Board of Directors and of those
shareholders who have demanded that a meeting be called or that
matters be included in the agenda.
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Artikel 13 Vorsitz und Protokoll
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Article 13 Chair, Minutes
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a)
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Den Vorsitz in der Generalversammlung führt der
Präsident des Verwaltungsrats, bei dessen Verhinderung ein
anderes vom Verwaltungsrat bezeichnetes Mitglied des
Verwaltungsrats oder ein anderer von der Generalversammlung
für den betreffenden Tag bezeichneter Vorsitzender.
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a)
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The General Meeting of Shareholders shall be chaired by the
Chairman, or, in his absence, by another member of the Board of
Directors, or by another Chairman elected for that day by the
General Meeting of Shareholders.
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D-10
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b)
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Der Vorsitzende bezeichnet einen Protokollführer sowie die
Stimmenzähler, welche keine Aktionäre sein müssen.
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b)
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The Chairman designates a Secretary for the minutes as well as
the scrutinizers who need not be shareholders.
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c)
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Der Verwaltungsrat ist verantwortlich für die
Protokollführung. Das Protokoll wird vom Vorsitzenden und
vom Protokollführer unterzeichnet.
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c)
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The Board of Directors is responsible for the keeping of the
minutes, which are to be signed by the Chairman and by the
Secretary.
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Artikel 14 Stimmrecht und Vertreter
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Article 14 Voting Rights and Shareholders
Proxies
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a)
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Jede Aktie berechtigt, unter Vorbehalt der Einschränkungen
gemäss Artikel 8 der Statuten und Artikel 14 lit.
b) und c) untenstehend, zu einer Stimme. Jeder
stimmberechtigte Aktionär kann seine Aktien durch eine
andere von ihm schriftlich bevollmächtigte Person vertreten
lassen, welche kein Aktionär sein muss.
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a)
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Each share is entitled to one vote subject to the provisions of
Article 8 of the Articles of Association and Article 14
paragraph b) and c) below. Each shareholder may be represented
at the General Meeting of Shareholders by another person who is
authorized by a written proxy and who does not need to be a
shareholder.
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b)
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Ungeachtet lit. a) vorstehend gilt Folgendes: Sobald und
solange eine natürliche oder juristische Person Namenaktien
entsprechend 10% oder mehr des im Handelsregister eingetragenen
Aktienkapitals der Gesellschaft kontrolliert, ist diese bei
ordentlichen oder ausserordentlichen Generalversammlungen
maximal zu den gemäss nachfolgender Formel zu eruierenden
Stimmen (abgerundet auf die nächst tiefere, runde Zahl)
berechtigt:
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b)
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Notwithstanding paragraph a) above, if and so long as there are
Controlled Shares representing 10% or more of the registered
share capital recorded in the Commercial Register, regardless of
the identity of the holder thereof, such Controlled Shares shall
be entitled to cast votes at any General Meeting of Shareholders
or Extraordinary General Meeting of Shareholders in the
aggregate equal to the number (rounded down to the nearest whole
number) obtained from the following formula:
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[(T
¸
100) x 10] − 1
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[(T
¸
100) x 10] − 1
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Wobei gilt: T ist gleich der Gesamtanzahl
der Stimmrechte, welche auf dem im Handelsregister eingetragenen
gesamten Aktienkapital der Gesellschaft verliehen werden.
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Where: T is the aggregate number of votes
conferred by all the registered share capital recorded in the
Commercial Register.
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c)
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Als kontrolliert im Sinne dieser Statuten gilt die
Gesamtheit der einer stimmberechtigten Klasse angehörenden
Aktien der Gesellschaft, welche von einer Person:
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c)
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For purposes of these Articles, Controlled Shares
means all shares of the Company, of all classes entitled to vote
owned by a person in the aggregate whether:
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(aa)
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direkt, als auch
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(aa)
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directly or
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(bb)
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ndirekt, definiert aufgrund der nachfolgenden
Zuordnungskriterien, gehalten werden:
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(bb)
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due to Constructive Ownership, defined as ownership deemed to
exist after application of the following rules of ownership
attribution:
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(i)
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Zuordnung aufgrund einer Personengesellschaft (Partnership)
oder einer anderen Gesellschaft, einem Trust oder eines
Nachlasses.
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(i)
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Attribution from any partnership, estate, trust, or
corporation.
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Mit Ausnahme der Regelung in
Unterabsatz (D) untenstehend:
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Except as provided in subparagraph (D) below:
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D-11
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(A)
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Aktien, welche direkt oder indirekt von oder für einer/eine
Personengesellschaft (Partnership) oder einem/einen
Nachlass gehalten werden, gelten als anteilsmässig von den
betreffenden Partnern oder Begünstigten gehalten.
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(A)
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Shares owned, directly or indirectly, by or for a partnership or
estate shall be considered as owned proportionately by its
partners or beneficiaries.
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(B)
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Aktien, welche direkt oder indirekt von oder für
einem/einen Trust gehalten werden, gelten als von den
Begünstigten dieses Trusts im Verhältnis ihres
rechnungsmässigen Anteils gehalten; allerdings
gelten Aktien, welche direkt oder indirekt von oder für
einem/einen Teil eines Trusts gehalten werden, der gemäss
den anwendbaren Steuergesetzen (einschliesslich US
Bundeseinkommenssteuerrechts) einer Person gehört, als von
dieser Person gehalten gelten. Im hier verwendeten Sinne wird
unter einem Trust, wenn vom Verwaltungsrat so bestimmt, nicht
auch ein Trust verstanden, der in den Vereinigten Staaten oder
einer anderen Jurisdiktion gegründet oder organisiert ist
und der Teil eines von der US Bundeseinkommenssteuer bzw. von
den Steuern der betreffenden anderen Jurisdiktionen befreiten
Aktienvergütungs-, Renten- oder Gewinnbeteiligungsplans
eines Mitarbeiters ist, welcher ausschliesslich dem Zweck der
Begünstigung von Mitarbeitern oder deren Begünstigten
dient.
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(B)
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Shares owned, directly or indirectly by or for a trust shall be
considered as owned by its beneficiaries in proportion to the
actuarial interest of such beneficiaries in such trust;
provided, however, that shares owned, directly or
indirectly, by or for any portion of a trust of which a person
is considered to be the owner by applicable tax laws, including
for U.S. federal income tax purposes, shall be considered owned
by such person. For purposes of the foregoing, if so determined
by the Board of Directors, a trust shall not include a trust
created or organized in the United States or any other
jurisdiction and forming part of a stock bonus, pension or
profit sharing plan of an employer for the exclusive benefit of
employees or their beneficiaries that is exempt from U.S.
federal income taxation respectively from applicable taxes of
such other jurisdiction.
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(C)
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Wenn eine Person direkt oder indirekt wertmässig mit 10%
oder mehr an einer Gesellschaft beteiligt ist oder die Anteile
für diese Person gehalten werden, so gelten die der
Gesellschaft direkt oder indirekt gehörenden Aktien als von
dieser Person gehalten, dies im Verhältnis des Werts der
dieser Person gehörenden Aktien zum Gesamtwert aller Aktien
der Gesellschaft.
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(C)
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If 10% or more in value of the shares in a corporation is owned
directly or indirectly, by or for any person, such person shall
be considered as owning the shares owned, directly or
indirectly, by or for such corporation, in that proportion which
the value of the shares which such person so owns bears to the
value of all the shares in such corporation.
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D-12
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(D)
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Wenn mehr als 50% der Stimmrechte aller stimmberechtigten
Aktienklassen einer Gesellschaft von einer Personengesellschaft
(Partnership) oder einer anderen Gesellschaft, einem
Nachlass oder einem Trust direkt oder indirekt gehalten werden,
so werden Betreffenden im Rahmen dieses
Unterabsatzes (i) sämtliche Stimmrechte der
betreffenden Gesellschaft zugerechnet.
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(D)
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For purposes of this subparagraph (i), if a partnership, estate,
trust, or corporation owns, directly or indirectly, more than
50% of the total combined voting power of all classes of shares
entitled to vote in a corporation, it shall be considered as
owning all the shares entitled to vote.
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(ii)
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Zuordnung bei Personengesellschaften (Partnerships) oder
anderen Gesellschaften, bei einem Nachlass oder einem Trust:
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(ii)
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Attribution to partnerships, estates, trusts, and corporations:
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(A)
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Aktien, welche direkt oder indirekt von oder für
einem/einen Partner oder einem/einen Berechtigten eines
Nachlasses gehalten werden, gelten als von der betreffenden
Personengesellschaft (Partnership) oder vom betreffenden
Nachlass gehalten.
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(A)
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Shares owned, directly or indirectly, by or for a partner or a
beneficiary of an estate shall be considered as owned by the
partnership or estate.
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D-13
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(B)
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Aktien, welche direkt oder indirekt von oder für
einem/einen Begünstigten eines Trusts gehalten werden,
gelten als vom Trust gehalten, sofern der Anspruch des
Begünstigten am Trust nicht lediglich geringer und
ungewisser Natur ist (remote contingent interest);
vorausgesetzt aber, dass direkt oder indirekt einer
Person gehörende Aktien, welche gemäss den anwendbaren
Steuergesetzen (einschliesslich US Bundeseinkommenssteuer)
Eigentümerin eines Trustanteils ist, als vom Trust gehalten
gelten. Ein ungewisser Anspruch eines Begünstigten eines
Trusts ist im Rahmen des voranstehenden Satzes gering, wenn
unter grösstmöglicher Ausschöpfung des
Ermessensbereichs des Trustees zugunsten dieses
Begünstigten, der rechnungsmässige Wert des Anspruchs
5% oder weniger des Trustvermögens ausmacht. Unter einem
Trust im Sinne des Unterabsatzes (B) wird, wenn vom
Verwaltungsrat so bestimmt, nicht auch ein Trust verstanden, der
in den Vereinigten Staaten oder einer anderen Jurisdiktion
gegründet oder organisiert ist und der Teil eines von der
US Bundeseinkommenssteuer bzw. von den Steuern der betreffenden
anderen Jurisdiktionen befreiten Aktienvergütungs-, Renten-
oder Gewinnbeteiligungsplans eines Mitarbeiters ist, welcher
ausschliesslich dem Zweck der Begünstigung von Mitarbeitern
oder deren Begünstigten dient.
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(B)
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Shares owned, directly or indirectly, by or for a beneficiary of
a trust shall be considered as owned by the trust, unless such
beneficiarys interest in the trust is a remote contingent
interest; provided, however, that shares owned,
directly or indirectly, by or for a person who is considered the
owner of any portion of a trust by applicable tax laws,
including for U.S. federal income tax purposes, shall be
considered owned by the trust. For purposes of the preceding
sentence, a contingent interest of a beneficiary in a trust
shall be considered remote if, under the maximum exercise of
discretion by the trustee in favour of such beneficiary, the
value of such interest, computed actuarially, is 5% or less of
the value of the trust property. For purposes of this
subparagraph (B), if so determined by the Board of Directors, a
trust shall not include a trust created or organized in the
United States or any other jurisdiction and forming part of a
stock bonus, pension or profit sharing plan of an employer for
the exclusive benefit of employees or their beneficiaries that
is exempt from U.S. federal income taxation respectively from
applicable taxes of such other jurisdiction.
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D-14
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(C)
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Wenn eine Person direkt oder indirekt wertmässig mit 50%
oder mehr an einer Gesellschaft beteiligt ist oder die Anteile
für diese Person gehalten werden, so gelten die der
Gesellschaft direkt oder indirekt gehörenden Aktien als von
dieser Person gehalten; allerdings ist die vorangehende
Bestimmung nicht anwendbar, wenn sie aufgrund des Haltens
eigener Aktien durch die Gesellschaft zur Anwendung käme.
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(C)
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If 50% or more in value of the shares in a corporation is owned,
directly or indirectly, by or for any person, such corporation
shall be considered as owning the shares owned, directly or
indirectly, by or for such person; provided,
however, the foregoing rule shall not be applied so as to
consider a corporation as owning its own shares.
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(iii)
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Kontrollvereinbarungen. Wenn einer Person
aufgrund einer Vereinbarung, eines Vertrages, einer
Übereinkunft oder einer sonstigen Beziehung betreffend eine
oder mehrere Aktien der Gesellschaft ganz oder
anteilsmässig (A) Einfluss auf Stimmrechte
zukommt (einschliesslich das Recht zur Ausübung oder zur
Bestimmung der Ausübung des Stimmrechts an diesen Aktien);
und/oder (B) Einfluss auf die
Verfügungsberechtigung dieser Aktien zukommt
(einschliesslich das Recht, diese Aktien zu veräussern oder
die Veräusserung anzuordnen), so gelten diese Aktien als
von der betreffenden Person gehalten.
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(iii)
|
|
Control arrangements. If a person through any
arrangement, contract, understanding, relationship, or otherwise
regarding one or more shares of the Company has or shares (A)
voting power which includes the power to vote, or to direct the
voting of, such share;
and/or (B)
investment power which includes the power to dispose, or to
direct the disposition of, such share(s), such share(s) shall be
considered as owned by such person.
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(iv)
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Optionsrechte, Wandelrechte oder ähnliche
Rechte. Wenn eine Person ein Recht hat, eine oder
mehrere Aktien zu erwerben, einschliesslich (A) durch
Ausübung eines Options-, Wandel- oder eines ähnlichen
Rechts, (B) durch Wandlung einer
Sicherheit; (C) durch die Möglichkeit, einen
Trust, ein Vermögensverwaltungskonto oder eine
ähnliche Vereinbarung für nichtig zu erklären;
oder (D) durch die automatische Aufhebung eines
Trusts, eines Vermögensverwaltungskontos oder einer
ähnlichen Vereinbarung, so gelten diese Aktien als von der
betreffenden Person gehalten. Als Option, mit welcher Aktien
erworben werden können, gelten in diesem Sinne
Optionsrechte (und jede einzelne einer Serie von Optionen), mit
denen erstgenannte Option erhalten werden kann.
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(iv)
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Options, warrants or similar rights. If any
person has a right to acquire one or more shares, including (A)
by way of an option, warrant or similar right; (B) through the
conversion of a security; (C) pursuant to the power to revoke a
trust, discretionary account, or similar arrangement; or (D)
pursuant to the automatic termination of a trust, discretionary
account or similar arrangement, such shares shall be considered
as owned by such person. For this purpose, an option to acquire
such an option, and each one of a series of such options, shall
be considered as an option to acquire such shares.
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D-15
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(v)
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Familienmitglieder. Eine natürliche Person hält
ihre Aktien direkt oder indirekt von oder
für (A) ihren oder seine Ehepartner/in
(ausgenommen Ehepartner, die rechtlich aufgrund eines
Scheidungsurteils oder einer Verfügung zum Getrenntleben
[separate maintenance] getrennt sind);
und (B) ihre oder seine Kinder, Enkel und Eltern. Ein
im Rechtssinne adoptiertes Kind gilt im Sinne dieses
Unterabsatzes (v) als Kind der betreffenden
natürlichen Person.
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(v)
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Members of a family. An individual shall be considered
as owning the shares owned, directly or indirectly by or for (A)
his or her spouse (other than a spouse who is legally separated
from the individual under a decree of divorce or separate
maintenance); and (B) his or her children, grandchildren and
parents. For purposes of this subparagraph (v), a legally
adopted child of an individual shall be treated as a child of
such individual by blood.
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(vi)
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Keine Umgehung. Wenn eine Person Trusts,
Vollmachten, übrige Vertretungsberechtigungen oder sonstige
vertragliche Abreden errichtet oder benutzt in der Absicht, die
wirtschaftliche Berechtigung an den Aktien zu verdecken oder die
Fälligkeit einer wirtschaftlichen Berechtigung an den
Aktien, die sich gemäss einem Plan oder Programm ergeben
würde, verhindert, um die Bestimmungen dieser Statuten zu
umgehen, so gelten die Aktien als von dieser Person gehalten.
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(vi)
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No circumvention. If a person creates or uses
a trust, proxy, power of attorney, pooling arrangement or any
other contract, arrangement, or device with the purpose or
effect of divesting such person of beneficial ownership of
shares of the Company or preventing the vesting of such
beneficial ownership as part of a plan or scheme to evade the
provisions of these articles of association, such shares shall
be considered as owned by such person.
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(vii)
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Anwendbarkeitsbestimmungen. Im Rahmen der
obenstehenden Unterabsätze (i) (vi)
dieses Artikels 14 lit. c) (bb) gilt folgendes:
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(vii)
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Rules of application. For purposes of
subparagraphs (i) to (vi) of this subparagraph (bb) of
subparagraph c) of Article 14, the following shall apply:
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D-16
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(A)
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Aktien, die indirekt von einer Person gemäss den
Unterabsätzen (i), (ii), (iii),
(iv), (v) und (vi) gehalten werden, gelten im
Rahmen der Anwendung dieser Unterabsätze als
tatsächlich dieser Person gehörend; allerdings
sollen (I) Aktien, die indirekt von einer
natürlichen Person gemäss
Unterabsatz (v) obenstehend gehalten werden, nicht in
der Weise von ihm oder ihr als gehalten gelten, dass unter
(nochmaliger) Anwendung von Unterabsatz (v) der/die
entsprechend andere als indirekt berechtigt gilt;
(II) Aktien, die gemäss Unterabsatz
(ii) obenstehend indirekt von einer Personengesellschaft
(Partnership) oder einer anderen Gesellschaft, einem
Nachlass oder Trust gehalten werden, nicht in der Weise als
gehalten gelten, dass unter Anwendung von
Unterabsatz (i) obenstehend (betreffend Zuordnung an
einen Partner, Begünstigten, Eigentümer oder
Gesellschafter einer Personengesellschaft (Partnership) oder
anderen Gesellschaft, eines Nachlasses oder Trusts) der/die
entsprechend andere als indirekt berechtigt gilt; und
(III) Aktien, die als von einer natürlichen Person
gemäss den Unterabsätzen
(iv) oder (v) obenstehend gehalten gelten, von
ihm oder ihr als gemäss Unterabsatz (iv) gehalten
gelten.
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(A)
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Shares constructively owned by a person by reasons of the
application of subparagraphs (i), (ii), (iii), (iv), (v) and
(vi) shall, for purposes of applying such subparagraphs, be
considered as actually owned by such person; provided,
however, that (I) shares constructively owned by an
individual by reason of the application of subparagraph (v)
above shall not be considered as owned by him or her for
purposes of again applying such subparagraph (v) in order to
make another the constructive owner of such shares; (II) shares
constructively owned by a partnership, estate, trust or
corporation by reason of the application of subparagraph (ii)
above shall not be considered as owned by it for purposes of
applying subparagraph (i) above (relating to attribution to a
partner, beneficiary, owner or shareholder from a partnership,
estate, trust or corporation) in order to make another the
constructive owner of such shares; and (III) if shares may be
considered as owned by an individual under subparagraphs (iv) or
(v) above, such shares shall be considered as owned by him or
her under subparagraph (iv).
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(B)
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Aktien, welche aufgrund mehrerer Bestimmungen gemäss den
Unterabsätzen (i) (v) dieses Artikels
14 lit. c) (bb) gehalten werden oder von mehreren Personen,
sollen gemäss derjenigen Regel zugeordnet werden, welche
der betreffenden Person/den betreffenden Personen den
höchsten Prozentsatz an Aktien zuweist.
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(B)
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For purposes of any one determination, shares which may be owned
under more than one of the rules of subparagraphs (i) through
(v) above of subparagraph (bb) of subparagraph c) of Article 14,
or by more than one person, shall be owned under that
attribution rule which imputes to the person, or persons,
concerned the largest total percentage of such shares.
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D-17
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d)
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[reserviert]
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d)
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[reserved]
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e)
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Der Verwaltungsrat hat das Recht, die Bestimmungen dieses
Artikels 14 auszulegen, die Berechtigung von natürlichen
und juristischen Personen an Aktien der Gesellschaft zur
Sicherstellung der Umsetzung der Bestimmungen dieses Artikels 14
festzulegen sowie letzte Berichtigungen (welche er nach den
Umständen für gerecht und vernünftig hält)
an der Gesamtzahl der mit den Aktien verbundenen Stimmen
vorzunehmen, um sicherzustellen, dass keine Person gesamthaft
direkt oder indirekt 10% oder mehr der gesamten Stimmkraft aller
stimmberechtigten Aktienklassen erhält. Bei der Auslegung
kann der Verwaltungsrat Gesetze, Reglemente und übrige
Bestimmungen sowie Rechtsprechung aus dem In- und Ausland
beiziehen, welche diesem Artikel 14 grundsätzlich
ähnlich sind.
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e)
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The Board of Directors shall have the authority to interpret the
provisions of this Article 14 and to determine the ownership of
shares by any individual or entity so as to fully implement the
provisions of this Article 14 and to make such final adjustments
to the aggregate number of votes attaching to any shares that
they consider fair and reasonable in all the circumstances to
ensure that no Person will have in the aggregate direct or
Constructive Ownership of 10% or more of the total combined
voting power of all classes of shares entitled to vote. In so
interpreting this Article 14, the Board of Directors may look to
laws, rules, regulations and court decisions (including of
countries outside of Switzerland) having language substantially
similar to this Article 14.
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f)
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Der Verwaltungsrat kann in besonderen Fällen Ausnahmen von
den vorerwähnten Stimmrechtsbeschränkungen
gewähren.
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f)
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The Board of Directors may in special cases allow exceptions
from this limitation on voting rights.
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Artikel 15 Beschlüsse
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Article 15 Resolutions
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a)
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Die Generalversammlung ist beschlussfähig, wenn zwei oder
mehr Personen, welche als Aktionäre oder
Stimmrechtsvertreter mindestens fünfzig Prozent (50%) der
gesamten ausstehenden Aktien (entsprechend den im
Handelsregister eingetragenen Aktien minus den von der
Gesellschaft direkt oder indirekt gehaltenen eigenen Aktien)
vertreten, während der Generalversammlung anwesend sind.
Falls die Gesellschaft einen Aktionär hat, genügt die
Anwesenheit eines Aktionärs oder Stimmrechtsvertreters, um
ein gültiges Quorum zu erstellen.
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a)
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The General Meeting of Shareholders can validly pass resolutions
if 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 shares (being the total number of issued
shares as registered in the commercial register minus shares
held in treasury) are present throughout the meeting; provided,
that if the Company shall at any time have only one shareholder,
one shareholder present in person or by proxy shall constitute a
quorum.
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b)
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Die Generalversammlung fasst ihre Beschlüsse und vollzieht
ihre Wahlen, soweit das Gesetz oder diese Statuten nichts
anderes vorsehen, mit der einfachen Mehrheit der abgegebenen
Stimmen (wobei Enthaltungen, sog. Broker Nonvotes, leere oder
ungültige Stimmen für die Bestimmung des Mehrs nicht
berücksichtigt werden).
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b)
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Unless otherwise required by law or the Articles of Association,
the General Meeting of Shareholders shall pass its resolutions
and carry out its elections with the simple majority of the
votes cast (whereby abstentions, broker non-votes, blank or
invalid ballots shall be disregarded for purposes of
establishing the majority).
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D-18
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c)
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Der Vorsitzende bestimmt das Abstimmungsverfahren. Erfolgen die
Wahlen nicht elektronisch, haben sie mittels Stimmzettel zu
erfolgen, wenn mindestens 50 anwesende Aktionäre dies per
Handzeichen verlangen. Die Weisungserteilung durch die
Aktionäre an ihre an der Versammlung anwesenden Vertreter
via Internet oder Telefon kann durch den Vorsitzenden gestattet
werden.
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c)
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The Chairman of the General Meeting of Shareholders shall
determine the voting procedure. Provided that the voting is not
done electronically, voting shall be by ballot if more than 50
of the shareholders present so demand by a show of hands. The
Chairman may permit the shareholders to give their instructions
by means of the internet or telephone to their representatives
who are present at the meeting.
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Artikel 16 Quorum
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Article 16 Quorums
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Ein Beschluss der Generalversammlung, der mindestens zwei
Drittel der vertretenen Stimmen und die absolute Mehrheit der
vertretenen Aktiennennwerte auf sich vereinigt, ist erforderlich
für:
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A resolution of the General Meeting of Shareholders passed by at
least two thirds of the represented share votes and the absolute
majority of the represented shares par value is required for:
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1.
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die in Artikel 704 Absatz 1 OR aufgeführten
Geschäfte, d.h. für:
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1.
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the cases listed in Article 704 paragraph 1 CO, i.e.:
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(a)
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die Änderung des Gesellschaftszwecks;
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(a)
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the change of the company purpose;
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(b)
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die Einführung von Stimmrechtsaktien;
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(b)
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the creation of shares with privileged voting rights;
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(c)
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die Beschränkung der Übertragbarkeit von Namenaktien
oder Partizipationsscheinen;
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(c)
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the restriction of the transferability of registered shares or
participation certificates;
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(d)
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eine genehmigte oder bedingte Kapitalerhöhung;
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(d)
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an increase of capital, authorized or subject to a condition;
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(e)
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die Kapitalerhöhung aus Eigenkapital, gegen Sacheinlage
oder zwecks Sachübernahme und die Gewährung von
besonderen Vorteilen;
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(e)
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an increase of capital out of equity, against contribution in
kind, or for the purpose of acquisition of assets and the
granting of special benefits;
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(f)
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die Einschränkung oder Aufhebung des Bezugsrechts;
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(f)
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the limitation or withdrawal of pre-emptive rights;
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(g)
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die Verlegung des Sitzes der Gesellschaft;
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(g)
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the change of the domicile of the Company;
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(h)
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die Auflösung der Gesellschaft.
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(h)
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the liquidation of the Company.
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2.
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Fusion, Spaltung und Umwandlung der Gesellschaft (zwingende
gesetzliche Bestimmungen vorbehalten);
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2.
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the merger, de-merger or conversion of the Company (subject to
mandatory law);
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3.
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die Lockerung und die Aufhebung von
Übertragungsbeschränkungen der Namenaktien oder
Partizipationsscheine;
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3.
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the alleviating or withdrawal of restrictions upon the transfer
of registered shares or participation certificates;
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4.
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die Umwandlung von Namenaktien in Inhaberaktien und umgekehrt
sowie die Umwandlung von Partizipationsscheinen in Aktien;
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4.
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the conversion of registered shares into bearer shares and vice
versa as well as the conversion of participation certificates
into shares;
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5.
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die Abberufung von Mitgliedern des Verwaltungsrats im Sinne von
Artikel 705 Absatz 1 OR; und
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5.
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the dismissal of any member of the Board of Directors according
to Article 705 paragraph 1 CO; and
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D-19
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6.
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die Änderung oder Aufhebung der Artikel 8, 14, 15 und 16
der Statuten.
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6.
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the amendment or elimination of the provisions of Article 8,
Article 14 and Article 15 of the Articles of Association as well
as those contained in this Article 16.
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B. Der Verwaltungsrat
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B. The Board of Directors
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Artikel 17 Wahl, Konstituierung und
Entschädigung
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Article 17 Election, Constitution and
Indemnification
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a)
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Der Verwaltungsrat besteht aus wenigstens 3 und höchstens
13 Mitgliedern. Die Amtsdauer des Verwaltungsrats beträgt
drei Jahre. Die erste Amtsdauer wird für jedes Mitglied bei
der ersten Wahl durch den Verwaltungsrat so festgelegt, dass
jedes Jahr eine gleiche Anzahl Verwaltungsräte neu bzw.
wiedergewählt werden müssen und spätestens nach
drei Jahren sämtliche Mitglieder des Verwaltungsrats sich
einer Wiederwahl haben stellen müssen. Der Verwaltungsrat
bestimmt die Reihenfolge der Wiederwahl, wobei die erste
Amtszeit einzelner Mitglieder des Verwaltungsrats weniger als
drei Jahre betragen wird. Diesbezüglich ist unter einem
Jahr der Zeitraum zwischen zwei ordentlichen,
aufeinanderfolgenden Generalversammlungen zu verstehen. Im Falle
einer Zu- oder Abnahme der Anzahl der Mitglieder des
Verwaltungsrats, bestimmt der Verwaltungsrat die neue
Reihenfolge der Wiederwahlen. Infolgedessen kann die Amtsdauer
einzelner Mitglieder des Verwaltungsrats weniger als drei Jahre
betragen. Die Amtsdauer läuft mit dem Tag der nächsten
ordentlichen Generalversammlung ab, vorbehältlich
vorgängigen Rücktritts oder Abwahl. Wenn vor Ablauf
dieser Amtsdauer Verwaltungsräte ersetzt werden, läuft
die Amtsdauer der neu hinzu gewählten Mitglieder mit der
ordentlichen Amtsdauer ihrer Vorgänger ab.
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a)
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The Board of Directors shall consist of a minimum of three and a
maximum of thirteen members. The term shall be three years. Each
year the Board of Directors shall be renewed by rotation, to the
extent possible in equal numbers and in such manner that, after
a period of three years, all members will have been subject to
re-election. The Board of Directors shall establish the order of
rotation, whereas the first term of some members may be less
than three years. In this regard, one year shall mean the period
between two ordinary General Meetings of Shareholders. In the
event of increase or a decrease in the number of Directors, the
Board of Directors shall establish a new order of rotation. In
this context the terms of office of some members may be less
than three years. The term of office of a member of the Board of
Directors shall, subject to prior resignation or removal, expire
upon the day of the next ordinary General Meeting of
Shareholders. Newly-appointed members shall complete the term of
office of their predecessors.
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Die Mitglieder des Verwaltungsrats können
wiedergewählt werden.
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Members of the Board of Directors may be re-elected.
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b)
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Der Verwaltungsrat konstituiert sich selber. Der Verwaltungsrat
wählt seinen Präsidenten sowie einen
Vizepräsidenten. Er bezeichnet einen Sekretär; dieser
braucht nicht dem Verwaltungsrat anzugehören. Die
Organisation des Verwaltungsrats wird im Organisationsregelement
festgelegt. Der Vorsitzende hat den Stichentscheid.
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b)
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The Board of Directors shall constitute itself. It appoints its
Chairman, a Vice-Chairman and a Secretary who does not need to
be a member of the Board of Directors. The Organization of the
Board of Directors is provided for in the Organizational
Regulations. The Chairman shall have the casting vote.
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D-20
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c)
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Die Mitglieder des Verwaltungsrats erhalten für ihre
Tätigkeit eine Entschädigung, deren Höhe vom
Verwaltungsrat festgelegt wird. Die Mitglieder des
Verwaltungsrats sind ebenfalls berechtigt, an
Mitarbeiterbeteiligungsprogrammen der Gesellschaft teilzunehmen.
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c)
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Members of the Board of Directors shall receive compensation for
their work in an amount to be determined by the Board. They may
also participate in the Companys employee benefit plans.
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d)
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Soweit es das Gesetz zulässt, werden die Mitglieder des
Verwaltungsrats sowie der Geschäftsleitung aus dem
Gesellschaftsvermögen schadlos gehalten für
Forderungen, Kosten, Verluste, Schäden, Bussen, und
sonstige Auslagen, welche ihnen im Zusammenhang mit ihrer
Tätigkeit für die Gesellschaft entstehen bzw. gegen
diese erhoben werden, es sei denn, ein rechtskräftiger
Entscheid eines Gerichts oder einer anderen Behörde stelle
fest, dass die betreffende Person die obgenannten Auslagen und
Verpflichtungen aufgrund einer vorsätzlichen oder
grobfahrlässigen Pflichtverletzung verursacht hat.
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d)
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The Company shall indemnify and hold harmless, to the fullest
extent permitted by law, each of the members of the Board of
Directors and officers out of the assets of the Company from and
against all actions, costs, charges, losses, damages and
expenses which they or any of them 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 on behalf of the
Company; provided that this indemnity shall not extend to any
matter in which any of said persons is found, in a final
judgement or decree not subject to appeal, to have committed
with intent or gross negligence.
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Unabhängig von vorstehender Bestimmung schiesst die
Gesellschaft den Mitgliedern des Verwaltungsrats sowie der
Geschäftsleitung die im Zusammenhang mit oben
erwähnten Angelegenheiten entstehenden Gerichts- und
Anwaltskosten vor. Ausgenommen sind jene Fälle, in denen
die Gesellschaft selbst gegen die betreffenden Personen vorgeht.
Die Gesellschaft kann die aufgewendeten Auslagen
zurückfordern, wenn ein Gericht oder eine andere
zuständige Behörde rechtskräftig feststellt, dass
die betreffende Person gegenüber der Gesellschaft eine
Pflichtverletzung begangen hat.
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Without limiting the foregoing paragraph, the Company shall
advance court costs and attorneys fees to the members of
the Board of Directors and officers, except in cases where the
Company itself is plaintiff. The Company may however recover
such advanced cost if a court or another competent authority
holds that the member of the Board of Directors or the officer
in question has breached its duties to the Company.
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Artikel 18 Oberleitung und
-aufsicht,
Delegation
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Article 18 Ultimate Direction, Delegation
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a)
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Der Verwaltungsrat hat die Oberleitung der Gesellschaft sowie
die Aufsicht über die Geschäftsleitung. Er vertritt
die Gesellschaft gegenüber Dritten und kann in allen
Angelegenheiten Beschluss fassen, welche nicht gemäss
Gesetz, Statuten oder Organisationsreglement einem anderen Organ
zugewiesen sind.
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a)
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The Board of Directors is entrusted with the ultimate direction
of the Company as well as the supervision of the management. It
represents the Company towards third parties and attends to all
matters which are not delegated to or reserved for another
corporate body of the Company by law, the Articles of
Association or the regulations.
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D-21
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b)
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Der Verwaltungsrat kann aus seiner Mitte Ausschüssen
bestellen oder einzelne Mitglieder bestimmen, welche mit der
Vorbereitung und/oder Ausführung seiner Beschlüsse
oder der Überwachung bestimmter Geschäfte betraut
sind. Der Verwaltungsrat erlässt hierzu die notwendigen
organisatorischen Weisungen. Mit Ausnahme der
unübertragbaren Befugnisse kann der Verwaltungsrat die
Geschäftsführung ganz oder teilweise an einzelne
Mitglieder, an einen Ausschuss oder an Dritte, welche keine
Aktionäre zu sein brauchen, übertragen. Ebenso kann
der Verwaltungsrat vorgenannten Personen die Befugnis erteilen,
im Namen der Gesellschaft zu zeichnen. Der Verwaltungsrat
erlässt hierzu die notwendigen Organisationsreglemente und
erstellt die erforderlichen Vertragsdokumente.
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b)
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The Board of Directors may delegate preparation
and/or
implementation of its decisions and supervision of the business
to committees or to individual members of the Board of
Directors. The organizational regulations will be defined by the
Board of Directors. While reserving its non-transferable powers,
the Board of Directors may further delegate the management of
the business or parts thereof and representation of the Company
to one or more persons, members of the Board of Directors or
others who need not be shareholders. The Board of Directors
shall record all such arrangements in a set of regulations for
the Company and set up the necessary contractual framework.
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Artikel 19 Aufgaben
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Article 19 Duties
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Der Verwaltungsrat hat folgende unübertragbare und
unentziehbare Aufgaben:
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The Board of Directors has the following non-transferable and
inalienable duties:
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1.
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die Oberleitung der Gesellschaft und die Erteilung der
nötigen Weisungen;
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1.
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to ultimately manage the Company and issue the necessary
directives;
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2.
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die Festlegung der Organisation;
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2.
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to determine the organization;
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3.
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die Ausgestaltung des Rechnungswesens, der Finanzkontrolle sowie
der Finanzplanung, sofern diese für die Führung der
Gesellschaft notwendig ist;
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3.
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to organize the accounting, the financial control, as well as
the financial planning if necessary for the administration of
the Company;
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4.
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die Ernennung und Abberufung der mit der
Geschäftsführung und der Vertretung betrauten
Personen, sowie die Erteilung der Zeichnungsberechtigungen;
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4.
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to appoint and remove the persons entrusted with the management
and representation of the Company and to grant signatory power;
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5.
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die Oberaufsicht über die mit der
Geschäftsführung und der Vertretung betrauten
Personen, namentlich im Hinblick auf die Befolgung der Gesetze,
Statuten, Reglemente und Weisungen;
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5.
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to ultimately supervise the persons entrusted with the
management, in particular with respect to compliance with the
law and with the Articles of Association, regulations and
directives;
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6.
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die Erstellung des Geschäftsberichtes sowie die
Vorbereitung der Generalversammlung und die Ausführung
ihrer Beschlüsse;
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6.
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to issue the business report, as well as the preparation of the
General Meeting of Shareholders and to implement the
latters resolutions;
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7.
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die Benachrichtigung des Richters im Falle der
Überschuldung;
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7.
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to inform the judge in the event of over-indebtedness;
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8.
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die Beschlussfassung über die nachträgliche
Liberierung von nicht vollständig liberierten Aktien;
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8.
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to pass resolutions regarding the subsequent payment of capital
with respect to non-fully paid-in shares;
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D-22
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9.
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die Beschlussfassung über die Feststellung von
Kapitalerhöhungen und die entsprechenden
Statutenänderungen; und
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9.
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to pass resolutions confirming increases in share capital and
regarding the amendments to the Articles of Association entailed
thereby; and
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10.
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die Überwachung der Fachkenntnisse der
Spezialrevisionsstelle in den Fällen, in denen das Gesetz
den Einsatz einer solchen vorsieht.
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10.
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to examine the professional qualifications of the specially
qualified Auditors in the cases in which the law foresees the
use of such Auditors.
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C. Revisionsstelle und Spezialrevisionsstelle
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C. Auditors and Special Auditor
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Artikel 20 Amtsdauer, Befugnisse und Pflichten
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Article 20 Term, Powers and Duties
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a)
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Die Revisionsstelle wird von der Generalversammlung
gewählt. Rechte und Pflichten der Revisionsstelle bestimmen
sich nach den gesetzlichen Vorschriften.
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a)
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The Auditors shall be elected by the General Meeting of
Shareholders and shall have the powers and duties vested in them
by law.
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b)
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Die Generalversammlung kann eine Spezialrevisionsstelle
ernennen, welche die vom Gesetz bei Kapitalerhöhungen durch
Sacheinlage oder Verrechnung verlangten
Prüfungsbestätigungen abgibt.
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b)
|
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The General Meeting of Shareholders may appoint a special
auditing firm entrusted with the examinations required by
applicable law in connection with capital increases against
contribution in kind or set-off.
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c)
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Die Amtsdauer der Revisionsstelle und (falls eingesetzt) der
Spezialrevisionsstelle beträgt ein Jahr. Die Amtsdauer
beginnt mit dem Tag der Wahl und endet mit der ersten
darauffolgenden ordentlichen Generalversammlung.
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c)
|
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The term of office of the Auditors and (if appointed) the
special auditors shall be one year. The term of office shall
commence on the day of election, and shall terminate on the
first annual ordinary General Meeting of Shareholders following
their election.
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IV. Liquidation
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IV. Liquidation
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Artikel 21 Auflösung und Liquidation
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Article 21 Dissolution and Liquidation
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a)
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Die Generalversammlung kann jederzeit in Übereinstimmung
mit den gesetzlichen und statutarischen Bestimmungen die
Auflösung und die Liquidation der Gesellschaft beschliessen.
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a)
|
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The General Meeting of Shareholders may at any time resolve the
dissolution and liquidation of the Company in accordance with
the provisions of the law and of the Articles of Association.
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b)
|
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Die Liquidation wird durch den Verwaltungsrat besorgt, sofern
sie nicht durch einen Beschluss der Generalversammlung anderen
Personen übertragen wird.
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b)
|
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The liquidation shall be carried out by the Board of Directors
to the extent that the General Meeting of Shareholders has not
entrusted the same to other persons.
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c)
|
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Die Liquidation ist gemäss Artikel 742 ff. OR
durchzuführen. Dabei können die Liquidatoren über
das Vermögen der Gesellschaft (einschliesslich Immobilien)
durch privaten Rechtsakt verfügen.
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c)
|
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The liquidation of the Company shall take place in accordance
with Article 742 et seq. CO. The liquidators are authorized to
dispose of the assets (including real estate) by way of private
contract.
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d)
|
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Das Vermögen der aufgelösten Gesellschaft wird nach
Tilgung ihrer Schulden unter die Aktionäre nach Massgabe
der einbezahlten Beträge verteilt.
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d)
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After all debts have been satisfied, the net proceeds shall be
distributed among the shareholders in proportion to the amounts
paid-in.
|
D-23
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V. Mitteilungen und Sprache der Statuten
|
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V. Notices and Language of the Articles of
Association
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Artikel 22 Mitteilungen und Bekanntmachungen
|
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Article 22 Communications and Announcements
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a)
|
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Das Schweizerische Handelsamtsblatt ist das offizielle
Publikationsmittel der Gesellschaft.
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a)
|
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The official means of publication of the Company shall be the
Swiss Official Gazette of Commerce.
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b)
|
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Mitteilungen der Gesellschaft an die Aktionäre oder
Partizipanten sowie andere Bekanntmachungen erfolgen durch
Publikation im Schweizerischen Handelsamtsblatt.
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b)
|
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Invitations to shareholders or participants and other
communications of the Company shall be published in the Swiss
Official Gazette of Commerce.
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Artikel 23 Sprache der Statuten
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Article 23 Language of the Articles of
Association
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Im Falle eines Widerspruchs zwischen der deutschen und jeder
anderen Fassung dieser Statuten ist die deutsche Fassung
massgeblich.
|
|
In the event of deviations between the German version of these
Articles of Association and any version in another language, the
German authentic text prevails.
|
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|
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VI. Übergangsbestimmungen
|
|
VI. Transitional Provisions
|
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Artikel 24 Sacheinlage
|
|
Article 24 Contribution in Kind
|
|
|
|
Die Gesellschaft übernimmt bei der Kapitalerhöhung vom
30. November 2010 gemäss einem Sacheinlagevertrag von
30. November 2010 (Sacheinlagevertrag) in
Verbindung mit einem Urteil des Supreme Court von Bermuda vom
26. November 2010 zum Umstrukturierungsplan (Scheme
of Arrangement) vom 18. November 2010 zwischen der
Allied World Assurance Company Holdings, Ltd, einer Gesellschaft
mit beschränkter Haftung gemäss Bermuda Recht mit Sitz
in Bermuda und Kotierung am New York Stock Exchange
(Allied World Bermuda), und ihren Aktionären,
der von den Aktionären der Allied World Bermuda genehmigt
wurde, alle 39794636 Aktien mit Stimmrecht der
Allied World Bermuda, welche einen Wert von insgesamt CHF
2337536918.64 haben. Als Gegenleistung
für diese Sacheinlage gibt die Gesellschaft insgesamt
39794636 voll einbezahlte Namenaktien mit einem
Nennwert von insgesamt CHF 596919540 aus an die
Allied World Bermuda, die (1) in Bezug auf
38313836 Namenaktien der Gesellschaft, mit einem
Nennwert von je CHF 15.00, als indirekte Stellvertreterin
für die Aktionäre aller Aktien mit Stimmrechten der
Allied World Bermuda, die bei Handelsschluss an der New York
Stock Exchange (NYSE) am 30. November 2010
(Stichzeitpunkt) ausgegeben sind,
und (2) in Bezug auf 1480800 Namenaktien
der Gesellschaft, mit einem Nennwert von je CHF 15.00, im
eigenen Namen und auf eigene Rechnung handelt. Die Gesellschaft
weist die Differenz zwischen dem totalen Nennwert der
ausgegebenen Namenaktien und dem Übernahmewert der
Sacheinlage im Gesamtbetrag von CHF
1740617378.64 den Reserven der Gesellschaft zu.
|
|
In connection with (1) the capital increase, dated November 30,
2010, and in accordance with (2) a contribution in kind
agreement (Contribution in Kind Agreement), dated
November 30, 2010, in connection with the order issued by the
Supreme Court of Bermuda on November 26, 2010 sanctioning the
scheme of arrangement (Scheme of Arrangement) dated
November 18, 2010, by and between Allied World Assurance Company
Holdings, Ltd, an exempted company with limited liability under
the laws of Bermuda, with a registered office in Bermuda and
with common shares listed on the New York Stock Exchange
(Allied World Bermuda), and Allied World
Bermudas shareholders, all of the 39,794,636 voting common
shares of Allied World Bermuda (total value of CHF
2,337,536,918.64) have been acquired by the Company. As
consideration for this contribution in kind, the Company has
issued a total of 39,794,636 fully paid-in registered shares
with a total par value of CHF 596,919,540 to Allied World
Bermuda, which acts (i) in relation to 38,313,836 registered
shares of the Company, each with a par value of CHF 15.00, as
nominee for the account of the holders of all Allied World
Bermuda voting common shares outstanding as of the close of
trading on the New York Stock Exchange on November 30, 2010
(Record Date), and (ii) in relation to 1,480,800
registered shares of the Company, each with a par value of CHF
15.00, in its own name and account. The surplus of the
difference between the aggregate par value of the issued
registered shares and the total value of the contribution in
kind, in the amount of CHF 1,740,617,378.64, is allocated to the
reserves of the Company.
|
D-24
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Die Gesellschaft übernimmt bei der Schaffung des
Partizipationskapitals vom 30. November 2010 gemäss
den Sacheinlagevertrag in Verbindung mit einem Urteil des
Supreme Court von Bermuda vom 26. November 2010 zum Scheme
of Arrangement vom 18. November 2010, alle 202340
Aktien ohne Stimmrecht der Allied World Bermuda, welche einen
Wert von insgesamt CHF 11885451.60 haben. Als
Gegenleistung für diese Sacheinlage gibt die Gesellschaft
insgesamt 202340 voll einbezahlte
Namenpartizipationsscheine mit einem Nennwert von insgesamt CHF
3035100 aus an die Allied World Bermuda, die als
indirekte Stellvertreterin für die Aktionäre aller
Aktien ohne Stimmrecht der Allied World Bermuda, die zum
Stichzeitpunkt ausgegeben sind, handelt. Die Gesellschaft weist
die Differenz zwischen dem totalen Nennwert der ausgegebenen
Namenpartizipationsscheine und dem Übernahmewert der
Sacheinlage im Gesamtbetrag von CHF 8850351.60 den
Reserven der Gesellschaft zu.
|
|
In connection with (1) the creation of the participation
capital, dated November 30, 2010, and in accordance with (2) the
Contribution in Kind Agreement in connection with the order
issued by the Supreme Court of Bermuda on November 26, 2010
sanctioning the Scheme of Arrangement dated November 18, 2010,
all of the 202,340 non-voting common shares of Allied World
Bermuda (total value of CHF 11,885,451.60) have been acquired by
the Company. As consideration for this contribution in kind, the
Company issues 202,340 fully paid-in registered participation
certificates with a total par value of CHF 3,035,100 to Allied
World Bermuda, which acts as nominee for the account of the
holders of all non-voting common shares of Allied World Bermuda
outstanding as of the close of trading on the New York Stock
Exchange on the Record Date. The surplus of the difference
between the aggregate par value of the issued registered
participation certificates and the total value of the
contribution in kind, in the amount of CHF 8,850,351.60, is
allocated to the reserves of the Company.
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[ ] /
[ ]
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[ ]
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D-25
Annex E
TRANSALLIED GROUP HOLDINGS, AG
FOURTH AMENDED AND RESTATED
2004 STOCK INCENTIVE PLAN
TABLE OF
CONTENTS
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ARTICLE I GENERAL
|
|
|
E-1
|
|
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1.1
|
|
|
Purpose
|
|
|
E-1
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|
|
1.2
|
|
|
Definitions of Certain Terms
|
|
|
E-1
|
|
|
1.3
|
|
|
Administration
|
|
|
E-2
|
|
|
1.4
|
|
|
Persons Eligible for Awards
|
|
|
E-3
|
|
|
1.5
|
|
|
Types of Awards Under Plan
|
|
|
E-3
|
|
|
1.6
|
|
|
Registered Shares Available for Awards
|
|
|
E-3
|
|
|
|
|
|
|
ARTICLE II AWARDS UNDER THE PLAN
|
|
|
E-4
|
|
|
2.1
|
|
|
Agreements Evidencing Awards
|
|
|
E-4
|
|
|
2.2
|
|
|
No Rights as a Shareholder
|
|
|
E-4
|
|
|
2.3
|
|
|
Grant of Restricted Registered Shares
|
|
|
E-5
|
|
|
2.4
|
|
|
Grant of Restricted Stock Units
|
|
|
E-5
|
|
|
2.5
|
|
|
Grant of Dividend Equivalent Rights
|
|
|
E-5
|
|
|
2.6
|
|
|
Other Stock-Based Awards
|
|
|
E-5
|
|
|
2.7
|
|
|
Performance-Based Awards
|
|
|
E-5
|
|
|
2.8
|
|
|
Certain Restrictions
|
|
|
E-6
|
|
|
|
|
|
|
ARTICLE III MISCELLANEOUS
|
|
|
E-6
|
|
|
3.1
|
|
|
Amendment of the Plan
|
|
|
E-6
|
|
|
3.2
|
|
|
Confidentiality
|
|
|
E-6
|
|
|
3.3
|
|
|
Tax Withholding
|
|
|
E-6
|
|
|
3.4
|
|
|
Required Consents and Legends
|
|
|
E-6
|
|
|
3.5
|
|
|
Nonassignability; No Hedging
|
|
|
E-7
|
|
|
3.6
|
|
|
Successor Entity
|
|
|
E-7
|
|
|
3.7
|
|
|
Right of Discharge Reserved
|
|
|
E-7
|
|
|
3.8
|
|
|
Nature of Payments
|
|
|
E-7
|
|
|
3.9
|
|
|
Non-Uniform Determinations
|
|
|
E-8
|
|
|
3.10
|
|
|
Other Payments or Awards
|
|
|
E-8
|
|
|
3.11
|
|
|
Plan Headings
|
|
|
E-8
|
|
|
3.12
|
|
|
Termination of Plan
|
|
|
E-8
|
|
|
3.13
|
|
|
Governing Law; Venue
|
|
|
E-8
|
|
|
3.14
|
|
|
Severability; Entire Agreement
|
|
|
E-8
|
|
|
3.15
|
|
|
Waiver of Claims
|
|
|
E-8
|
|
|
3.16
|
|
|
No Third Party Beneficiaries
|
|
|
E-9
|
|
|
3.17
|
|
|
Successors and Assigns of TransAllied
|
|
|
E-9
|
|
|
3.18
|
|
|
Date of Adoption and Approval of Shareholders
|
|
|
E-9
|
|
|
3.19
|
|
|
Section 409A
|
|
|
E-9
|
|
TRANSALLIED
GROUP HOLDINGS, AG
FOURTH
AMENDED AND RESTATED
2004
STOCK INCENTIVE PLAN
ARTICLE I
GENERAL
1.1 Purpose
The purpose of the TransAllied Group Holdings, AG Fourth 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.
1.2 Definitions of Certain Terms
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
TransAllied.
CERTIFICATE means a share certificate (or
other appropriate document or evidence of ownership)
representing Registered Shares of TransAllied.
COMMITTEE has the meaning set forth in
Section 1.3.1.
COMPANY means TransAllied 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.
PERFORMANCE GOAL means, for a Performance
Period, a performance goal established by the Committee for such
Performance Period based on Performance Measures selected by the
Committee. The Performance Goals must be substantially uncertain
to be attained at the time they are established and established
in such a way that a third party with knowledge of the relevant
facts could determine whether and to what extent the Performance
Goals have been met. The Committee is authorized to make
adjustments in the Performance Goals in recognition of unusual
or nonrecurring events affecting the Company, any affiliate, or
the financial statements of the Company or any affiliate, or of
changes in applicable laws, rules, rulings, regulations, or
other requirements of any governmental body or securities
exchange or inter-dealer quotation system, or accounting
principles, whenever the Committee determines that such
adjustments are appropriate in order to prevent dilution or
enlargement of the benefits or potential benefits intended to be
made available under the Plan; provided that any such
adjustment does not constitute impermissible discretion under
Section 162(m).
PERFORMANCE MEASURES means, with respect to a
Section 162(m) Award, one or more of the following
performance metrics, which may be applied with respect to an
individual grantee based on the attainment of specific levels of
performance of the Company
and/or one
or more subsidiaries, affiliates, divisions, operational or
business units, product lines, brands, business segments,
administrative departments or any combination of the foregoing
and which may be measured on an absolute, adjusted or relative
basis: (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;
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(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.
PERFORMANCE PERIOD means a period established
by the Committee at the time any Section 162(m) Award is
granted (or at any time thereafter so long as such period is
established within the time allowed under Section 162(m))
during which any Performance Measures with respect to such Award
are to be achieved.
PLAN means the TransAllied Group Holdings, AG
Fourth Amended and Restated 2004 Stock Incentive Plan, as
described herein and as hereafter amended from time to time,
which amends and restates the Allied World Assurance Company
Holdings, AG Third Amended and Restated 2004 Stock Incentive
Plan.
REGISTERED SHARES mean the registered shares
of TransAllied.
SECTION 162(m) means Section 162(m)
of the U.S. Internal Revenue Code of 1986, as amended, and
the rules, regulations and official guidance issued thereunder.
SECTION 162(m) AWARD means any Award
that is intended to qualify and in fact qualifies for the
performance-based compensation exemption to the application of
the $1 million deduction limit under Section 162(m).
SECTION 409A means Section 409A of
the U.S. Internal Revenue Code of 1986, as amended, and the
rules, regulations and official guidance issued thereunder.
TRANSALLIED means TransAllied Group Holdings,
AG or a successor entity contemplated by Section 3.6.
1.3 Administration
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, which
shall be composed of not less than two outside
directors (within the meaning of Section 162(m)). If
at any time such a committee has not been so designated or is
not acting, the Board shall constitute the Committee. Any action
by the Board with respect to a Section 162(m) Award will be
made only by members of the Board who are outside directors to
the extent required by and in compliance with
Section 162(m). The Committee is authorized, subject to the
provisions of the Plan and applicable law, 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,
subject to approval by the Board to the extent required by
applicable law, to determine the persons who shall receive
Awards, the time when Awards shall be granted, the terms of such
Awards and the number of Registered 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, subject to approval by the Board to the
extent required by applicable law, to (i) amend any
outstanding Award Agreement in any respect, whether or not 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 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,
Registered Shares, other securities, other Awards or other
property or (2) canceled, forfeited or suspended,
(B) Registered 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
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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, but
only to the extent in accordance with applicable law, including
Section 162(m), to the extent applicable.
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 TransAllied 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 or any determination made in good faith under the
Plan or any Award Agreement and against and from any and all
amounts paid by such Covered Person, with TransAllieds
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
TransAllied shall have the right, at its own expense, to assume
and defend any such action, suit or proceeding and, once
TransAllied gives notice of its intent to assume the defense,
TransAllied shall have sole control over such defense with
counsel of TransAllieds 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
or determinations 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 TransAllieds
Articles of Association or Organizational Regulations, as a
matter of law, or otherwise, or any other power that TransAllied
may have to indemnify such persons or hold them harmless.
1.4 Persons Eligible for Awards
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.
1.5 Types of Awards Under Plan
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. TransAllied, however, will not
grant stock options pursuant to the Plan.
1.6 Registered Shares Available for Awards
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 four million (4,000,000) Registered
Shares. Such Registered Shares may, in the discretion of the
Committee, be either authorized but unissued shares or shares
previously issued and reacquired by TransAllied. If any Award
shall expire, terminate or otherwise lapse, in whole or in part,
any Registered Shares subject to such Award (or portion thereof)
shall again be available for issuance under the Plan. Any
Registered Shares delivered by TransAllied, any Registered
Shares with respect to which Awards are made by TransAllied and
any Registered Shares with respect to which TransAllied 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 Registered
Shares authorized pursuant to Section 1.6.1 and 1.6.3 and
the terms of the Plan and any outstanding Awards (including,
without limitation, the number of Registered Shares covered by
each outstanding Award, the type of property to which the Award
is subject, the
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exercise or strike price of any Award and any applicable
performance measures under any Award (including without
limitation, Performance Measures and Performance Goals), in each
case, 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 Registered Shares resulting from a recapitalization,
stock split, stock dividend, combination or exchange of
Registered Shares, merger, amalgamation, consolidation, rights
offering, separation, reorganization or liquidation, or any
other change in the corporate structure or shares of
TransAllied. After any adjustment made pursuant to this
Section 1.6.2, the number of Registered 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
TransAllied in which TransAllied is not the surviving
corporation; (ii) a merger, amalgamation or consolidation
involving TransAllied in which TransAllied is the surviving
corporation but the holders of shares of Registered 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 TransAllied entitled to
vote in the election of directors to the Board; or (iv) the
reorganization or liquidation of TransAllied (each, a
Corporate Event), in lieu of providing the
adjustment set forth 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 Registered
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 Registered Shares covered by the Award
at such time. Notwithstanding anything herein to the contrary,
an adjustment to a Section 162(m) Award under this
Section 1.6.2 may not be made in a manner that would cause
the modified award to result in a loss of deduction under
Section 162(m), unless the Committee determines that such
adjustment is desirable notwithstanding such loss of deduction.
1.6.3 There shall be no limit on the amount of cash,
securities (other than Registered 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 during any time that the Company is subject to
Section 162(m), the maximum number of Registered Shares
with respect to which Awards may be granted to any individual in
any one year shall not exceed the maximum number of Registered
Shares authorized for issue hereunder, as such number may change
from time to time.
ARTICLE II
AWARDS UNDER
THE PLAN
2.1 Agreements Evidencing Awards
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.
2.2 No Rights as a Shareholder
No grantee of an Award shall have any of the rights of a
shareholder of TransAllied with respect to Registered 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,
Registered 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 Grant of Restricted Registered Shares
The Committee may grant or offer for sale restricted Registered
Shares in such amounts and subject to Section 2.8 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 2.8 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
Registered Shares, such Certificate may be registered in the
name of the grantee but may be held by TransAllied or its
designated agent until the time the restrictions lapse.
2.4 Grant of Restricted Stock Units
The Committee may grant Awards of restricted stock units in such
amounts and subject to Section 2.8 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 TransAllied until delivery of Registered
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 Registered Share, or cash, securities or other
property equal in value to a Registered Share or a combination
thereof as specified by the Committee.
2.5 Grant of Dividend Equivalent Rights
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 Registered 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 TransAllied 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 Registered 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.
2.6 Other Stock-Based Awards
The Committee may grant other types of equity-based or
equity-related Awards (including the grant or offer for sale of
unrestricted Registered Shares) in such amounts and subject to
such terms and conditions, as the Committee shall determine.
Such Awards may entail the transfer of actual Registered Shares
to Award recipients, or payment in cash or otherwise of amounts
based on the value of Registered 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.
2.7 Performance-Based Awards
The Committee shall have authority to designate Awards as
performance-based, the attainment of which shall be based on the
achievement of performance goals during performance periods. In
order for a performance-based Award to be a Section 162(m)
Award, the Committee shall establish in writing (including
approved minutes of the Committee), within the first
90 days of a Performance Period (or, if applicable, within
the maximum period allowed under Section 162(m)),
(i) which grantees will be eligible to receive
Section 162(m) Awards in respect of such Performance
Period, (ii) the types of Awards to be issued,
(iii) the Performance Measure(s) to be used to establish
the Performance Goal(s), (iv) the objective Performance
Goals that must be met with respect to such Performance Period,
and (v) any other terms and conditions that the Committee
deems appropriate and consistent with this Plan and the
requirements of Section 162(m).
In addition to such other limitations as may be established by
the Committee, a grantee shall be eligible to receive payment in
respect of a Section 162(m) Award only to the extent that,
following the completion of the Performance Period, the
Committee shall have met to review and shall have certified in
writing (including approved minutes of the Committee) whether,
and to what extent, the Performance Goals for the Performance
Period have been achieved and, if so met, to calculate and
certify in writing the amount of the Section 162(m)
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Awards earned for the Performance Period. The Committee shall
then determine the amount of each grantees
Section 162(m) Award for the Performance Period and, in so
doing, may apply discretion to eliminate or reduce the amount of
a Section 162(m) Award, if and when it deems appropriate;
provided that the exercise of such discretion would not
cause the Section 162(m) Award to fail to be
qualified performance-based compensation under
Section 162(m). The Committee also has the authority to
provide for accelerated vesting of any Award based on the
achievement of Performance Goals pursuant to the Performance
Measures specified in the Award Agreement. Except as otherwise
provided by the Committee in an Award Agreement, the
performance-based Awards are intended to constitute short term
deferrals within the meaning of Section 409A.
2.8 Certain Restrictions
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 Registered 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.
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 Registered 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.
3.4 Required Consents and Legends
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 Registered 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
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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 TransAllied to list, register or qualify
the Registered Shares on any securities exchange.
3.5 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 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.
3.6 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 TransAllied with or
into any other entity or any transaction in which another person
or entity acquires all of the issued and outstanding Registered
Shares of TransAllied, or all or substantially all of the assets
of TransAllied, 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.
3.7 Right of Discharge Reserved
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 Nature of Payments
3.8.1 Any and all grants of Awards and deliveries of
Registered 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 Registered
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 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, 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.
3.10 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.
3.11 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.
3.12 Termination of Plan
The Board reserves the right to terminate the Plan at any time;
provided, however, that in any case, the Plan shall
terminate on
[ ,
2021], 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 SWITZERLAND 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.
3.15 Waiver of Claims
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, TransAllied 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).
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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
TransAllied 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 TransAllied
The terms of this Plan shall be binding upon and inure to the
benefit of TransAllied and any successor entity contemplated by
Section 3.6.
3.18 Date of Adoption and Approval of
Shareholders
This Plan, as amended, was adopted by the Board on June 12,
2011, subject to the closing of the merger transaction between
Allied World Assurance Company Holdings, AG and Transatlantic
Holdings, Inc., whereafter Allied World Assurance Company
Holdings, AG shall be renamed TransAllied, and approval of the
shareholders of the Company at a General Meeting of Shareholders
on
[ ].
3.19 Section 409A
The Plan and all Awards granted hereunder are intended to be
exempt from the provisions of 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 Section 409A. All provisions of this Plan shall be
construed and interpreted in a manner consistent with the
requirements for avoiding taxes or penalties under
Section 409A. The Company reserves the right to amend
Awards granted hereunder to cause such Awards to comply with or
be exempt from Section 409A.
* * *
E-9
PART II
INFORMATION
NOT REQUIRED IN PROSPECTUS; UNDERTAKINGS
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Item 20.
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Indemnification
of Directors and Officers
|
The following summary is qualified in its entirety by reference
to the complete text of the Allied World Articles.
The Allied World Articles provide that Allied World shall
indemnify and hold harmless, to the fullest extent permitted by
Swiss law, each of the members of the Allied World board of
directors and officers out of the assets of Allied World from
and against all actions, costs, charges, losses, damages and
expenses which they or any of them 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 on behalf of Allied
World; 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 with
intent or gross negligence.
Without limiting the foregoing paragraph, Allied World shall
advance court costs and attorneys fees to the members of
the Allied World board of directors and officers, except in
cases where Allied World itself is plaintiff. Allied World may,
however, recover such advanced cost if a court or another
competent authority holds that the member of the Allied World
board of directors or the officer in question has breached its
duties to Allied World.
Allied World may purchase and maintain insurance, at its
expense, to protect itself and any director, officer, employee
or agent of Allied World or another corporation, partnership,
limited liability company, joint venture, trust or other
enterprise against any such expense, liability or loss, whether
or not Allied World would have the power to indemnify such
person against such expense, liability or loss.
II-1
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Item 21.
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Exhibits
and Financial Statement Schedules
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Exhibit
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No.
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Document
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2
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.1
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Agreement and Plan of Merger, dated as of June 12, 2011,
among Allied World, Transatlantic and Merger Sub (included as
Annex A to the joint proxy statement/prospectus forming a
part of this Registration Statement and incorporated herein by
reference) (The annexes, schedules and certain exhibits have
been omitted pursuant to Item 601(b)(2) of
Regulation S-K)
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3
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.1
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Articles of Association of Allied World (incorporated herein by
reference to the Current Report on
Form 8-K
of Allied World Assurance Company Holdings, AG filed with the
SEC on August 1, 2011)
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3
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.2
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Allied World Organizational Resolutions (incorporated herein by
reference to the Registration Statement on
Form 8-A12B/A
of Allied World Assurance Company Holdings, AG filed with the
SEC on December 1, 2010)
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5
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.1
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|
Opinion of Baker & McKenzie as to the validity of the
shares of Allied World Assurance Company Holdings, AG common
stock to be issued in the
merger
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23
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.1
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Consent of Baker & McKenzie (included in
Exhibit 5.1 to the joint proxy/prospectus forming a part of
this Registration
Statement)
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23
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.2
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Consent of Independent Registered Public Accounting Firm of
Allied World Assurance Company Holdings, AG,
Deloitte & Touche Ltd.
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23
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.3
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Consent of Independent Registered Public Accounting Firm of
Transatlantic Holdings, Inc., Pricewaterhouse Coopers LLP
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24
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.1
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Power of Attorney*
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99
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.1
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Consent of Deutsche Bank Securities Inc.
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99
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.2
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Consent of Moelis & Company LLC
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99
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.3
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Consent of Richard S. Press*
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99
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.4
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Consent of Michael C. Sapnar*
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99
|
.5
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|
Consent of Stephen P. Bradley*
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|
99
|
.6
|
|
Consent of John L. McCarthy*
|
|
99
|
.7
|
|
Consent of Ian H. Chippendale*
|
|
99
|
.8
|
|
Consent of John G. Foos*
|
|
99
|
.9
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|
Form of Proxy Cards of Allied World Assurance Company Holdings,
AG*
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|
99
|
.10
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Form of Proxy Card of Transatlantic Holdings, Inc.*
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To be filed by amendment |
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* |
|
Previously filed |
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are
being made, a post-effective amendment to this registration
statement: (i) to include any prospectus required by
Section 10(a)(3) of the Securities Act; (ii) to
reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set
forth in the registration statement (notwithstanding the
foregoing, any increase or decrease in volume of securities
offered (if the total dollar value of securities offered would
not exceed that which was registered) and any deviation from the
low or high end of the estimated maximum offering range may be
reflected in the form of prospectus filed with the Securities
and Exchange Commission pursuant to Rule 424(b) if, in the
aggregate, the changes in volume and price represent no more
than a 20% change in the maximum aggregate offering price set
forth in the Calculation of Registration Fee table
in the effective registration statement); and (iii) to
include any material information with respect to the plan of
distribution not previously disclosed in the registration
statement or any material change to such information in the
registration statement.
II-2
(2) That, for the purpose of determining any liability
under the Securities Act, each such post-effective amendment
shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a
post-effective amendment any of the securities being registered
which remain unsold at the termination of the offering.
(4) That, for the purpose of determining liability under
the Securities Act to any purchaser, each filing of the
Registrants annual report pursuant to Section 13(a)
or 15(d) of the Exchange Act, (and, where applicable, each
filing of an employee benefit plans annual report pursuant
to Section 15(d) of the Exchange Act) that is incorporated
by reference in this registration statement shall be deemed to
be a new registration statement relating to the securities
offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering
thereof.
(5) That prior to any public reoffering of the securities
registered hereunder through use of a prospectus which is a part
of this registration statement by any person or party who is
deemed to be an underwriter within the meaning of
Rule 145(c), the registrant undertakes that such reoffering
prospectus will contain the information called for by the
applicable registration form with respect to reofferings by
persons who may be deemed underwriters, in addition to the
information called for by the other items of the applicable form.
(6) That every prospectus (i) that is filed pursuant
to paragraph (5) above, or (ii) that purports to meet
the requirements of Section 10(a)(3) of the Securities Act
and is used in connection with an offering of securities subject
to Rule 415, will be filed as part of an amendment to this
registration statement and will not be used until such amendment
has become effective, and that for the purpose of determining
liabilities under the Securities Act, each such post-effective
amendment shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of
such securities at that time shall be deemed to be the initial
bona fide offering thereof.
(7) To respond to requests for information that is
incorporated by reference into the prospectus pursuant to
Items 4, 10(b), 11 or 13 of this form, within one business
day of receipt of such request, and to send the incorporated
documents by first class mail or other equally prompt means.
This includes information contained in documents filed
subsequent to the effective date of the registration statement
through the date of responding to the request.
(8) To supply by means of a post-effective amendment all
information concerning a transaction, and the company being
acquired involved therein, that was not the subject of and
included in this registration statement when it became effective.
(9) Insofar as indemnification for liabilities arising
under the Securities Act may be permitted to directors, officers
and controlling persons of the registrant pursuant to the
foregoing provisions, or otherwise, the registrant has been
advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as
expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer
or controlling person of the registrant in the successful
defense of any action, suit or proceeding) is asserted by such
director, officer, or controlling person in connection with the
securities being registered, the registrant will, unless in the
opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate
jurisdiction the question of whether such indemnification by it
is against public policy as expressed in the Securities Act and
will be governed by the final adjudication of such issue.
(10) The undersigned registrant hereby undertakes to
deliver or cause to be delivered with the prospectus, to each
person to whom the prospectus is sent or given, the latest
annual report to security holders that is incorporated by
reference in the prospectus and furnished pursuant to and
meeting the requirements of
Rule 14a-3
or
Rule 14c-3
under the Exchange Act; and, where interim financial information
required to be presented by Article 3 of
Regulation S-X
is not set forth in the prospectus, to deliver, or cause to be
delivered to each person to whom the prospectus is sent or
given, the latest quarterly report that is specifically
incorporated by reference in the prospectus to provide such
interim financial information.
II-3
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as
amended, the registrant has duly caused this registration
statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of New York, State of New
York, on August 10, 2011.
ALLIED WORLD ASSURANCE COMPANY HOLDINGS, AG
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By:
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/s/ Scott
A. Carmilani
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Name: Scott A. Carmilani
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Title:
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President and Chief Executive Officer
|
Pursuant to the requirements of the Securities Act of 1933, as
amended, this registration statement has been signed by the
following persons in the capacities and on the dates indicated.
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Signature
|
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Title
|
|
Date
|
|
|
|
|
|
|
/s/ Scott
A. Carmilani
Scott
A. Carmilani
|
|
President, Chief Executive Officer and Chairman of the Board
(Principal Executive Officer)
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August 10, 2011
|
|
|
|
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/s/ Joan
H. Dillard
Joan
H. Dillard
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|
Executive Vice President and Chief Financial Officer
(Principal Financial and Accounting Officer)
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|
August 10, 2011
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|
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*
Barbara
T. Alexander
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Director
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|
August 10, 2011
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|
|
|
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|
*
James
F. Duffy
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Director
|
|
August 10, 2011
|
|
|
|
|
|
*
Bart
Friedman
|
|
Vice Chairman of the Board
|
|
August 10, 2011
|
|
|
|
|
|
*
Scott
Hunter
|
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Director
|
|
August 10, 2011
|
|
|
|
|
|
*
Mark
R. Patterson
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Director
|
|
August 10, 2011
|
|
|
|
|
|
*
Patrick
de Saint-Aignan
|
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Director
|
|
August 10, 2011
|
|
|
|
|
|
*
Samuel
J. Weinhoff
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|
Director
|
|
August 10, 2011
|
|
|
|
|
|
*
Puglisi
& Associates
|
|
Authorized Representative in the United States
|
|
August 10, 2011
|
|
|
|
* By:
|
/s/ Wesley
D. Dupont
|
|
Wesley D. Dupont
Attorney-in-fact
II-4
EXHIBIT INDEX
|
|
|
|
|
Exhibit
|
|
|
No.
|
|
Document
|
|
|
2
|
.1
|
|
Agreement and Plan of Merger, dated as of June 12, 2011,
among Allied World, Transatlantic and Merger Sub (included as
Annex A to the joint proxy statement/prospectus forming a
part of this Registration Statement and incorporated herein by
reference) (The annexes, schedules and certain exhibits have
been omitted pursuant to Item 601(b)(2) of
Regulation S-K)
|
|
3
|
.1
|
|
Articles of Association of Allied World (incorporated herein by
reference to the Current Report on
Form 8-K
of Allied World Assurance Company Holdings, AG filed with the
SEC on August 1, 2011)
|
|
3
|
.2
|
|
Allied World Organizational Resolutions (incorporated herein by
reference to the Registration Statement on
Form 8-A12B/A
of Allied World Assurance Company Holdings, AG filed with the
SEC on December 1, 2010)
|
|
5
|
.1
|
|
Opinion of Baker & McKenzie as to the validity of the
shares of Allied World Assurance Company Holdings, AG common
stock to be issued in the
merger
|
|
23
|
.1
|
|
Consent of Baker & McKenzie (included in
Exhibit 5.1 to the joint proxy/prospectus forming a part of
this Registration
Statement)
|
|
23
|
.2
|
|
Consent of Independent Registered Public Accounting Firm of
Allied World Assurance Company Holdings, AG,
Deloitte & Touche Ltd.
|
|
23
|
.3
|
|
Consent of Independent Registered Public Accounting Firm of
Transatlantic Holdings, Inc., Pricewaterhouse Coopers LLP
|
|
24
|
.1
|
|
Power of Attorney*
|
|
99
|
.1
|
|
Consent of Deutsche Bank Securities Inc.
|
|
99
|
.2
|
|
Consent of Moelis & Company LLC
|
|
99
|
.3
|
|
Consent of Richard S. Press*
|
|
99
|
.4
|
|
Consent of Michael C. Sapnar*
|
|
99
|
.5
|
|
Consent of Stephen P. Bradley*
|
|
99
|
.6
|
|
Consent of John L. McCarthy*
|
|
99
|
.7
|
|
Consent of Ian H. Chippendale*
|
|
99
|
.8
|
|
Consent of John G. Foos*
|
|
99
|
.9
|
|
Form of Proxy Cards of Allied World Assurance Company Holdings,
AG*
|
|
99
|
.10
|
|
Form of Proxy Card of Transatlantic Holdings, Inc.*
|
|
|
|
|
|
To be filed by amendment |
|
* |
|
Previously filed |