def14a
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(A) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant þ
Filed by a Party other than the Registrant o
Check the appropriate box:
o Preliminary Proxy Statement
o Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
þ Definitive Proxy Statement
o Definitive Additional Materials
o Soliciting Material Pursuant to Section 240.14a-12
ALLIED WORLD ASSURANCE COMPANY HOLDINGS, LTD
(Name of Registrant as Specified in Its Charter)
Not Applicable
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
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No fee required. |
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Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11. |
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Title of each class of securities to which transaction applies: |
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Aggregate number of securities to which transaction applies: |
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Per unit price or other underlying value of transaction computed pursuant to
Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and
state how it was determined): |
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Proposed maximum aggregate value of transaction: |
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Total fee paid: |
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Fee paid previously with preliminary materials. |
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Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the
offsetting fee was paid previously. Identify the previous filing
by registration statement number, or the Form or Schedule and the
date of its filing. |
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Amount Previously Paid: |
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Form, Schedule or Registration Statement No.: |
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Filing Party: |
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Date Filed: |
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Dear Shareholders:
On November 18, 2010, commencing at 10:00 a.m., local
time, we will hold special court-ordered meetings of our voting
and
non-voting
common shareholders at our corporate headquarters located at 27
Richmond Road, Pembroke HM 08, Bermuda.
Our board of directors has unanimously approved, and is
recommending that our common shareholders approve, a proposal
that would result in your holding shares in a Swiss corporation
rather than a Bermuda company. The proposed scheme of
arrangement under Bermuda law will effectively change our place
of incorporation from Bermuda to Switzerland. The number of
common shares you will own in Allied World Assurance Company
Holdings, AG, the new Swiss corporation, will be the same as the
number of common shares you held in Allied World Assurance
Company Holdings, Ltd, the existing Bermuda company, immediately
prior to the completion of the transaction, and your relative
economic interest in the company will remain unchanged.
After the completion of the transaction, our company will
continue to conduct the same business operations as we conducted
prior to the transaction, with the Swiss corporation as our
ultimate holding company instead of the Bermuda company. We
expect the voting shares of the Swiss corporation to be listed
on the NYSE under the symbol AWH, the same symbol
under which our common shares are currently listed. Upon
completion of the transaction, we will remain subject to the
U.S. Securities and Exchange Commission reporting
requirements, the mandates of the Sarbanes-Oxley Act and the
applicable corporate governance rules of the NYSE, and we will
continue to report our consolidated financial results in
U.S. dollars and under U.S. generally accepted
accounting principles.
The planned change to our place of incorporation from Bermuda to
Switzerland will locate the company in a country that is a
leading financial center with a strong reputation for economic
and political stability, a shareholder-friendly governance
environment and a corporate tax regime that will allow us to
maintain a competitive worldwide effective corporate tax rate.
Under U.S. federal income tax law, our shareholders
generally will not recognize a gain or loss in the transaction.
This proxy statement provides you with detailed information
regarding the transaction. We encourage you to read this entire
document carefully. You should carefully consider Risk
Factors beginning on page 22 for a discussion of
risks before voting at the meeting.
The transaction cannot be completed without, among other things,
(1) the affirmative vote of a majority in number of the
holders of Allied World Assurance Company Holdings, Ltd voting
common shares present and voting on the proposal, whether in
person or by proxy, representing 75% or more in value of the
voting common shares present and voting on the proposal, whether
in person or by proxy; (2) the affirmative vote of a
majority in number of the holders of Allied World Assurance
Company Holdings, Ltd non-voting common shares present and
voting on the proposal, whether in person or by proxy,
representing 75% or more in value of the non-voting common
shares present and voting on the proposal, whether in person or
by proxy; and (3) the approval of the Supreme Court of
Bermuda. Your board of directors unanimously recommends that
you vote to approve the transaction.
Please date, sign and return the enclosed proxy card(s)
in the enclosed, postage-paid envelope as promptly as
possible, or appoint a proxy to vote your shares by using the
telephone or Internet, as described in the attached proxy
statement, so that your shares may be represented at the
relevant special court-ordered meeting and voted in accordance
with your wishes.
If you have any questions about the meeting, or if you require
assistance, please call our proxy solicitor, MacKenzie Partners,
Inc., at
(800) 322-2885
or our Corporate Secretary at
(441) 278-5400.
If you attend the relevant meeting, you may vote in person, even
if you have previously submitted a proxy card.
Sincerely,
Scott A. Carmilani
President, Chief Executive Officer and Chairman of the
Board
Neither the Securities and Exchange Commission nor any state
securities commission has approved or disapproved of the
securities to be issued in the transaction or determined if this
proxy statement is truthful or complete. Any representation to
the contrary is a criminal offense.
This proxy statement is dated October 14, 2010 and is first
being mailed to shareholders on or about October 14, 2010.
FOR
HOLDERS OF VOTING COMMON SHARES ONLY
ALLIED
WORLD ASSURANCE COMPANY HOLDINGS, LTD
27 Richmond Road
Pembroke HM 08, Bermuda
NOTICE OF SPECIAL COURT-ORDERED
MEETING OF
ALLIED WORLD ASSURANCE COMPANY
HOLDINGS, LTD
VOTING COMMON
SHAREHOLDERS
TO BE HELD ON
NOVEMBER 18, 2010
October 14,
2010
To Our Voting Shareholders:
We will hold a special court-ordered meeting of our voting
common shareholders at our corporate headquarters, located at 27
Richmond Road, Pembroke HM 08, Bermuda, commencing at
10:00 a.m., local time, on November 18, 2010 to vote:
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To approve a redomestication to be effected by the Scheme of
Arrangement attached as Annex A to this proxy statement,
between Allied World Assurance Company Holdings, Ltd, a company
organized under the laws of Bermuda (Allied World
Bermuda), and Allied World Assurance Company Holdings, AG,
a Swiss corporation and a wholly-owned subsidiary of Allied
World Bermuda (Allied World Switzerland). Under the
terms of the Scheme of Arrangement, each holder of Allied World
Bermuda voting common shares outstanding immediately before the
transaction is effected will receive voting shares of Allied
World Switzerland, par value $15.00 per share, on a
one-for-one
basis with respect to such outstanding Allied World Bermuda
voting common shares, and each holder of Allied World Bermuda
non-voting common shares outstanding immediately before the
transaction is effected will receive non-voting participation
certificates of Allied World Switzerland, par value $15.00 per
share, on a
one-for-one
basis with respect to such outstanding Allied World Bermuda
non-voting common shares;
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On a motion to adjourn the meeting to a later date to solicit
additional proxies if there are insufficient votes at the time
of the meeting to approve the Scheme of Arrangement; and
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On any other matters that may properly come before the meeting
and any adjournments or postponements of the meeting.
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Under Bermuda law, the Scheme of Agreement must be separately
approved by the holders of Allied World Bermudas voting
and
non-voting
common shares. Only shareholders of record holding voting common
shares, as shown by the transfer books of Allied World Bermuda,
as of the close of business on October 12, 2010 are
entitled to vote at the special court-ordered meeting and at any
adjournment or postponement thereof. If you are a holder of
non-voting common shares, you may ignore this Notice. Instead,
please see the notice specifically for our non-voting
shareholders.
Please sign, date and return the enclosed proxy card in the
return envelope furnished for that purpose, as promptly as
possible, whether or not you plan to attend the meeting. If you
later desire to revoke your proxy for any reason, you may do so
in the manner described in the attached proxy statement. For
further information concerning the use of the proxy and other
related matters, you are urged to read the proxy statement on
the following pages.
If you are a record holder of voting common shares and plan to
attend the meeting, please check the appropriate box on the
proxy card or, if you appoint a proxy by Internet or telephone,
indicate your plans to attend when prompted.
The Scheme of Arrangement will be subject to an application to
the Supreme Court of Bermuda seeking sanction or approval of the
Scheme of Arrangement, which application will be heard on or
about November 26, 2010.
By Order of the Board of Directors,
Wesley D. Dupont
Corporate Secretary
This proxy statement incorporates documents by reference. See
Where You Can Find More Information beginning on
page 85 for a listing of documents incorporated by
reference. These documents are available to any person,
including any beneficial owner of common shares, upon request
directed to Wesley D. Dupont, Corporate Secretary, Allied World
Assurance Company Holdings, Ltd, 27 Richmond Road, Pembroke HM
08, Bermuda. To ensure timely delivery of these documents, any
request should be made by November 11, 2010. The exhibits
to these documents will generally not be made available unless
they are specifically incorporated by reference in this proxy
statement.
FOR
HOLDERS OF NON-VOTING COMMON SHARES ONLY
ALLIED
WORLD ASSURANCE COMPANY HOLDINGS, LTD
27 Richmond Road
Pembroke HM 08, Bermuda
NOTICE OF SPECIAL COURT-ORDERED
MEETING OF
ALLIED WORLD ASSURANCE COMPANY
HOLDINGS, LTD
NON-VOTING COMMON
SHAREHOLDERS
TO BE HELD ON
NOVEMBER 18, 2010
October 14,
2010
To Our Non-Voting Shareholders:
We will hold a special court-ordered meeting of our non-voting
common shareholders at our corporate headquarters, located at 27
Richmond Road, Pembroke HM 08, Bermuda, commencing at
10:30 a.m., local time, on November 18, 2010 to vote:
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To approve a redomestication to be effected by the Scheme of
Arrangement attached as Annex A to this proxy statement,
between Allied World Assurance Company Holdings, Ltd, a company
organized under the laws of Bermuda (Allied World
Bermuda), and Allied World Assurance Company Holdings, AG,
a Swiss corporation and a wholly-owned subsidiary of Allied
World Bermuda (Allied World Switzerland). Under the
terms of the Scheme of Arrangement, each holder of Allied World
Bermuda voting common shares outstanding immediately before the
transaction is effected will receive voting shares of Allied
World Switzerland, par value $15.00 per share, on a
one-for-one
basis with respect to such outstanding Allied World Bermuda
voting common shares, and each holder of Allied World Bermuda
non-voting common shares outstanding immediately before the
transaction is effected will receive non-voting participation
certificates of Allied World Switzerland, par value $15.00 per
share, on a
one-for-one
basis with respect to such outstanding Allied World Bermuda
non-voting common shares;
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On a motion to adjourn the meeting to a later date to solicit
additional proxies if there are insufficient votes at the time
of the meeting to approve the Scheme of Arrangement; and
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On any other matters that may properly come before the meeting
and any adjournments or postponements of the meeting.
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Under Bermuda law, the Scheme of Agreement must be separately
approved by the holders of Allied World Bermudas voting
and
non-voting
common shares. Only shareholders of record holding non-voting
common shares, as shown by the transfer books of Allied World
Bermuda, as of the close of business on October 12, 2010
are entitled to vote at the special court-ordered meeting and at
any adjournment or postponement thereof. If you are a holder
of voting common shares, you may ignore this Notice. Instead,
please see the notice specifically for our voting
shareholders.
Please sign, date and return the enclosed proxy card in the
return envelope furnished for that purpose, as promptly as
possible, whether or not you plan to attend the meeting. If you
later desire to revoke your proxy for any reason, you may do so
in the manner described in the attached proxy statement. For
further information concerning the use of the proxy and other
related matters, you are urged to read the proxy statement.
If you are a record holder of non-voting common shares and plan
to attend the meeting, please check the appropriate box on the
proxy card or, if you appoint a proxy by Internet or telephone,
indicate your plans to attend when prompted.
The Scheme of Arrangement will be subject to an application to
the Supreme Court of Bermuda seeking sanction or approval of the
Scheme of Arrangement, which application will be heard on or
about November 26, 2010.
By Order of the Board of Directors,
Wesley D. Dupont
Corporate Secretary
This proxy statement for our non-voting common shareholders
incorporates documents by reference. See Where You Can
Find More Information beginning on page 85 for a
listing of documents incorporated by reference. These documents
are available to any person, including any beneficial owner of
common shares, upon request directed to Wesley D. Dupont,
Corporate Secretary, Allied World Assurance Company Holdings,
Ltd, 27 Richmond Road, Pembroke HM 08, Bermuda. To ensure timely
delivery of these documents, any request should be made by
November 11, 2010. The exhibits to these documents will
generally not be made available unless they are specifically
incorporated by reference in this proxy statement.
TABLE OF
CONTENTS
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i
ALLIED
WORLD ASSURANCE COMPANY HOLDINGS, LTD
27 Richmond Road
Pembroke HM 08, Bermuda
PROXY STATEMENT
For the Special Court-Ordered
Meetings of
Voting Common Shareholders
and
Non-Voting Common
Shareholders
To be held on
November 18, 2010
GENERAL
INFORMATION
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Why am I receiving these materials? |
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You are receiving these materials because you are a shareholder
of Allied World Assurance Company Holdings, Ltd (Allied
World Bermuda) as of the Record Date (as defined below).
The board of directors of Allied World Bermuda is soliciting the
enclosed proxy to be voted at our special court-ordered meetings
of voting common shareholders and non-voting common shareholders
to be held on November 18, 2010 (the Special
Meetings), and any adjournments or postponements thereof,
at the times and place and for the purposes set forth in the
accompanying Notice of Special Court-Ordered Meeting of Allied
World Assurance Company Holdings, Ltd Voting Common Shareholders
and the accompanying Notice of Special Court-Ordered Meeting of
Allied World Assurance Company Holdings, Ltd Non-Voting Common
Shareholders (collectively, the Notices of Special
Meetings). This proxy statement summarizes the information
you need to know to vote at the relevant Special Meeting. When
the enclosed proxy card is properly executed and returned, the
companys common shares, par value $0.03 per share, it
represents will be voted, subject to any direction to the
contrary, at the relevant Special Meeting FOR the matters
specified in the relevant Notice of Special Meeting attached
hereto and described more fully herein. |
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This proxy statement, the attached Notices of Special Meetings
and the enclosed proxy cards are being first mailed to
shareholders on or about October 14, 2010. |
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Who is entitled to vote? |
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The Board has set October 12, 2010, as the record date for
the Special Meetings (the Record Date). Shareholders
of record holding Allied World Bermuda voting common shares, as
shown by the transfer books of the company as of the close of
business on the Record Date, will be entitled to vote at the
special court-ordered meeting of voting common shareholders and
at any adjournment or postponement thereof. Holders of
non-voting common shares (the substantial majority of which are
currently held by certain Goldman Sachs Capital Partners and
other investment funds, which are affiliates of the Goldman
Sachs Group, Inc. (the GSCP Funds)), will receive
this proxy statement but will be entitled to vote at a separate
special court-ordered meeting of non-voting common shareholders
to be held immediately following the special court-ordered
meeting of voting common shareholders. As of October 12,
2010, there were 42,346,654 common shares outstanding, of which
38,896,801 were voting common shares and 3,449,853 were
non-voting common shares. In addition, Allied World Bermuda
holds 8,465,456 common shares in treasury, which are not
entitled to vote at the Special Meetings. References to
common shares in this proxy statement refer to
Allied World Bermudas voting and non-voting common shares
combined. |
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What will I be voting on? |
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You are being asked to vote on a scheme of arrangement under
Bermuda law, whereby your common shares of Allied World Bermuda
will be cancelled and you will receive, on a
one-for-one
basis, new voting shares and/or non-voting participation
certificates, as applicable, of Allied World Assurance Company
Holdings, AG, the new Swiss corporation (Allied World
Switzerland), for the purpose of changing our place of
incorporation |
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from Bermuda to Switzerland (the Scheme of
Arrangement). As a result of the Scheme of Arrangement,
shareholders of Allied World Bermuda will become shareholders of
Allied World Switzerland. |
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You are also being asked to vote on a proposal to adjourn the
meeting to a later date to solicit additional proxies if there
are insufficient votes at the time of the meeting to approve the
Scheme of Arrangement proposal. Approval of the adjournment
proposal is not a condition to the Scheme of Arrangement. You
may also vote on any other business that properly comes before
the relevant Special Meeting. |
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What are the voting recommendations of the Board? |
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Your Board unanimously recommends that you vote: |
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A. FOR the approval of the Scheme of Arrangement, and
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B. FOR the motion to adjourn the relevant Special
Meeting to a later date to solicit additional proxies if there
are insufficient votes at the time of the meeting to approve the
Scheme of Arrangement.
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How many votes do I have? |
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Holders of outstanding common shares are entitled to one vote
per share on each matter to be voted upon by the shareholders at
the relevant Special Meeting. |
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How do I vote? |
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The manner in which your shares may be voted depends on how your
shares are held. If you own shares of record, meaning that your
common shares are represented by certificates or book entries in
your name so that you appear as a shareholder on the records of
the companys share transfer agent, Continental Stock
Transfer & Trust Company, you may appoint a proxy
to vote on your behalf: |
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By internet, at the web address shown on the form
of proxy card;
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By telephone, using the telephone number shown on
the form of proxy card; and
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By mail, returning your completed and signed proxy
card to the address shown on the form of proxy card.
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If you own shares of record, you may also vote your common
shares in person at the relevant Special Meeting. |
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If you own shares through a bank or brokerage firm, you may
instead receive from your bank or brokerage firm a voting
instruction form with this proxy statement that you may use to
instruct them how your shares are to be voted. As with a proxy
card, you may direct how your shares are to be voted by
completing, signing and returning the voting instructions form
in the envelope provided. Many banks and brokerage firms have
arranged for internet or telephonic voting of shares and provide
instructions for using those services on the voting instruction
form. If you want to vote your shares in person at the meeting,
you must obtain a proxy from your bank or broker giving you the
right to vote your common shares at the relevant Special Meeting. |
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Allied World Bermuda has requested that bank, brokerage and
other custodians, nominees and fiduciaries forward solicitation
materials to the beneficial owners of voting common shares and
will reimburse the banks, brokers and other fiduciaries for
their reasonable
out-of-pocket
expenses for forwarding the materials. |
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Who will count the vote? |
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A representative from Conyers Dill & Pearman Limited,
a Bermuda law firm, will act as the inspector of elections and
will be responsible for determining whether or not a quorum is
present and tabulating the votes cast by proxy (which will have
been certified by our independent transfer agent) or in person
at the relevant Special Meeting. |
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What does it mean if I receive more than one proxy card? |
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Generally, it means that you hold shares registered in more than
one account. To ensure that all of your shares are voted, you
should complete, sign and return each proxy card you receive. |
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What happens if I sign and return my proxy card but do not
indicate how to vote my shares? |
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If no instructions are provided in an executed proxy card, the
common shares represented by the proxy will be voted at the
relevant Special Meeting FOR each of the proposals, and,
as to any other business as may properly come before the Special
Meeting, in accordance with the proxyholders judgment as
to such business. |
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How are abstentions and broker non-votes
treated? |
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Abstentions and broker non-votes will be counted
toward the presence of a quorum at, but will not be considered
votes cast on any of the proposals brought before, the relevant
Special Meeting. Broker non-votes are shares held by banks or
brokers for which voting instructions have not been received
from the beneficial owners or the persons entitled to vote those
shares and for which the bank or broker does not have
discretionary voting power under rules applicable to
broker-dealers. If you own shares through a bank or brokerage
firm and you do not instruct your bank or broker how to vote,
your bank or broker will have discretion to vote your shares on
routine matters. More importantly, without
instructions from you, your bank or broker will not have
discretion to vote on non-routine matters, such as
the approval of the Scheme of Arrangement. |
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Can I change my vote after I have mailed my signed proxy card
or otherwise instructed how my shares are to be voted? |
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Yes. You may change your vote by: |
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Voting again over the internet or by telephone prior
to 7:00 p.m., Eastern Time, on November 17, 2010;
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Providing the Corporate Secretary with written
notice of revocation, by voting in person at the relevant
Special 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 own shares through a bank or brokerage firm,
obtaining a proxy from your bank or broker giving you the right
to vote your common shares at the relevant Special Meeting.
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Attendance at a Special Meeting by a shareholder who has
executed and delivered a proxy card to us shall not in and of
itself constitute a revocation of such proxy. Only your vote at
the relevant Special Meeting will revoke your proxy. |
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How does the voting take place at the relevant Special
Meeting? |
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A: |
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A vote by poll will be taken on all matters properly brought
before the relevant Special Meeting. On a vote by poll, each
shareholder present who elects to vote in person and each person
holding a valid proxy is entitled to one vote for each common
share owned or represented. |
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Q: |
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Who pays the costs of soliciting proxies? |
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The cost of the solicitation of proxies will be borne by Allied
World Bermuda. Solicitation will be made by mail, and may be
made by the companys directors, officers and employees,
personally or by telephone, facsimile or other electronic means,
for which the companys directors, officers and employees
will not receive any additional compensation. Proxy cards and
materials also will be distributed to beneficial owners of
voting common shares through banks, brokers, custodians,
nominees and other parties, and the company expects to reimburse
such parties for their charges and expenses. MacKenzie Partners,
Inc. has been retained to assist the company in the solicitation
of proxies at a fee not expected to exceed $8,000, plus
out-of-pocket
expenses. |
3
OVERVIEW
OF THE REDOMESTICATION
We are seeking your approval of the Scheme of Arrangement at the
Special Meetings that will effectively change our place of
incorporation from Bermuda to Switzerland.
The Scheme of Arrangement involves several steps. Allied World
Bermuda, the Bermuda company whose common shares you currently
own, has formed a new corporation registered in Switzerland
named Allied World Assurance Company Holdings, AG (as defined
above, Allied World Switzerland) as a direct,
wholly-owned subsidiary. On October 1, 2010, we made
application to the Supreme Court of Bermuda (the Supreme
Court) to order the calling of a meeting of holders of
Allied World Bermuda voting common shares (and immediately
thereafter a meeting of holders of Allied World Bermuda
non-voting common shares) to approve the Scheme of Arrangement.
On October 7, 2010, the Supreme Court ordered us to seek
your approval of the Scheme of Arrangement. We will hold the
Special Meetings to approve the Scheme of Arrangement on
November 18, 2010. If we obtain the necessary shareholder
approval, the Supreme Court will have a sanction hearing on or
about November 26, 2010 to approve the Scheme of
Arrangement (the Sanction Hearing). Assuming we
receive the necessary approvals from the shareholders and the
Supreme Court and the other conditions to consummation of the
Scheme of Arrangement are satisfied, the following steps will
occur pursuant to the Scheme of Arrangement:
(1) all previously outstanding common shares of Allied
World Bermuda will be cancelled;
(2) Allied World Bermuda will issue such number of voting
and non-voting common shares as are outstanding as of the
effectiveness of the Scheme of Arrangement to Allied World
Switzerland (which will constitute all of Allied World
Bermudas outstanding common shares at such time); and
(3) Allied World Switzerland will issue (i) voting
shares of Allied World Switzerland on a
one-for-one
basis to the holders of Allied World Bermuda voting common
shares that have been cancelled and (ii) non-voting
participation certificates of Allied World Switzerland having no
voting rights on a
one-for-one
basis to the holders of Allied World Bermuda non-voting common
shares that have been cancelled.
As a result of the Scheme of Arrangement, the holders of voting
common shares of Allied World Bermuda will become holders of
voting shares of Allied World Switzerland, the holders of
non-voting common shares of Allied World Bermuda will become
holders of non-voting participation certificates of Allied World
Switzerland, and Allied World Bermuda will become a wholly-owned
subsidiary of Allied World Switzerland.
In connection with the consummation of the Scheme of Arrangement:
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Allied World Switzerland may issue additional voting shares of
Allied World Switzerland to be held in treasury (the
Treasury Shares), subject to the 10% aggregate share
and participation capital limit under Swiss law, in order to
satisfy delivery obligations under certain of our equity-based
incentive plans and under the put agreements we may enter into
with the holders of the Allied World Switzerland non-voting
participation certificates and warrants with respect to
non-voting participation certificates (see Description of
Allied World Switzerland Shares Participation
Certificates); and
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pursuant to the terms of Allied World Bermudas warrants
outstanding on the date of the consummation of the Scheme of
Arrangement, Allied World Switzerland will assume Allied World
Bermudas obligations under the warrants and will agree to
issue voting shares
and/or
non-voting participation certificates of Allied World
Switzerland (rather than Allied World Bermuda shares) upon
exercise of the warrants in accordance with their terms.
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As of September 30, 2010, there were 38,944,723 voting
common shares of Allied World Bermuda outstanding, 3,449,853
non-voting common shares outstanding, and warrants outstanding
to purchase up to 2,000,000 voting common shares and up to
1,500,000 non-voting common shares of Allied World Bermuda. In
addition, as of such date there were 3,060,433 voting common
shares of Allied World Bermuda reserved for issuance pursuant to
outstanding equity awards and an additional 3,519,864 voting
common shares available for issuance but unissued under Allied
World Bermudas equity-based incentive plans. Allied World
Bermuda also held 8,399,326 common shares in treasury.
Immediately after completion of the Redomestication (as defined
below), our new parent company Allied World Switzerland will
have the same number of Allied World Switzerland voting
4
shares and non-voting participation certificates as there were
voting common shares and non-voting common shares, respectively,
outstanding for Allied World Bermuda immediately before
completion of the transaction. Prior to the effective date of
the Scheme of Arrangement, we plan to cancel a sufficient number
of Allied World Bermuda common shares held in treasury so that
the aggregate par value of all Allied World Switzerland voting
shares and non-voting participation certificates we may hold in
treasury will be 10% or less of the aggregate share and
participation capital.
We refer to the foregoing transactions, including the steps of
the Scheme of Arrangement, as the Redomestication.
The following diagram shows the structure of Allied World
Bermuda before the Redomestication and following the
Redomestication. The diagram does not reflect all of the legal
entities owned by Allied World Bermuda.
Following the Redomestication, our outstanding 7.50% Senior
Notes due August 1, 2016 (the Senior Notes)
will remain outstanding at Allied World Bermuda. Subsequent to
the solicitation of votes pursuant to this proxy statement,
Allied World Bermuda will seek the consent of the noteholders
solely for the purpose of removing the contractual requirement
in the indenture governing the notes that would require Allied
World Bermuda to continue to file periodic reports with the
U.S. Securities and Exchange Commission (SEC)
following the Redomestication (which would be in addition to the
SEC reports that will be required of Allied World Switzerland).
The consent of the noteholders is not a condition to the
completion of the Scheme of Arrangement. Following the
Redomestication, Allied World Switzerland will fully and
unconditionally guarantee the Senior Notes.
In this proxy statement, we sometimes refer to Allied World
Bermuda and Allied World Switzerland as we,
our, us or the company and
which, as the context so requires, includes Allied World Bermuda
or Allied World Switzerland and its subsidiaries as a
consolidated group. Also, in this proxy statement, $
refers to U.S. dollars and CHF to Swiss francs.
All amounts of Swiss francs reported in this proxy statement, or
metrics reported in U.S. dollars that are based on Swiss francs
(for example par value and share capital amounts for Allied
World Switzerland), assume an exchange rate of CHF 1.085 to
$1.00, the exchange rate prevailing on June 30, 2010.
5
QUESTIONS
AND ANSWERS ABOUT THE REDOMESTICATION
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Q: |
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What am I being asked to vote on at the meeting? |
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You are being asked to vote on a Scheme of Arrangement under
Bermuda law, whereby your common shares of Allied World Bermuda
will be cancelled and you will receive, on a
one-for-one
basis, new voting shares or non-voting participation
certificates of Allied World Switzerland, which will reflect
your current holding of common shares in Allied World Bermuda,
for the purpose of changing our place of incorporation from
Bermuda to Switzerland. As a result of the Scheme of
Arrangement, shareholders of Allied World Bermuda will become
shareholders of Allied World Switzerland. Many of the principal
attributes of Allied World Bermudas voting shares and
non-voting shares and Allied World Switzerlands voting
shares and non-voting participation certificates, respectively,
will be similar. However, there are differences between your
rights under Swiss law and under Bermuda law. In addition, there
are differences between Allied World Bermudas memorandum
of association and bye-laws and Allied World Switzerlands
articles of association and organizational regulations that will
become effective after the completion of the Redomestication. We
discuss these differences in detail under Description of
Allied World Switzerland Shares and Comparison of
Rights of Shareholders and Powers of the Board of
Directors. Copies of forms of Allied World
Switzerlands articles of association and organizational
regulations are attached as Annex D and Annex E to
this proxy statement, respectively. |
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You are also being asked to vote on a proposal to adjourn the
meeting to a later date to solicit additional proxies if there
are insufficient votes at the time of the meeting to approve the
Scheme of Arrangement proposal. Approval of the adjournment
proposal is not a condition to the Scheme of Arrangement. |
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Why was Switzerland selected as the place of domicile for
Allied World Switzerland? |
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Switzerland is a leading financial center and has a strong
reputation for economic and political stability. It is home to
several of Europes major multinational organizations
spanning several industries, including power, banking,
insurance, consumer products and pharmaceuticals. Switzerland
also has a stable and well-developed infrastructure base and is
a major transportation hub, providing a base for possible
expansion of corporate functions in an optimal centralized
European location. |
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We believe that the Redomestication to Switzerland will help
reduce certain reputational, political, regulatory and financial
risks to our company. The Redomestication can increase our
strategic flexibility while posing no noticeable risks to our
operating model, our long-term strategy or our ability to
maintain a competitive worldwide effective corporate tax rate. |
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Switzerland also has a well-developed legal system that we
believe encourages a high standard of corporate governance and
provides shareholders with substantial rights. Generally, the
rights of a shareholder of a Swiss company are substantially
similar to, and in some cases more favorable to shareholders
than, the rights of a shareholder of a Bermuda company. |
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Please see The Redomestication Background and
Reasons for the Redomestication for more information. Our
board of directors has considered both the potential advantages
and risks of the Redomestication and has unanimously approved
the Scheme of Arrangement and recommended that the shareholders
vote for the Scheme of Arrangement. We cannot assure you,
however, that the anticipated benefits of the Redomestication
will be realized. In addition to the potential benefits
described above, the Redomestication will expose Allied World
Bermuda and its shareholders to certain risks. Please see the
discussion under Risk Factors. |
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Will the Redomestication affect our current or future
operations? |
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A: |
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We currently believe that the Redomestication will have no
material impact on how we conduct our
day-to-day
operations. The location of our future operations will depend on
the needs of our business, independent of our legal domicile. |
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Will the Redomestication dilute my economic interest? |
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A: |
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The Redomestication will not dilute your economic interest in
Allied World Bermuda. Immediately after the Redomestication, the
number of outstanding voting shares of Allied World Switzerland
will be the same as the number of outstanding voting common
shares of Allied World Bermuda immediately before the |
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Redomestication and the number of outstanding non-voting
participation certificates of Allied World Switzerland will be
the same as the number of outstanding non-voting common shares
of Allied World Bermuda immediately before the Redomestication.
For changes in the capital structure that could have a dilutive
effect see Description of Allied World Switzerland
Shares Capital Structure below. |
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Q: |
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What are the material tax consequences of the
Redomestication? |
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Please read the following questions and answers regarding some
of the potential tax consequences of the Redomestication. Please
refer to Material Tax Considerations beginning on
page 38 for a description of the material U.S. federal
income tax and Swiss tax consequences of the Redomestication to
Allied World Bermuda shareholders. Determining the actual tax
consequences to you of the Redomestication may be complex and
will depend on your specific situation. You are urged to consult
your tax adviser for a full understanding of the tax
consequences of the Redomestication to you. |
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Is the Redomestication taxable to me? |
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Under U.S. federal income tax law, holders of shares of Allied
World Bermuda generally will not recognize a gain or loss in the
Redomestication. Under Swiss tax law, no tax is due from
non-Swiss holders of Allied World Bermuda shares on the receipt
of Allied World Switzerland voting shares or non-voting
participation certificates in the Redomestication. Any
beneficial owner of Allied World Bermuda shares, and
particularly Swiss holders, are urged to consult their tax
advisers regarding the tax consequences to them of the
Redomestication. |
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Is the Redomestication a taxable transaction for either
Allied World Bermuda or Allied World Switzerland? |
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No. The Redomestication is not a taxable transaction for
Allied World Bermuda or Allied World Switzerland. |
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When do you expect the Redomestication to be completed? |
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We are working towards completing the Redomestication as quickly
as possible and, assuming the Scheme of Arrangement is approved
by the requisite shareholder votes and by the Supreme Court and
the conditions to the consummation of the Scheme of Arrangement
are satisfied, we expect to do so as soon as practicable
following the Sanction Hearing. We currently expect to complete
the Redomestication prior to the year end 2010, but delays may
occur. See Annex C for an expected timetable. The
Redomestication may be abandoned or delayed for any reason by
our board of directors at any time prior to the Special Meetings. |
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What will I receive for my Allied World Bermuda common
shares? |
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After the Redomestication is completed, you will hold one Allied
World Switzerland voting share for each Allied World Bermuda
voting common share you held immediately prior to the completion
of the Redomestication and one Allied World Switzerland
non-voting participation certificate for each Allied World
Bermuda non-voting common share you held immediately prior to
the completion of the Redomestication. |
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If the Scheme of Arrangement is approved, do I have to take
any action to cancel my Allied World Bermuda common shares and
receive Allied World Switzerland voting shares or non-voting
participation certificates? |
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No. Your Allied World Bermuda common shares will be
cancelled and Allied World Switzerland securities will be issued
without any action on your part. If you held Allied World
Bermuda voting common shares you will receive Allied World
Switzerland voting shares, and if you held Allied World Bermuda
non-voting common shares you will receive Allied World
Switzerland non-voting participation certificates. All of Allied
World Switzerlands voting shares and non-voting
participation certificates will be issued in uncertificated
book-entry form. Consequently, if you currently hold Allied
World Bermuda shares in certificated form, following the
Redomestication, your Allied World Bermuda share certificates
will cease to have effect as documents or evidence of title. The
transfer agent will make an electronic book-entry in your name
and will mail you a statement evidencing your ownership of
Allied World Switzerland voting shares and/or non-voting
participation certificates, as applicable. |
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Can I trade Allied World Bermuda shares between the date of
this proxy statement and the effective time of the Scheme of
Arrangement? |
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Yes. Allied World Bermuda shares will continue to trade on the
New York Stock Exchange (NYSE) during this period. |
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After the Redomestication, where can I trade Allied World
Switzerland shares? |
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We intend to apply so that, immediately following the
consummation of the Redomestication, the voting shares of Allied
World Switzerland will be listed on the NYSE under the symbol
AWH, the same symbol under which your common shares
are currently listed. |
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What vote of Allied World Bermuda shareholders is required to
approve the proposals? |
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To approve the Scheme of Arrangement, (i) the affirmative
vote of a majority in number of the holders of the Allied World
Bermuda voting common shares present and voting at the meeting
of voting common shareholders, whether in person or by proxy,
representing 75% or more in value of the voting common shares
present and voting at the meeting, whether in person or by
proxy; and (ii) the affirmative vote of a majority in
number of the holders of the Allied World Bermuda non-voting
common shares present and voting at the meeting of non-voting
common shareholders, whether in person or by proxy, representing
75% or more in value of the non-voting common shares present and
voting at the meeting, whether in person or by proxy, is
required. The affirmative vote of holders of at least a majority
of the Allied World Bermuda voting common shares present and
voting at the meeting, whether in person or by proxy, is
required to approve the adjournment proposal with respect to the
meeting of voting common shareholders; and the affirmative vote
of holders of at least a majority of the Allied World Bermuda
non-voting common shares present and voting at the meeting,
whether in person or by proxy, is required to approve the
adjournment proposal with respect to the meeting of non-voting
common shareholders. Please see Summary
Required Vote and General Information Q:
How are abstentions and broker non-votes
treated? for more information, including a description of
the effects of abstentions and broker non-votes on the proposals. |
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Why is there a Special Meeting of non-voting common
shareholders being held following the Special Meeting of voting
common shareholders? |
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Under Bermuda law, the Scheme of Arrangement must be separately
approved by the holders of Allied World Bermudas voting
and non-voting common shares. The GSCP Funds hold 91.6% of the
outstanding non-voting common shares of Allied World Bermuda as
of October 12, 2010. In light of the requirement that the
holders of the Allied World Bermuda non-voting common shares
approve the Scheme of Arrangement, prior to submitting the
Scheme of Arrangement and related transactions to our
shareholders, we inquired of the GSCP Funds whether they would
support the proposed Redomestication transactions. The GSCP
Funds have communicated to us that they have determined, on a
preliminary basis, to support the transactions. You should note,
however, that the GSCP Funds continue to evaluate the
transactions and have not committed or in any way obligated
themselves to vote for the Scheme of Arrangement, and there is
no assurance that the GSCP Funds will not ultimately determine
against supporting the Redomestication and to withhold their
votes from or cast their votes against the Scheme of
Arrangement. If the Scheme of Arrangement is approved, the
outstanding non-voting common shares of Allied World Bermuda
will be cancelled in exchange for non-voting participation
certificates of Allied World Switzerland on a
one-for-one
basis. The non-voting participation certificates have the same
entitlement to dividends and liquidation distributions as the
voting shares of Allied World Switzerland, but have no voting or
other participation rights in shareholders meetings. |
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What quorum is required for action at the meeting? |
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The presence of two or more persons at the meeting representing
in person or by proxy more than 50% of our total outstanding
voting common shares or non-voting common shares, as
appropriate, throughout the relevant meeting will constitute a
quorum. Abstentions and broker non-votes will be
counted toward the presence of a quorum at, but will not be
considered votes cast on any of the proposals brought before,
the meeting. Broker non-votes are shares held by banks or
brokers for which voting instructions have not been received
from the beneficial owners or the persons entitled to vote those
shares and for which the bank or broker does not have |
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discretionary voting power under rules applicable to
broker-dealers. If you own shares through a bank or brokerage
firm and you do not instruct your bank or broker how to vote,
your bank or broker will not have discretion to vote on the
proposal. Please see Summary Special
Court-Ordered Meetings and General
Information Q: How are abstentions and broker
non-votes treated? for more information, including a
description of the effects of abstentions and broker non-votes
on the proposals. |
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Does the Scheme of Arrangement require approval by the
Supreme Court of Bermuda? |
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The Scheme of Arrangement cannot be completed without the
approval of the Supreme Court of Bermuda. Subject to the holders
of common shares of Allied World Bermuda approving the Scheme of
Arrangement at the Special Meetings, a Supreme Court hearing
will be required to seek the sanction of the Scheme of
Arrangement. At the Sanction Hearing, the Supreme Court may
impose such conditions as it deems appropriate in relation to
the Scheme of Arrangement but may not impose any material
changes without the joint consent of Allied World Bermuda and
Allied World Switzerland. In determining whether to exercise its
discretion and approve the Scheme of Arrangement, the Supreme
Court will determine, among other things, whether the Scheme of
Arrangement is fair to Allied World Bermudas shareholders
in general. |
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May I attend the Supreme Court hearing? |
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Allied World Bermuda common shareholders (including any
beneficial owners of such shares that give voting instructions
to a custodian or clearing house that subsequently votes on the
proposal) who vote either for or against the proposal or who the
Supreme Court is satisfied have a substantial economic interest
in the Scheme of Arrangement are entitled to appear in person or
by counsel at the Supreme Court hearing on or about
November 26, 2010 at which Allied World Bermuda will seek
the sanction of the Scheme of Arrangement. In addition, the
Supreme Court has wide discretion to hear from interested
parties. Allied World Bermuda has agreed that it will not object
to the participation by any shareholder in the Supreme Court
hearing on the grounds that such person does not have a
substantial economic interest in its common shares. |
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What are the most important Swiss corporate tax consequences
of being organized as a Swiss holding company? |
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Switzerland imposes a corporate federal income tax on qualifying
holding companies at an effective tax rate of 7.83%. However,
the federal level qualifying net dividend income and qualifying
net capital gains on the sale of qualifying investments in
subsidiaries will be exempt from Swiss federal income tax. In
addition, we will be subject to an annual capital tax on our
year-end taxable equity. We will also be subject to a Swiss
issuance stamp tax levied at a rate of 1% on the fair value of
issuances of voting shares and non-voting participation
certificate and increases of our share and participation capital
and other types of increases in equity, other than in connection
with qualifying restructurings like the Redomestication. Please
refer to the questions and answers below for Swiss withholding
tax implications on future share repurchases and dividend
distributions of Allied World Switzerland and to Material
Tax Considerations Swiss Tax Considerations
for a further description of Allied World Switzerlands
corporate tax treatment. |
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The above types of Swiss taxes and rates aim to provide only a
very broad overview of some corporate tax aspects in Switzerland
and do not purport to be a complete analysis of the tax types
and rates that would be relevant for either Allied World
Switzerland or its shareholders. We are currently not subject to
income, capital, stamp or issuance taxes in Bermuda. |
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Will there be Swiss withholding tax on future share
repurchases, if any, by Allied World Switzerland? |
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Under present Swiss tax law, repurchases of voting shares or
non-voting participation certificates for the purposes of
capital reduction are treated as a partial liquidation subject
to 35% Swiss withholding tax, regardless of the place of
residency of the shareholder. The repurchase of voting shares or
non-voting participation certificates for purposes other than
capital reduction, such as to retain as Treasury Shares or
non-voting treasury participation certificates for use in
connection with stock incentive plans, convertible debt or other
instruments within certain periods, will generally not be
subject to Swiss withholding tax. However, the aggregate par
value of all Allied World Switzerland voting shares held as
Treasury Shares and non-voting participation certificates held
in treasury may not exceed 10% of the aggregate share and
participation capital. |
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In addition, for voting shares and non-voting participation
certificates repurchased for capital reduction, the portion of
the repurchase price attributable to the par value of the voting
shares and non-voting participation certificates repurchased
will not be subject to the Swiss withholding tax. Beginning on
January 1, 2011, subject to the adoption of implementing
regulations by the applicable Swiss authorities, the portion of
the repurchase price attributable to the qualifying additional
paid-in capital for Swiss statutory reporting purposes of the
voting shares and non-voting participation certificates
repurchased will also not be subject to the Swiss withholding
tax. |
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In most instances, Swiss companies listed on the SIX Swiss
Exchange (SIX) carry out share repurchase programs
through a second trading line on the SIX. Swiss
institutional investors typically purchase shares from
shareholders on the open market and then sell the shares on this
second trading line back to the company. The Swiss institutional
investors are generally able to receive a full refund of the
withholding tax. Due to, among other things, the time delay
between the sale to the company and the institutional
investors receipt of the refund, the price companies pay
to repurchase their shares has historically been slightly higher
than the price of such companies shares in ordinary
trading on the SIX first trading line. |
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We will not be able to use the SIX second trading line process
to repurchase our voting shares or non-voting participation
certificates because we do not intend to list our voting shares
or non-voting participation certificates on the SIX. We do,
however, intend to follow an alternative process whereby we
expect to be able to repurchase our voting shares in a manner
that should allow Swiss institutional market participants
selling the voting shares to us to receive a refund of the Swiss
withholding tax and, therefore, accomplish the same purpose as
share repurchases on the second trading line at substantially
the same cost to us and such market participants as share
repurchases on a second trading line. |
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Will there be Swiss withholding tax on future dividends, if
any, by Allied World Switzerland? |
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A Swiss withholding tax of 35% is due on dividends and similar
distributions to Allied World Switzerland shareholders and
holders of non-voting participation certificates from Allied
World Switzerland, regardless of the place of residency of the
holder, subject to the exceptions discussed below. Allied World
Switzerland will be required to withhold at such rate and remit
on a net basis any payments made to a holder of Allied World
Switzerland voting shares and non-voting participation
certificates and pay such withheld amounts to the Swiss federal
tax authorities. |
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Under present Swiss tax law, distributions to shareholders and
holders of non-voting participation certificates in relation to
a reduction of par value are exempt from Swiss withholding tax.
Beginning on January 1, 2011, subject to the adoption of
implementing regulations by the applicable Swiss authorities,
distributions to shareholders and holders of non-voting
participation certificates out of qualifying additional paid-in
capital for Swiss statutory purposes also will be exempt from
the Swiss withholding tax. Upon completion of the
Redomestication, we expect Allied World Switzerland to have a
par value and qualifying additional paid-in capital per share
for Swiss statutory reporting purposes, such that the
combination of the two will equal the fair market value of the
contributed share and participation capital of Allied World
Bermuda. Consequently, Allied World Switzerland expects that a
substantial amount of any potential future distributions may be
exempt from Swiss withholding tax. For a description of how
qualifying additional paid-in capital can be distributed under
Swiss law, see Description of Allied World Switzerland
Shares Dividends. |
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What is qualifying additional paid-in capital? |
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Under Swiss statutory reporting requirements, qualifying
additional paid-in capital per voting share and per
participation certificate represents the amount by which the
issue price of a voting share or non-voting participation
certificate, respectively, exceeds its par value. Following
approval by shareholders of a reclassification of qualifying
additional paid-in capital as freely distributable reserves,
qualifying additional paid-in capital may, subject to the
restrictions described under Description of Allied World
Switzerland Shares Dividends and
Description of Allied World Switzerland Shares
Repurchases of Shares, be returned to shareholders and
holders of non-voting participation certificates, including
through dividends and repurchases of voting shares and
non-voting participation certificates. Beginning on
January 1, 2011, subject to the adoption of implementing
regulations by the applicable Swiss authorities, distributions
to shareholders or holders of non-voting participation
certificates out of qualifying additional paid-in capital should
be exempt from Swiss withholding tax. Currently, only
distributions in relation to a reduction of par value are exempt
from Swiss withholding tax. Please note that qualifying
additional paid-in capital for Allied World Switzerlands
statutory reporting purposes will not be the same as additional
paid-in capital reflected on Allied World Switzerlands
consolidated financial statements prepared in accordance with
U.S. generally accepted accounting principals (U.S.
GAAP). |
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Q: |
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How will qualifying additional paid-in capital for Swiss
statutory reporting purposes be determined? |
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A: |
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Qualifying additional paid-in capital of Allied World
Switzerland for Swiss statutory reporting purposes will
represent the issue price of Allied World Switzerland voting
shares and non-voting participation certificates less their
aggregate par value. This issue price will be determined based
on the fair market value of the contributed share capital of
Allied World Bermuda, which will be based on the average trading
price of Allied World Bermuda common shares on the NYSE over the
five business days ending on the second business day prior to
the date of the Special Meetings (the pricing
period) plus a share premium of up to 30%, the final
amount of which, if any, will be determined on the effective
date of the Scheme of Arrangement based on a number of factors,
including the volatility and price of the shares during the
pricing period. The aggregate par value of Allied World
Switzerland voting shares and non-voting participation
certificates will equal the product of the number of Allied
World Switzerland voting shares and non-voting participation
certificates issued in the Redomestication times the par value
per share, or $15.00. As a result, qualifying additional
paid-in-capital
will represent the fair market value of Allied World
Bermudas share capital on the effective date of the Scheme
of Arrangement less the aggregate par value of the Allied World
Switzerland issued voting shares and non-voting participation
certificates (including the shares of Allied World Switzerland
initially issued to Allied World Bermuda upon formation). |
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The following table presents shareholders equity, as
adjusted, in accordance with Swiss statutory reporting
requirements as if the Redomestication had occurred on
June 30, 2010. The following table assumes the fair market
value of the contributed share capital of Allied World Bermuda
was $2.30 billion, which is based on the average stock
price during a pricing period ending on June 30, 2010 and
does not include any share premium. Assuming a 15% and 30%
premium, respectively, the assumed fair market value of the
contributed share capital would have been $2.65 billion and
$3.00 billion, respectively, and qualifying additional
paid-in capital would have been $2.16 billion and
$2.50 billion, respectively. Because the amount of the
premium, if any, will be derived based on the volatility and
price of the shares during the pricing period, we cannot
determine the exact amount of the premium, if any, until after
the pricing period. |
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At June 30, 2010
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(in millions, except
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share and per share amounts)
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Shareholders equity:
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Shares, $15.00 par value, 49,407,301 issued
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$
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741.1
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Qualifying additional paid-in capital
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1,563.3
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Retained earnings(a)
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Total shareholders equity
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$
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2,304.4
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(a) |
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As this relates to a newly formed holding company, the retained
earnings are zero. |
11
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See Summary Unaudited Summary Pro Forma
Financial Information for a pro forma presentation of
Allied World Switzerlands shareholders equity under
U.S. GAAP. |
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Q: |
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Whom should I call if I have questions about the meeting or
the Redomestication? |
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A: |
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You should contact either of the following: |
MacKenzie Partners, Inc., the proxy solicitor
105 Madison Avenue
New York, NY, 10016
Telephone:
(800) 322-2885
or
Wesley D. Dupont, Corporate Secretary
Allied World Assurance Company Holdings, Ltd
27 Richmond Road
Pembroke HM 08, Bermuda
Telephone:
(441) 278-5400
12
SUMMARY
This summary highlights selected information from this proxy
statement. It does not contain all of the information that is
important to you. To understand the Redomestication more fully,
and for a more complete legal description of the Scheme of
Arrangement, you should read carefully the entire proxy
statement, including Risk Factors and the annexes.
The Scheme of Arrangement, attached as Annex A to this
proxy statement, is the legal document that governs the Scheme
of Arrangement. The articles of association and organizational
regulations of Allied World Switzerland, substantially in the
forms attached as Annex D and Annex E to this proxy
statement, respectively, will govern our company after the
completion of the Redomestication. We encourage you to read
those documents carefully.
Parties
to the Scheme of Arrangement
Allied World Bermuda. We are a Bermuda-based
holding company with subsidiaries that underwrite 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. For the
year ended December 31, 2009, our U.S. insurance,
international insurance and reinsurance segments accounted for
39.8%, 32.8% and 27.4%, respectively, of our total gross
premiums written of $1,696.3 million. As of
December 31, 2009, we had $9,653.2 million of total
assets and $3,213.3 million of shareholders equity.
We were formed in November 2001 by a group of investors,
including American International Group, Inc. (AIG),
The Chubb Corporation (Chubb), the GSCP Funds and an
affiliate of Swiss Reinsurance Company. Since our formation, we
have focused primarily on the direct insurance markets. We offer
our clients and producers significant capacity in both the
direct property and casualty insurance markets as well as the
reinsurance market.
We have undergone significant corporate expansion since our
formation, and we now have 16 offices located in eight different
countries.
Internationally, we first established a presence in Europe when
Allied World Assurance Company (Europe) Limited was approved to
carry on business in the European Union from its office in
Ireland in October 2002 and from a branch office in London in
May 2003. Allied World Assurance Company (Reinsurance) Limited
was approved to write reinsurance in the European Union from its
office in Ireland in July 2003 and from a branch office in
London, England in August 2004. In October 2008, we expanded our
European presence when Allied World Assurance Company
(Reinsurance) Limited opened a branch office in Zug, Switzerland
to further penetrate the European market.
In July 2002, we established a presence in the United States
when we acquired two insurance companies, Allied World Assurance
Company (U.S.) Inc. and Allied World National Assurance Company.
We have recently made substantial investments to expand our
U.S. business, which grew significantly in 2009 and which
we expect will continue to grow in size and importance in the
coming years. In February 2008, we acquired a
U.S. reinsurance company we subsequently renamed Allied
World Reinsurance Company and we write our U.S. reinsurance
business through this company. In October 2008, we acquired
Darwin Professional Underwriters, Inc. and its subsidiaries to
expand our U.S. insurance platform. We currently have nine
offices in the United States, including offices in Atlanta,
Georgia and Costa Mesa and Los Angeles, California that opened
in 2008 and an office in Dallas, Texas that opened in 2009.
Our corporate expansion continued into Asia when Allied World
Assurance Company, Ltd opened branch offices in Hong Kong in
March 2009 and in Singapore in December 2009.
Our principal executive office is located at 27 Richmond Road,
Pembroke HM 08, Bermuda, and our telephone number is
(441) 278-5400.
Allied World Switzerland. Allied World
Switzerland is a newly formed Swiss corporation and is currently
wholly-owned by Allied World Bermuda. Allied World Switzerland
has only nominal assets and capitalization and has not engaged
in any business or other activities other than in connection
with its formation and the Scheme of
13
Arrangement. As a result of the Redomestication, Allied World
Switzerland will become the parent holding company of Allied
World Bermuda and its subsidiaries.
The principal executive office of Allied World Switzerland is
expected to be located at Lindenstrasse 8,
CH-6340 Zug,
Switzerland.
The
Redomestication
The Scheme of Arrangement will effectively change our place of
incorporation from Bermuda to Switzerland.
Scheme of Arrangement. The Scheme of
Arrangement involves several steps. Allied World Bermuda, the
Bermuda company whose common shares you currently own, has
formed Allied World Switzerland, as a direct, wholly-owned
subsidiary. On October 1, 2010, we made application to the
Supreme Court to order the calling of a meeting of holders of
Allied World Bermuda voting common shares (and immediately
thereafter a meeting of holders of Allied World Bermuda
non-voting common shares) to approve the Scheme of Arrangement.
On October 7, 2010, the Supreme Court ordered us to seek
your approval of the Scheme of Arrangement. We will hold the
Special Meetings to approve the Scheme of Arrangement on
November 18, 2010. If we obtain the necessary shareholder
approval, the Supreme Court will have the Sanction Hearing on or
about November 26, 2010 to approve the Scheme of
Arrangement. Assuming we receive the necessary approvals from
the shareholders and the Supreme Court, we will file the court
order sanctioning the Scheme of Arrangement with the Bermuda
Registrar of Companies, at which time the Scheme of Arrangement
will be effective.
Once the Scheme of Arrangement is effective, and the other
conditions to consummation of the Scheme of Arrangement are
satisfied, the following steps will occur:
(1) all previously outstanding common shares of Allied
World Bermuda will be cancelled;
(2) Allied World Bermuda, acting on behalf of its
shareholders, pursuant to a
Contribution-in-Kind
Agreement entered into by Allied World Bermuda and Allied World
Switzerland (the
Contribution-in-Kind
Agreement) substantially in the form attached as
Annex F to this proxy statement, will issue such number of
voting common shares and non-voting common shares as are
outstanding as of the effectiveness of the Scheme of Arrangement
to Allied World Switzerland (which will constitute all of Allied
World Bermudas outstanding common shares at such time);
(3) Allied World Switzerland will increase its share and
participation capital by an amount equal to the aggregate par
value of the new voting shares and non-voting participation
certificates and file amended articles of association reflecting
the share and participation capital increase with the Swiss
commercial register (the commercial
register); and
(4) the new voting shares of Allied World Switzerland will
be delivered on a
one-for-one
basis to the holders of Allied World Bermuda voting common
shares that have been cancelled and the new non-voting
participation certificates of Allied World Switzerland will be
delivered on a
one-for-one
basis to the holders of Allied World Bermuda non-voting common
shares that have been cancelled.
As a result of the Scheme of Arrangement, the holders of voting
common shares of Allied World Bermuda will become holders of
voting common shares of Allied World Switzerland, the holders of
non-voting common shares of Allied World Bermuda will become
holders of non-voting participation certificates of Allied World
Switzerland, and Allied World Bermuda will become a wholly-owned
subsidiary of Allied World Switzerland.
In connection with consummation of the Scheme of Arrangement:
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Allied World Switzerland may issue additional Treasury Shares in
exchange for common shares held by Allied World Bermuda in
treasury on the date the Scheme of Arrangement becomes effective
on a
one-for-one
basis, subject to the 10% aggregate share and participation
capital limit under Swiss law, in order to satisfy delivery
obligations under our equity-based incentive plans and delivery
obligations under the put agreements we may enter into with the
holders of the Allied World Switzerland non-voting participation
certificates and warrants with respect to non-voting
participation certificates (see Description of Allied
World Switzerland Shares Participation
Certificates); and
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14
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pursuant to the terms of Allied World Bermudas warrants
outstanding on the date of the consummation of the Scheme of
Arrangement, Allied World Switzerland will assume Allied World
Bermudas obligations under the warrants and will agree to
issue voting shares
and/or
non-voting participation certificates of Allied World
Switzerland (rather than Allied World Bermuda shares) upon
exercise of the warrants in accordance with their terms.
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As of September 30, 2010, there were 38,944,723 voting
common shares of Allied World Bermuda outstanding, 3,449,853
non-voting common shares outstanding, and warrants outstanding
to purchase up to 2,000,000 voting common shares and up to
1,500,000 non-voting common shares of Allied World Bermuda. In
addition, as of such date there were an aggregate of 6,969,717
voting common shares of Allied World Bermuda reserved for
issuance pursuant to outstanding equity awards, or available for
issuance but unissued, under its equity compensation plans.
Further, we held 8,399,326 common shares of Allied World Bermuda
in treasury.
After the Redomestication, you will continue to own an interest
in a parent company that will continue to conduct the same
business operations as conducted by Allied World Bermuda before
the Redomestication. The number of shares you will own in Allied
World Switzerland will be the same as the number of shares you
owned in Allied World Bermuda immediately prior to the
Redomestication, and your relative economic interest in the
Allied World Bermuda group will remain unchanged.
The completion of the Redomestication will change the governing
law that applies to us from Bermuda law to Swiss law. There are
differences between Bermuda law and Swiss law and between Allied
World Bermudas memorandum of association and bye-laws on
the one hand, and Allied World Switzerlands articles of
association and organizational regulations on the other hand.
See Comparison of Rights of Shareholders and Powers of the
Board of Directors for a summary of some of these
differences.
Upon completion of the Redomestication, we will remain subject
to SEC reporting requirements, the mandates of the
Sarbanes-Oxley Act and the applicable corporate governance rules
of the NYSE, and we will continue to report our financial
results in U.S. dollars and under U.S. GAAP. Under
Swiss corporate and tax law, we will also have to report the
statutory annual accounts of Allied World Switzerland in CHF.
Assuming that the Scheme of Arrangement is approved by holders
of our voting and non-voting common shares and the conditions to
the consummation of the Scheme of Arrangement are satisfied, we
anticipate that the Scheme of Arrangement will become effective
as soon as practicable following approval of the Supreme Court
at the Sanction Hearing on or about November 26, 2010, and
upon our filing of the court order sanctioning the Scheme of
Arrangement with the Bermuda Registrar of Companies, and will
settle on the following business day. In the Scheme of
Arrangement and this proxy statement, the Transaction
Time refers to the time at which such settlement occurs.
Reasons
for the Redomestication
We presently operate out of 16 different offices located in
eight different countries and provide insurance and reinsurance
coverage worldwide. Our board of directors has determined that
it is in the best interests of Allied World Bermuda and its
shareholders to change our place of incorporation from Bermuda
to Switzerland based in part on Switzerland:
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being a leading financial center,
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having a strong reputation for economic and political stability
as well a tradition of respecting the rule of law,
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having a sophisticated insurance and reinsurance regulatory
environment within which we can operate,
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having numerous tax treaties and excellent relations with major
developed and developing countries around the world,
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being in close proximity to the established tax environment of
the European Union, and
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providing a base for possible expansion of corporate functions
in an optimal centralized European location.
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We believe that the Redomestication will help promote our
stature and visibility by becoming a member of an international
community that is home to some of Europes major
multinational organizations. The Redomestication
15
will help us reduce certain reputational, political, regulatory
and financial risks to our company and increase our strategic
flexibility while posing no noticeable risks to our operating
model, our long-term strategy and our ability to maintain a
competitive worldwide effective corporate tax rate.
We carefully considered the effects of the Redomestication on
our shareholders. Switzerland has a well-developed legal system
that encourages a high standard of corporate governance and
provides shareholders with substantial rights similar to, and in
some cases more favorable to shareholders than, the rights of
shareholders under Bermuda law. Following the Redomestication we
will remain subject to SEC reporting requirements, the mandates
of the Sarbanes-Oxley Act and the corporate governance rules of
the NYSE. For more information on our reasons for the
Redomestication, please see The
Redomestication Background and Reasons for the
Redomestication. In addition to the potential benefits
described above, the Redomestication will expose Allied World
Bermuda and its shareholders to certain risks. Please see the
discussion under Risk Factors.
Tax
Considerations
Under U.S. federal income tax law, holders of shares of
Allied World Bermuda generally will not recognize a gain or loss
in the Redomestication. Under Swiss tax law, no tax is due for
non-Swiss holders of Allied World Bermuda common shares on the
receipt of Allied World Switzerland voting shares in the Scheme
of Arrangement. Please refer to Material Tax
Considerations for a description of the material
U.S. federal income tax and Swiss tax consequences of the
Redomestication to Allied World Bermuda shareholders.
Determining the actual tax consequences of the Redomestication
to you may be complex and will depend on your specific
situation. You are urged to consult your tax adviser for a full
understanding of the tax consequences of the Redomestication to
you.
Rights of
Shareholders
Many of the principal attributes of Allied World Bermudas
voting common shares and Allied World Switzerlands voting
shares will be similar. However, there are differences between
your rights under Swiss law and under Bermuda law. In addition,
there are differences between Allied World Bermudas
memorandum of association and bye-laws and Allied World
Switzerlands proposed articles of association and
organizational regulations. We discuss these differences in
detail under Description of Allied World Switzerland
Shares and Comparison of Rights of Shareholders and
Powers of the Board of Directors. Copies of forms of
Allied World Switzerlands proposed articles of association
and organizational regulations are attached as Annex D and
Annex E to this proxy statement, respectively.
Stock
Exchange Listing
We intend to apply so that, immediately following the
consummation of the Redomestication, the voting shares of Allied
World Switzerland will be listed on the NYSE under the symbol
AWH, the same symbol under which your common shares
are currently listed.
Conditions
to Consummation of the Scheme of Arrangement
The Scheme of Arrangement will not be completed unless, among
other things, the following conditions are satisfied or, if
allowed by law, waived: (i) the Allied World Switzerland
voting shares to be issued in connection with the Scheme of
Arrangement are authorized for listing on the NYSE, subject to
official notice of issuance; and (ii) neither Allied World
Bermuda nor Allied World Switzerland is subject to any
governmental decree, order or injunction that prohibits the
consummation of the Scheme of Arrangement.
In addition, Allied World Bermuda must obtain, prior to the
consummation of the Scheme of Arrangement, (i) an opinion
from Willkie Farr & Gallagher LLP, in form and
substance reasonably satisfactory to it, confirming, as of the
effective date of the Scheme of Arrangement, the matters of
U.S. federal income tax law discussed under Material
Tax Considerations U.S. Federal Income Tax
Considerations; and (ii) an opinion from
PricewaterhouseCoopers AG, in form and substance reasonably
satisfactory to it, confirming, as of the effective date of the
Scheme of Arrangement, the matters of Swiss tax law discussed
under Material Tax Considerations Swiss Tax
Considerations.
16
Court
Approval of the Scheme of Arrangement
The Scheme of Arrangement cannot be completed without the
approval of the Supreme Court of Bermuda. Subject to the holders
of common shares of Allied World Bermuda approving the Scheme of
Arrangement, a Supreme Court hearing will be required to seek
the sanction of the Scheme of Arrangement. At the Sanction
Hearing, the Supreme Court may impose such conditions as it
deems appropriate in relation to the Scheme of Arrangement but
may not impose any material changes without the joint consent of
Allied World Bermuda and Allied World Switzerland. In
determining whether to exercise its discretion and approve the
Scheme of Arrangement, the Supreme Court will determine, among
other things, whether the Scheme of Arrangement is fair to the
holders of Allied World Bermudas shareholders in general.
Market
Price of Allied World Bermuda Common Shares
On September 29, 2010, the last trading day before the
public announcement of the Redomestication, the closing price of
the Allied World Bermuda common shares on the NYSE was $56.60
per share. On October 12, 2010, the most recent practicable
date before the date of this proxy statement, the closing price
of the Allied World Bermuda common shares on the NYSE was $56.35
per share.
No
Appraisal Rights
Under Bermuda law, the shareholders of Allied World Bermuda do
not have any right to an appraisal of the value of their shares
or payment for them in connection with the Scheme of Arrangement.
Accounting
Treatment of the Scheme of Arrangement
Under U.S. GAAP, the Scheme of Arrangement represents a
transaction between entities under common control. Assets and
liabilities transferred between entities under common control
are accounted for at cost. Accordingly, the assets and
liabilities of Allied World Switzerland will be reflected at
their carrying amounts in the accounts of Allied World Bermuda
at the Transaction Time.
Special
Court-Ordered Meetings
Time, Place, Date and Purpose. The Special
Meeting of the holders of voting common shares will be held on
November 18, 2010 at 10:00 a.m., local time, (and
immediately thereafter the Special Meeting of the holders of
non-voting
common shares will be held) at our offices, located at 27
Richmond Road, Pembroke HM 08, Bermuda. At each meeting, Allied
World Bermudas board of directors will ask the holders of
common shares to vote to approve:
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the Scheme of Arrangement, pursuant to which (i) the
holders of Allied World Bermuda voting common shares will have
their voting common shares of Allied World Bermuda cancelled and
will receive new voting shares, par value $15.00 per share, of
Allied World Switzerland on a
one-for-one
basis for outstanding Allied World Bermuda voting common shares
and (ii) the holders of Allied World Bermuda non-voting
common shares will have their non-voting common shares of Allied
World Bermuda cancelled and will receive non-voting
participation certificates, par value $15.00 per certificate, of
Allied World Switzerland on a
one-for-one
basis for outstanding Allied World Bermuda non-voting common
shares;
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a motion to adjourn the relevant Special Meeting to a later date
to solicit additional proxies if there are insufficient votes at
the time of the meeting to approve the Scheme of
Arrangement; and
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any other matters that properly come before the relevant Special
Meeting and any adjournments or postponements of the meeting.
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Record Date. Only holders of record of Allied
World Bermuda common shares as of the close of business on
October 12, 2010 are entitled to notice of and to vote at
the relevant Special Meeting or any adjournment or postponement
of the relevant Special Meeting.
17
Quorum. The presence of two or more persons at
each meeting representing in person or by proxy more than 50% of
our total outstanding voting common shares or non-voting common
shares, as applicable, throughout the meeting will constitute a
quorum. Abstentions and broker non-votes will be
counted toward the presence of a quorum at, but will not be
considered votes cast on any of the proposals brought before,
the Special Meetings.
Recommendation
of the Board of Directors
The Allied World Bermuda board of directors unanimously
recommends that Allied World Bermudas shareholders vote
FOR the Scheme of Arrangement. The Allied
World Bermuda board of directors also unanimously recommends
that Allied World Bermudas shareholders vote
FOR the proposal to adjourn the meeting to a
later date if there are insufficient votes at the time of the
meeting to approve the Scheme of Arrangement proposal. Approval
of the adjournment proposal is not a condition to the Scheme of
Arrangement.
Required
Vote
The Scheme of Arrangement requires (i) the affirmative vote
of a majority in number of the holders of the Allied World
Bermuda voting common shares present and voting at the meeting
of voting common shareholders, whether in person or by proxy,
representing 75% or more in value of the voting common shares
present and voting at the meeting, whether in person or by
proxy, and (ii) the affirmative vote of a majority in
number of the holders of the Allied World Bermuda non-voting
common shares present and voting at the meeting of non-voting
common shareholders, whether in person or by proxy, representing
75% or more in value of the non-voting common shares present and
voting at the meeting, whether in person or by proxy. The
affirmative vote of holders of at least a majority of the Allied
World Bermuda voting common shares present and voting at the
meeting, whether in person or by proxy, is required to approve
the adjournment proposal with respect to the meeting of voting
common shareholders; and the affirmative vote of holders of at
least a majority of the Allied World Bermuda non-voting common
shares present and voting at the meeting, whether in person or
by proxy, is required to approve the adjournment proposal with
respect to the meeting of non-voting common shareholders.
18
Selected
Historical Financial Data
The following table sets forth our summary historical statement
of operations data and summary balance sheet data as of and for
the six months ended June 30, 2010 (derived from our
unaudited consolidated financial statements) and for the years
ended December 31, 2009, 2008, 2007, 2006 and 2005 (derived
from our audited consolidated financial statements), all of
which have been prepared in accordance with U.S. GAAP.
These historical results are not necessarily indicative of
results to be expected from any future period. For further
discussion of this risk see Item 1A. Risk
Factors in our
Form 10-K
for the fiscal year ended December 31, 2009, filed with the
SEC on March 1, 2010 which is incorporated by reference in
this proxy statement.
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Six Months
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Ended June 30,
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Year Ended December 31,
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2010
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2009
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2009
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2008
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2007
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2006
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2005
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(unaudited)
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($ in millions, except per share amounts and ratios)
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Summary Statement of Operations Data:
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Gross premiums written
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$
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998.0
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$
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972.4
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$
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1,696.3
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$
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1,445.6
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$
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1,505.5
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$
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1,659.0
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$
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1,560.3
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Net premiums written
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$
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803.1
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$
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766.4
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$
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1,321.1
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$
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1,107.2
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$
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1,153.1
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$
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1,306.6
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$
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1,222.0
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Net premiums earned
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$
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677.2
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$
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657.6
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$
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1,316.9
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$
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1,117.0
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$
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1,159.9
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$
|
1,252.0
|
|
|
$
|
1,271.5
|
|
Net investment income
|
|
|
134.5
|
|
|
|
154.4
|
|
|
|
300.7
|
|
|
|
308.8
|
|
|
|
297.9
|
|
|
|
244.4
|
|
|
|
178.6
|
|
Net realized investment gains (losses)
|
|
|
172.4
|
|
|
|
41.7
|
|
|
|
126.4
|
|
|
|
(60.0
|
)
|
|
|
37.0
|
|
|
|
(4.8
|
)
|
|
|
(10.2
|
)
|
Net impairment charges recognized in earnings
|
|
|
(0.2
|
)
|
|
|
(47.4
|
)
|
|
|
(49.6
|
)
|
|
|
(212.9
|
)
|
|
|
(44.6
|
)
|
|
|
(23.9
|
)
|
|
|
|
|
Other income
|
|
|
0.9
|
|
|
|
0.8
|
|
|
|
1.5
|
|
|
|
0.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net losses and loss expenses
|
|
|
420.9
|
|
|
|
326.2
|
|
|
|
604.1
|
|
|
|
641.1
|
|
|
|
682.3
|
|
|
|
739.1
|
|
|
|
1,344.6
|
|
Acquisition costs
|
|
|
78.7
|
|
|
|
74.1
|
|
|
|
148.9
|
|
|
|
112.6
|
|
|
|
119.0
|
|
|
|
141.5
|
|
|
|
143.4
|
|
General and administrative expenses
|
|
|
131.5
|
|
|
|
118.9
|
|
|
|
248.6
|
|
|
|
185.9
|
|
|
|
141.6
|
|
|
|
106.1
|
|
|
|
94.3
|
|
Amortization and impairment of intangible assets
|
|
|
1.8
|
|
|
|
2.1
|
|
|
|
11.1
|
|
|
|
0.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense
|
|
|
19.0
|
|
|
|
20.0
|
|
|
|
39.0
|
|
|
|
38.7
|
|
|
|
37.8
|
|
|
|
32.6
|
|
|
|
15.6
|
|
Foreign exchange loss (gain)
|
|
|
1.6
|
|
|
|
(0.4
|
)
|
|
|
0.7
|
|
|
|
(1.4
|
)
|
|
|
(0.8
|
)
|
|
|
0.6
|
|
|
|
2.2
|
|
Income tax expense (benefit)
|
|
|
13.6
|
|
|
|
21.1
|
|
|
|
36.6
|
|
|
|
(7.6
|
)
|
|
|
1.1
|
|
|
|
5.0
|
|
|
|
(0.4
|
)
|
Net income (loss)
|
|
$
|
317.7
|
|
|
$
|
245.1
|
|
|
$
|
606.9
|
|
|
$
|
183.6
|
|
|
$
|
469.2
|
|
|
$
|
442.8
|
|
|
$
|
(159.8
|
)
|
Per Share Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss) per share (1):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
6.34
|
|
|
$
|
4.96
|
|
|
$
|
12.26
|
|
|
$
|
3.75
|
|
|
$
|
7.84
|
|
|
$
|
8.09
|
|
|
$
|
(3.19
|
)
|
Diluted
|
|
|
5.98
|
|
|
|
4.79
|
|
|
|
11.67
|
|
|
|
3.59
|
|
|
|
7.53
|
|
|
|
7.75
|
|
|
|
(3.19
|
)
|
Weighted average number of common shares outstanding (2):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
50,123,945
|
|
|
|
49,386,549
|
|
|
|
49,503,438
|
|
|
|
48,936,912
|
|
|
|
59,846,987
|
|
|
|
54,746,613
|
|
|
|
50,162,842
|
|
Diluted
|
|
|
53,086,708
|
|
|
|
51,215,808
|
|
|
|
51,992,674
|
|
|
|
51,147,215
|
|
|
|
62,331,165
|
|
|
|
57,115,172
|
|
|
|
50,162,842
|
|
Dividends declared per share
|
|
$
|
0.40
|
|
|
$
|
0.36
|
|
|
$
|
0.74
|
|
|
$
|
0.72
|
|
|
$
|
0.63
|
|
|
$
|
0.15
|
|
|
$
|
9.93
|
|
19
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months
|
|
|
|
|
Ended June 30,
|
|
Year Ended December 31,
|
|
|
2010
|
|
2009
|
|
2009
|
|
2008
|
|
2007
|
|
2006
|
|
2005
|
|
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
Selected Ratios:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss and loss expense ratio(3)
|
|
|
62.1
|
%
|
|
|
49.6
|
%
|
|
|
45.9
|
%
|
|
|
57.4
|
%
|
|
|
58.8
|
%
|
|
|
59.0
|
%
|
|
|
105.7
|
%
|
Acquisition cost ratio(4)
|
|
|
11.6
|
|
|
|
11.3
|
|
|
|
11.3
|
|
|
|
10.1
|
|
|
|
10.3
|
|
|
|
11.3
|
|
|
|
11.3
|
|
General and administrative expense ratio(5)
|
|
|
19.4
|
|
|
|
18.1
|
|
|
|
18.9
|
|
|
|
16.6
|
|
|
|
12.2
|
|
|
|
8.5
|
|
|
|
7.4
|
|
Expense ratio(6)
|
|
|
31.0
|
|
|
|
29.4
|
|
|
|
30.2
|
|
|
|
26.7
|
|
|
|
22.5
|
|
|
|
19.8
|
|
|
|
18.7
|
|
Combined ratio(7)
|
|
|
93.1
|
|
|
|
79.0
|
|
|
|
76.1
|
|
|
|
84.1
|
|
|
|
81.3
|
|
|
|
78.8
|
|
|
|
124.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of June 30,
|
|
As of December 31,
|
|
|
2010
|
|
2009
|
|
2009
|
|
2008
|
|
2007
|
|
2006
|
|
2005
|
|
|
(unaudited)
|
|
($ in millions, except per share amounts)
|
|
Summary Balance Sheet Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
442.7
|
|
|
$
|
475.7
|
|
|
$
|
292.2
|
|
|
$
|
655.8
|
|
|
$
|
202.6
|
|
|
$
|
366.8
|
|
|
$
|
172.4
|
|
Investments at fair value
|
|
|
7,420.6
|
|
|
|
6,652.8
|
|
|
|
7,156.3
|
|
|
|
6,157.1
|
|
|
|
6,029.3
|
|
|
|
5,440.3
|
|
|
|
4,687.4
|
|
Reinsurance recoverable
|
|
|
932.4
|
|
|
|
909.7
|
|
|
|
920.0
|
|
|
|
888.3
|
|
|
|
682.8
|
|
|
|
689.1
|
|
|
|
716.3
|
|
Total assets
|
|
|
10,214.4
|
|
|
|
9,630.6
|
|
|
|
9,653.2
|
|
|
|
9,022.5
|
|
|
|
7,899.1
|
|
|
|
7,620.6
|
|
|
|
6,610.5
|
|
Reserve for losses and loss expenses
|
|
|
4,920.4
|
|
|
|
4,713.7
|
|
|
|
4,761.8
|
|
|
|
4,576.8
|
|
|
|
3,919.8
|
|
|
|
3,637.0
|
|
|
|
3,405.4
|
|
Unearned premiums
|
|
|
1,070.0
|
|
|
|
1,066.7
|
|
|
|
928.6
|
|
|
|
930.4
|
|
|
|
811.1
|
|
|
|
813.8
|
|
|
|
740.1
|
|
Total debt
|
|
|
499.0
|
|
|
|
498.9
|
|
|
|
498.9
|
|
|
|
742.5
|
|
|
|
498.7
|
|
|
|
498.6
|
|
|
|
500.0
|
|
Total shareholders equity
|
|
|
3,468.5
|
|
|
|
2,741.4
|
|
|
|
3,213.3
|
|
|
|
2,416.9
|
|
|
|
2,239.8
|
|
|
|
2,220.1
|
|
|
|
1,420.3
|
|
|
|
|
(1) |
|
Please refer to Note 13 of the notes to consolidated
financial statements in our
Form 10-K
for the fiscal year ended December 31, 2009, filed with the
SEC on March 1, 2010, for the calculation of basic and
diluted earnings per share. |
|
|
|
(2) |
|
Does not include 8,465,456 common shares repurchased
between July 1, 2010 and October 12, 2010, 5,000,000
of which were repurchased from the GSCP Funds. |
|
|
|
(3) |
|
Calculated by dividing net losses and loss expenses by net
premiums earned. |
|
(4) |
|
Calculated by dividing acquisition costs by net premiums earned. |
|
(5) |
|
Calculated by dividing general and administrative expenses by
net premiums earned. |
|
(6) |
|
Calculated by combining the acquisition cost ratio and the
general and administrative expense ratio. |
|
(7) |
|
Calculated by combining the loss ratio, acquisition cost ratio
and general and the administrative expense ratio. |
20
Unaudited
Summary Pro Forma Financial Information
Pro forma financial statements for Allied World Switzerland are
not presented in this proxy statement because no significant pro
forma adjustments are required to be made to the historical
condensed consolidated statement of operations and balance sheet
of Allied World Bermuda for the six months ended June 30,
2010 and to the historical consolidated statement of operations
of Allied World Bermuda for the year ended December 31,
2009. Those financial statements are included in Allied World
Bermudas Quarterly Report on
Form 10-Q
for the quarter ended June 30, 2010 and in its Annual
Report on
Form 10-K
for the year ended December 31, 2009, which are
incorporated by reference in this proxy statement.
As a result of the Scheme of Arrangement, the par value of the
parent companys shares increase from $0.03 for Allied
World Bermuda to $15.00 for Allied World Switzerland and
additional paid-in capital will decrease by the same amount.
Additional paid-in capital in the consolidated balance sheet
prepared in accordance with U.S. GAAP is different from
qualifying additional paid-in capital that will be presented in
our Swiss statutory parent company financial statements. See
Questions and Answers About the
Redomestication Q: How will qualifying additional
paid-in capital for Swiss statutory reporting purposes be
determined? for a discussion of shareholders equity
under Swiss statutory reporting requirements.
The following unaudited summary pro forma financial information
presents consolidated shareholders equity as of
June 30, 2010, actual (Allied World Bermuda) and as
adjusted (Allied World Switzerland), assuming the
Redomestication had been completed on June 30, 2010. The
pro forma adjustment reflects the completion of the
Redomestication, including the increase in par value and the
corresponding decrease in additional paid-in capital. You should
read this table in conjunction with Allied World Bermudas
unaudited condensed consolidated financial statements as of and
for the six months ended June 30, 2010 and the notes
thereto, which are incorporated by reference in this proxy
statement.
|
|
|
|
|
|
|
|
|
|
|
As of June 30, 2010
|
|
|
Actual
|
|
As Adjusted
|
|
|
(in thousands except share data and per share amounts)
|
|
Shareholders equity:
|
|
|
|
|
|
|
|
|
Common shares, par value $0.03 per share, 50,488,342 and nil
issued shares and 49,407,301 and nil outstanding shares
|
|
$
|
1,515
|
|
|
$
|
|
|
Registered shares, par value $15.00 per share, nil and
49,407,301 issued and outstanding shares
|
|
|
|
|
|
|
741,110
|
|
Additional paid-in capital
|
|
|
1,378,262
|
|
|
|
638,667
|
|
Treasury shares, at cost: 1,081,041 shares
|
|
|
(49,089
|
)
|
|
|
(49,089
|
)
|
Retained earnings
|
|
|
1,999,610
|
|
|
|
1,999,610
|
|
Accumulated other comprehensive income
|
|
|
138,245
|
|
|
|
138,245
|
|
Total shareholders equity
|
|
$
|
3,468,543
|
|
|
$
|
3,468,543
|
|
21
RISK
FACTORS
Before you decide how to vote on the Scheme of Arrangement,
you should consider carefully the following risk factors, in
addition to the other information contained in this proxy
statement and the documents incorporated by reference. In
particular, you should consider the risk factors discussed in
our Annual Report on
Form 10-K
for the year ended December 31, 2009 and such risks
discussed in our reports and other filings under the Securities
Exchange Act of 1934, as amended.
Your
rights as a shareholder will change as a result of the
Redomestication.
Because of differences between Swiss law and Bermuda law and
differences between the governing documents of Allied World
Switzerland and Allied World Bermuda, your rights as a
shareholder will change if the Redomestication is completed. For
example, following the Redomestication, the shareholders of
Allied World Switzerland will have the right to declare
dividends without the approval of the board of directors,
whereas prior to the Redomestication the board of directors has
the right, subject to statutory limitations, to declare and pay
dividends on Allied World Bermuda common shares. As another
example, under Swiss law, members of the board of directors of
Allied World Switzerland may be removed with or without cause by
the shareholders of Allied World Switzerland at a shareholders
meeting. In contrast, Allied World Bermuda shareholders may only
remove a director for cause. For a description of these and
other differences, see Comparison of Rights of
Shareholders and Powers of the Board of Directors and the
other risk factors below.
Allied
World Switzerland may not be able to make distributions or
repurchase shares without subjecting you to Swiss withholding
tax.
If Allied World Switzerland is not successful in its efforts to
make distributions, if any, through a reduction of par value or,
after January 1, 2011, subject to regulations still to be
promulgated by the applicable Swiss authorities, pay dividends,
if any, out of qualifying additional paid-in capital, then any
dividends paid by Allied World Switzerland will generally be
subject to a Swiss federal withholding tax at a rate of 35%. The
withholding tax must be withheld from the gross distribution and
paid to the Swiss Federal Tax Administration. Dividends paid on
Allied World Bermudas shares are not currently subject to
withholding tax in Bermuda. A U.S. holder that qualifies
for benefits under the Convention between the United States of
America and the Swiss Confederation for the Avoidance of Double
Taxation with Respect to Taxes on Income, which we refer to as
the
U.S.-Swiss
Treaty, may apply for a refund of the tax withheld in
excess of the 15% treaty rate (or in excess of the 5% reduced
treaty rate for qualifying corporate shareholders with at least
10% participation in the voting stock of Allied World
Switzerland, or for a full refund in case of qualified pension
funds). Payment of a capital distribution in the form of a par
value reduction is not subject to Swiss withholding tax.
However, there can be no assurance that Allied World
Switzerlands shareholders will approve a reduction in par
value, that Allied World Switzerland will be able to meet the
other legal requirements for a reduction in par value, or that
Swiss withholding rules will not be changed in the future. In
addition, over the long term, the amount of par value available
for Allied World Switzerland to use for par value reductions
will be limited. If Allied World Switzerland is unable to make a
distribution through a reduction in par value or, after
January 1, 2011, pay a dividend out of qualifying
additional paid-in capital, Allied World Switzerland may not be
able to make distributions without subjecting you to Swiss
withholding taxes.
Under present Swiss tax law, repurchases of voting shares or
non-voting participation certificates for the purposes of
capital reduction are treated as a partial liquidation subject
to 35% Swiss withholding tax on the difference between the par
value and the repurchase price. Allied World Switzerland may
follow a share/participation certificate repurchase process for
future repurchases, if any, similar to a second trading
line on the SIX in which Swiss institutional investors
sell shares to us and are generally able to receive a refund of
the Swiss withholding tax. However, if Allied World Switzerland
is unable to use this process successfully, Allied World
Switzerland may not be able to repurchase voting shares or
non-voting participation certificates for the purposes of
capital reduction without subjecting you to Swiss withholding
taxes. Please see Material Tax Considerations
Swiss Tax Considerations Consequences to
Shareholders of Allied World Switzerland Subsequent to the
Redomestication Repurchases of Shares for
Cancellation.
22
We may
not achieve a competitive worldwide effective corporate tax rate
following the Redomestication.
We believe that the Redomestication should improve our ability
to maintain a competitive worldwide effective corporate tax
rate. However, we cannot give any assurance as to what our
effective tax rate will be after the Redomestication because of,
among other things, uncertainty regarding the tax policies of
the jurisdictions where we operate. Our actual effective tax
rate may vary from the foregoing expectation and that variance
may be material. Additionally, the tax laws of Switzerland and
other jurisdictions could change in the future, and such changes
could cause a material change in our effective tax rate.
We are
required to declare dividends in Swiss francs and any currency
fluctuations between the U.S. dollar and Swiss francs will
affect the dollar value of the dividends we pay.
Under Swiss corporate law, we are required to declare dividends,
including distributions through a reduction in par value, in
Swiss francs. Dividend payments will be made by our transfer
agent in U.S. dollars converted at the applicable exchange
rate shortly before the payment date. As a result, shareholders
will be exposed to fluctuations in the exchange rate between the
date used for purposes of calculating the CHF amount of any
proposed dividend or par value reduction and the relevant
payment date, which will not be shorter than two months and
could be as long as a year.
As a
result of the higher par value of the Allied World Switzerland
shares and participation certificates, Allied World Switzerland
will have less flexibility than Allied World Bermuda with
respect to certain aspects of capital management.
Upon the completion of the Redomestication, the par value of
Allied World Switzerlands shares and participation
certificates will be $15.00 per share. The par value of Allied
World Bermudas common shares is $0.03 per share. Under
Swiss law, Allied World Switzerland may not issue its shares
below par value. As of June 30, 2010, the closing price of
Allied World Bermudas common shares on the NYSE was
$45.38. In the event Allied World Switzerland needs to raise
common equity capital at a time when the trading price of its
shares is below the par value of the shares and participation
certificates, Allied World Switzerland will be unable to issue
shares or participation certificates. We currently issue stock
options under our Second Amended and Restated Stock Option Plan
with an exercise price equal to the closing price of our common
shares on the date of issuance. Upon the Redomestication, we
will not be able to issue stock options with an exercise price
below the par value, which may limit the flexibility of our
compensation arrangements. As a consequence we would have to
consider reducing the par value of the Allied World Switzerland
voting shares which in turn would reduce our ability to make
Swiss withholding tax-free distributions to our shareholders.
As a
result of increased shareholder approval powers, Allied World
Switzerland will have less flexibility than Allied World Bermuda
with respect to certain aspects of capital
management.
Under Bermuda law, Allied World Bermudas directors may
issue, without shareholder approval, any common shares
authorized in Allied World Bermudas memorandum of
association that are not issued or reserved. Bermuda law also
provides the board of directors with substantial flexibility in
establishing the terms of preferred shares. In addition, Allied
World Bermudas board of directors has the right, subject
to statutory limitations, to declare and pay dividends on Allied
World Bermudas common shares without a shareholder vote.
Swiss law affords shareholders more powers and allows Allied
World Switzerlands shareholders to authorize share and
participation capital that can be issued by the board of
directors without shareholder approval, but this authorization
is limited to 50% of the existing registered share and
participation capital and must be renewed by the shareholders
every two years. Additionally, subject to specified exceptions
described in Allied World Switzerlands articles of
association, Swiss law grants preemptive rights to existing
shareholders and holders of non-voting participation
certificates to subscribe for new issuances of voting shares,
non-voting participation certificates and other securities.
Swiss law also does not provide as much flexibility in the
various terms that can attach to different classes of shares.
For example, while the board of directors of Allied World
Bermuda can authorize the issuance of preferred stock without
shareholder approval, Allied World Switzerland will not be able
to issue preferred stock (Vorzugsaktien) without the
approval of a majority of the votes cast at a general meeting.
Swiss law also reserves for approval
23
by shareholders many corporate actions over which Allied World
Bermudas board of directors currently has authority. For
example, dividends must be approved by shareholders. While we do
not believe that the differences between Bermuda law and Swiss
law relating to our capital management will have a material
adverse effect on us, we cannot assure you that situations will
not arise where such flexibility would have provided substantial
benefits to us and our shareholders.
We may
become subject to additional regulation.
Assuming that our newly formed Swiss operating company, Allied
World Assurance Company, AG, is approved as a licensed insurance
company in Switzerland by the Swiss Financial Markets
Supervisory Authority, which we refer to as FINMA,
we may become subject to regulatory oversight by an additional
financial regulatory body.
FINMA also has the discretion to supervise our group activities.
Allied World Bermuda is currently not subject to regulation in
Bermuda. Under so-called group supervision, FINMA
would have the right to supervise Allied World Switzerland on a
group-wide basis. The regulatory power of FINMA covers in
particular the following areas:
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reporting on organization;
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reporting on structure;
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reporting on internal transactions;
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solvency;
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group/conglomerate report; and
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corporate governance/risk management/internal control system.
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On December 11, 2009, we received non-binding written
confirmation from FINMA that it will not subject us to group
supervision based primarily on the fact that most of our senior
management will not reside in Switzerland. Factors which can
cause FINMA to subject us to group supervision include the
location of our top management and corresponding requests by
foreign regulators. We cannot assure you that our future
business needs may not require us to have a greater management
presence in Switzerland or that FINMA will not otherwise
determine to exercise group supervision over us. If subjected to
group supervision we may incur additional costs and
administrative obligations. These additional costs and
administrative obligations may have a substantial impact on our
organizational and operational flexibility. See The
Redomestication Regulatory Matters.
The
anticipated benefits of moving our principal executive office to
Switzerland may not be realized, and difficulties in connection
with moving our principal executive office could have an adverse
effect on us.
In connection with the Redomestication, we plan to relocate our
principal executive office from Pembroke, Bermuda to
Switzerland. We expect that some of our executive officers and
other key decision makers will relocate to Switzerland. We may
face significant challenges in relocating our principal
executive office to a different country, including difficulties
in retaining and attracting officers, key personnel and other
employees and challenges in maintaining a principal executive
office in a country different from the country where other
employees, including other executive officers and corporate
support staff, are located. Employees may be uncertain about
their future roles within our organization pending or following
the completion of the Redomestication. Management may also be
required to devote substantial time to the Redomestication and
related matters, which could otherwise be devoted to focusing on
ongoing business operations and other initiatives and
opportunities. Any such difficulties could have an adverse
effect on our business, results of operations or financial
condition.
The
Redomestication will result in additional costs to us, some of
which will be incurred whether or not the Redomestication is
completed.
The completion of the Redomestication will result in an increase
in some of our ongoing expenses and require us to incur some new
expenses including, among other things, the addition of
professional fees to comply with Swiss corporate and tax laws.
In addition, we will incur certain transaction costs in
connection with the
24
Redomestication whether or not the Redomestication is completed.
The Redomestication may also result in indirect costs by
diverting attention of management and employees from our
business.
The
market for the Allied World Switzerland shares may differ from
the market for the Allied World Bermuda shares, and Allied World
Switzerlands shares may be removed as a component of the
Russell 1000 Index and other indices or certain other
funds.
We intend to list the voting shares of Allied World Switzerland
on the NYSE under the symbol AWH the same symbol
under which the Allied World Bermuda common shares are currently
listed. The market price, trading volume or volatility of the
Allied World Switzerland voting shares could be different than
those of the Allied World Bermuda shares.
Allied World Bermudas voting common shares are currently a
component of the Russell 1000 Index and other indices. Russell
has considered Allied World Bermuda and a number of other
offshore registered companies as U.S. domestic
companies for purposes of inclusion in the Russell 1000. Russell
may decide to remove Allied World Switzerlands voting
shares as a component of the Russell 1000, and, while we are
uncertain as to when Russell will make its determination, this
determination may not be made until after the Special Meetings.
Other index funds have removed the shares of other offshore
registered companies that have recently redomesticated to
Switzerland. Similar issues could arise with respect to whether
Allied World Switzerlands voting shares will continue to
be included as a component in other indices or funds that may
impose a variety of qualifications that could be affected by the
Redomestication. If Allied World Switzerlands voting
shares are removed as a component of the Russell 1000 or other
indices or no longer meet the qualifications of such funds,
institutional investors attempting to track the performance of
the Russell 1000 or such other indices or the funds that impose
those qualifications would likely sell their voting shares,
which could adversely affect the price of the Allied World
Switzerland voting shares. Any such adverse impact on the price
of the Allied World Switzerland voting shares could be magnified
by the current heightened volatility in the financial markets.
CAUTIONARY
STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
Certain information included or incorporated by reference in
this proxy statement include forward-looking statements within
the meaning of The Private Securities Litigation Reform Act of
1995 that involve inherent risks and uncertainties. These
statements include in general forward-looking statements both
with respect to us and the insurance 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 proxy statement should not
be considered as a representation by us or any other person that
our objectives or plans will be achieved. These statements are
based on current plans, estimates and expectations.
Forward-looking statements include information concerning
possible or assumed future results of operations of Allied World
Bermuda and, following the Redomestication, Allied World
Switzerland. Actual results may differ materially from those
projected in such forward-looking statements and therefore you
should not place undue reliance on them. Forward-looking
statements include information about the following subjects:
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benefits, effects or results of the Redomestication;
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operations and results after the Redomestication;
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business strategies;
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expected financial position;
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expected results of operations;
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liquidity;
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future cash flows;
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dividends, share repurchases and other distributions;
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plans and objectives of management;
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timing of the Redomestication;
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tax treatment of the Redomestication;
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accounting treatment of the Redomestication;
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expenses related to the Redomestication;
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performance of contracts;
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compliance with applicable laws; and
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any other statements regarding future growth, future cash needs,
future operations, business plans and future financial results,
and any other statements that are not historical facts.
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The following factors could cause business conditions and our
results to differ materially from those expressed in the
forward-looking statements included or incorporated by reference
in this proxy statement:
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an inability to realize expected benefits from the
Redomestication or the occurrence of difficulties in connection
with the Redomestication;
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any unanticipated costs in connection with the Redomestication;
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changes in insurance or financial rating agency policies or
practices;
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the adequacy of our loss reserves and the need to adjust such
reserves as claims develop over time;
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greater frequency or severity of claims and loss activity,
including as a result of natural or man-made catastrophic
events, than our underwriting, reserving or investment practices
have anticipated;
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the inability of our risk models to adequately quantify
catastrophe exposures and risk accumulations;
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the impact of acts of terrorism, political unrest, acts of war
and pandemic diseases;
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unexpected levels of loss due to climate change;
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the effectiveness of our loss limitation methods;
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the effects of a prolonged recession and other adverse
consequences as a result of the recent turmoil in the
U.S. and international financial markets;
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the impact from claims beyond our current estimates relating to
the recent financial market turmoil, including subprime and
other credit and insurance exposures;
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failure of cedents to accurately assess the risks they
underwrite and we reinsure;
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changes in the availability or creditworthiness of our brokers
or reinsurers;
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changes in the availability, cost or quality of reinsurance
coverage;
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changes in general economic conditions, including inflation,
foreign currency exchange rates, interest rates, prevailing
credit terms and other factors that could affect our investment
portfolio;
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changes to our investment valuations due to differing
interpretations of valuation methodologies, or changes in the
determination of the impairments taken on our investments;
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availability of additional capital on commercially favorable
terms;
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loss of key personnel;
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employee error and misconduct, or a breach by one of our third
party program administrators of its obligations owed to us;
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difficulties with our information technology, telecommunications
systems and data security;
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operational risks associated with the integration of acquired
companies and the growth of our operations;
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changes in agreements and business relationships with affiliates
of some of our principal shareholders;
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decreased level of demand for direct property and casualty
insurance or reinsurance or increased competition due to an
increase in capacity of property and casualty insurers or
reinsurers;
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the effects of competitors pricing policies and of changes
in laws and regulations on competition, including industry
consolidation and development of competing financial products;
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effects of emerging claims and coverage issues;
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failure of our insurance and reinsurance subsidiaries to comply
with applicable legal and regulatory requirements;
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changes in Bermuda law or regulation or the political stability
of Bermuda;
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the impact of recently-enacted U.S. healthcare legislation and
other proposed legislation on our business;
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changes in legal, judicial, regulatory and social conditions;
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if we or one of our
non-U.S. subsidiaries
become subject to significant, or significantly increased,
income taxes in the United States or elsewhere; and
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changes in regulations or tax laws applicable to us, our
subsidiaries, brokers, customers or U.S. insurers or
reinsurers.
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Additional important factors that could cause actual results to
differ materially from those in such forward-looking statements
are set forth under Risk Factors and the The
Redomestication Background and Reasons for the
Redomestication and elsewhere in this proxy statement; and
in Item 1A. Risk Factors in our
Form 10-K
for the fiscal year ending December 31, 2009, filed with
the SEC on March 1, 2010 and incorporated by reference
herein, and risks contained in our other filings with the SEC.
We undertake 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.
THE
REDOMESTICATION
The Scheme of Arrangement will effectively change our place of
incorporation from Bermuda to Switzerland.
The Scheme of Arrangement involves several steps. Allied World
Bermuda, the Bermuda company whose common shares you currently
own, formed Allied World Switzerland, as a direct, wholly-owned
subsidiary. On October 1, 2010, we made application to the
Supreme Court in Bermuda to order the calling of meetings of
Allied World Bermuda common shareholders to approve the Scheme
of Arrangement. On October 7, 2010, the Supreme Court
ordered us to seek your approval of the Scheme of Arrangement.
We will hold the special court-ordered meetings to approve the
Scheme of Arrangement on November 18, 2010. If we obtain
the necessary shareholder approval, the Supreme Court will have
the Sanction Hearing on or about November 26, 2010 to
approve the Scheme of Arrangement. Assuming we receive the
necessary approvals from the shareholders and the Supreme Court
and the conditions to consummation of the Scheme of Arrangement
are satisfied, we will file the court order sanctioning the
Scheme of Arrangement with the Bermuda Registrar of Companies,
at which time the Scheme of Arrangement will be effective. See
also Summary The Redomestication above.
Background
and Reasons for the Redomestication
As Allied World has grown, we have regularly assessed our
organizational structure. As a provider of worldwide insurance
and reinsurance coverage, we presently operate out of 16
different offices located in eight different countries. After
considerable thought and study, extending well over a year, our
board of directors has
27
determined that it is in the best interests of Allied World
Bermuda and its shareholders to change our place of
incorporation from Bermuda to Switzerland. This decision was
based in part on the following determinations:
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Switzerland is a leading financial center and has a strong
reputation for economic and political stability, as well a
tradition of respecting the rule of law.
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We believe the Redomestication will help reduce certain
reputational, political, regulatory and financial risks to our
company.
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The Redomestication can increase our strategic flexibility while
posing no noticeable risks to our operating model, our long-term
strategy or our ability to maintain a competitive worldwide
effective corporate tax rate.
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Switzerland has a sophisticated insurance and reinsurance
regulatory environment within which we can operate.
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Switzerland is home to several of Europes major
multinational organizations spanning several industries,
including power, banking, insurance, consumer products and
pharmaceuticals. We expect that the Redomestication will help
promote our stature and visibility by becoming a member of this
international community.
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Switzerland has a well-developed legal system that we believe
encourages a high standard of corporate governance and provides
shareholders with substantial rights. Generally, the rights of a
shareholder of a Swiss company are substantially similar to, and
in some cases more favorable to shareholders than, the rights of
a shareholder of a Bermuda company.
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Switzerland has numerous tax treaties and excellent relations
with major developed and developing countries around the world.
The country has a well-developed and stable tax regime whereas
Bermuda generally does not maintain a system of direct corporate
taxation. We therefore expect that the Redomestication will
improve our global tax position by lowering our risk to possible
changes in tax legislation or tax treaties and disputes with tax
authorities.
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The Redomestication to Switzerland will also place us in close
proximity to the established tax environment of the European
Union.
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Switzerland has a stable and well-developed infrastructure base
and is a major transportation hub, providing a base for possible
expansion of corporate functions in an optimal centralized
European location.
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Finally, Switzerland is a country traditionally seen as
politically neutral and could have positive implications for our
global platform in certain countries.
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We also carefully considered the effects of the Redomestication
on our shareholders. Accordingly, our voting shares will
continue to trade on the NYSE under the symbol AWH.
We will remain subject to SEC reporting requirements, the
mandates of the Sarbanes-Oxley Act and the corporate governance
rules of the NYSE. Finally, we will continue to report our
financial results in U.S. dollars and under U.S. GAAP.
We also considered a redomestication to other jurisdictions such
as the United States and elsewhere but believe that a
redomestication to Switzerland provides the greatest potential
benefits with the least potential disadvantages. Our board of
directors has considered both the potential advantages and risks
of the Redomestication and has unanimously approved the Scheme
of Arrangement and recommended that the shareholders vote for
the Scheme of Arrangement. We cannot assure you, however, that
the anticipated benefits of the Redomestication will be
realized. In addition to the potential benefits described above,
the Redomestication will expose Allied World Bermuda and its
shareholders to certain risks. Please see the discussion under
Risk Factors.
Amendment
or Termination of the Scheme of Arrangement
The Scheme of Arrangement may be amended, modified or
supplemented by Allied World Bermuda and the Supreme Court.
However, after approval by the shareholders, no amendment,
modification or supplement may be made or effected that requires
further approval by the holders of Allied World Bermudas
common shares without obtaining that approval.
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Under Bermuda law, the board of directors of Allied World
Bermuda may terminate and abandon the Scheme of Arrangement at
any time prior to the Sanction Hearing. However, Allied World
Bermuda has determined that, subject to satisfaction of the
conditions to the Scheme of Arrangement, it will not terminate
and abandon the Scheme of Arrangement following the approval of
the Scheme of Arrangement by the holders of common shares. The
board of directors may also terminate or abandon the Scheme of
Arrangement if the conditions to the Scheme of Arrangement are
not satisfied or waived, and if such conditions are not
satisfied or waived on or before 5:00 p.m. (Bermuda time) on the
date nine months after the date on which the Scheme of
Arrangement becomes effective, or such later date as agreed by
Allied World Bermuda and sanctioned by the Supreme Court, the
Scheme of Arrangement will lapse by its terms.
Conditions
to Consummation of the Scheme of Arrangement
The Scheme of Arrangement will not be completed unless, among
other things, the following conditions are satisfied or, if
allowed by law, waived:
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the Allied World Switzerland voting shares to be issued in
connection with the Scheme of Arrangement including shares
issuable upon exchange for the non-voting participation
certificates are authorized for listing on the NYSE, subject to
official notice of issuance; and
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neither Allied World Bermuda nor Allied World Switzerland is
subject to any governmental decree, order or injunction that
prohibits the consummation of the Scheme of Arrangement.
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In addition, Allied World Bermuda must obtain, prior to the
consummation of the Scheme of Arrangement, (i) an opinion
from Willkie Farr & Gallagher LLP, in form and
substance reasonably satisfactory to it, confirming, as of the
effective date of the Scheme of Arrangement, the matters of
U.S. federal income tax law discussed under Material
Tax Considerations U.S. Federal Income Tax
Considerations; and (ii) an opinion from
PricewaterhouseCoopers AG, in form and substance reasonably
satisfactory to it, confirming, as of the effective date of the
Scheme of Arrangement, the matters of Swiss tax law discussed
under Material Tax Considerations Swiss Tax
Considerations.
Court
Approval of the Scheme of Arrangement
Pursuant to Section 99 of the Bermuda Companies Act 1991
(the Companies Act), the Scheme of Arrangement
requires court approval in Bermuda. This requires Allied World
Bermuda to file an application for the sanction of the Scheme of
Arrangement with the Supreme Court of Bermuda. Prior to the
mailing of this proxy statement, Allied World Bermuda obtained
directions from the Supreme Court providing for the convening of
an Allied World Bermuda meeting of voting common shareholders
(and immediately thereafter a meeting of Allied World Bermuda
non-voting common shareholders) and other procedural matters
regarding the meetings. A copy of the Supreme Courts
directions is attached as Annex B.
At the Special Meetings, Allied World Bermuda shareholders will
be asked to approve the Scheme of Arrangement. If the
shareholders approve the Scheme of Arrangement, then Allied
World Bermuda will apply for sanction of the Scheme of
Arrangement at the Sanction Hearing. We encourage you to read
the Scheme of Arrangement attached as Annex A in its
entirety for a complete description of its terms and conditions.
At the Sanction Hearing, the Supreme Court may impose such
conditions as it deems appropriate in relation to the Scheme of
Arrangement but may not impose any material changes without the
joint consent of Allied World Bermuda and Allied World
Switzerland. In determining whether to exercise its discretion
and approve the Scheme of Arrangement, the Supreme Court will
determine, among other things, whether the Scheme of Arrangement
is fair to Allied World Bermudas common shareholders in
general. If you are a common shareholder who wishes to appear or
be represented and present evidence or arguments at the Sanction
Hearing, you may do so. Holders of Allied World Bermuda common
shares at the Record Date are entitled to appear before the
Supreme Court, at the time and date set for the hearing of the
petition to sanction the Scheme of Arrangement, in order to
voice your objection to the Scheme of Arrangement. Allied World
Bermuda will not object to your appearance or participation at
the hearing.
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Should you wish to appear before the Supreme Court, Allied World
Bermuda encourages you to adopt one of the below noted
procedures:
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appearing in person at the Supreme Court, having notified Allied
World Bermudas legal counsel 48 hours in advance of
your intention to do so by e-mailing or telephoning Robin Mayor:
robin.mayor@conyersdill.com or
(441) 299-4929.
You will in such circumstances be requested to provide an
affidavit setting out the evidence upon which you seek to rely
at the hearing;
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filing an affidavit with the Supreme Court at least
48 hours prior to the date of the hearing of the petition
to sanction setting out your reasons for objecting. At the same
time as filing the affidavit, you should serve a copy of the
affidavit on Allied World Bermuda by leaving same at the office
of Conyers Dill & Pearman Limited, Clarendon House, 2
Church Street, Hamilton HM 11, Bermuda, Attention: Robin
Mayor/Graham Collis; or
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instructing counsel to appear on your behalf before the Supreme
Court, such counsel to provide notice of their intention to
appear to Conyers Dill & Pearman Limited at least
48 hours prior to the sanction hearing and at the same time
providing a copy of the evidence upon which counsel shall seek
to rely set out in an affidavit.
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In addition, the Supreme Court has wide discretion to hear from
interested parties. See Summary Special
Court-Ordered Meetings for more information.
The Scheme of Arrangement will become effective as soon as a
copy of the Order of the Supreme Court sanctioning the Scheme of
Arrangement has been delivered to the Registrar of Companies in
Bermuda as required by Section 99 of the Companies Act. See
Summary Conditions to Consummation of the
Scheme of Arrangement for more information on these
conditions.
Once the Scheme of Arrangement is effective, the Supreme Court
will have exclusive jurisdiction to hear and determine any suit,
action or proceeding and to settle any dispute which arises out
of or is connected with the terms of the Scheme of Arrangement
or its implementation or out of any action taken or omitted to
be taken under the Scheme of Arrangement or in connection with
the administration of the Scheme of Arrangement. A shareholder
who wishes to enforce any rights under the Scheme of Arrangement
after such time must notify Allied World Bermuda in writing of
its intention at least five business days prior to commencing a
new proceeding. After the effective time of the Scheme of
Arrangement, no shareholder may commence a proceeding against
Allied World Switzerland or Allied World Bermuda with respect to
or arising from the Scheme of Arrangement except to enforce its
rights under the scheme where a party has failed to perform its
obligations under the scheme.
When under any provision of the Scheme of Arrangement after the
effective time of the Scheme of Arrangement a matter is to be
determined by Allied World Bermuda, then Allied World Bermuda
will have discretion to interpret those matters under the Scheme
of Arrangement in a manner that it considers fair and
reasonable, and its decisions will be binding on all concerned.
Allied World Bermuda may, subject to U.S. securities law
constraints, consent to any modification of the Scheme of
Arrangement on behalf of the shareholders that the Supreme Court
determines to approve or impose.
Federal
Securities Law Consequences; Resale Restrictions
The issuance of Allied World Switzerland voting shares to the
holders of Allied World Bermudas voting common shares (and
the issuance of non-voting participation certificates to the
holders of Allied World Bermudas non-voting common shares)
in connection with the Scheme of Arrangement will not be
registered under the Securities Act. Section 3(a)(10) of
the Securities Act exempts securities issued in exchange for one
or more outstanding securities from the general requirement of
registration where the terms and conditions of the issuance and
exchange of such securities have been approved by any court of
competent jurisdiction, after a hearing upon the fairness of the
terms and conditions of the issuance and exchange at which all
persons to whom such securities will be issued have a right to
appear and to whom adequate notice of the hearing has been
given. In determining whether it is appropriate to sanction the
Scheme of Arrangement, the Supreme Court will consider at the
Sanction Hearing whether the terms and conditions of the Scheme
of Arrangement are fair to the holders of Allied World
Bermudas shareholders in general.
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The Allied World Switzerland voting shares issued to Allied
World Bermuda shareholders in connection with the
Redomestication will continue to be freely transferable, except
for restrictions applicable to certain affiliates of
Allied World Bermuda under the Securities Act, as follows:
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Persons who were not affiliates of Allied World Bermuda on the
date on which the Redomestication is consummated and have not
been affiliates within 90 days prior to such date will be
permitted to sell any Allied World Switzerland voting shares
received in the Scheme of Arrangement without regard to
Rule 144 under the Securities Act.
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Persons who were affiliates of Allied World Bermuda on the date
on which the Redomestication is consummated or were affiliates
within 90 days prior to such date will be permitted to
resell any Allied World Switzerland voting shares they receive
pursuant to the Scheme of Arrangement in the manner permitted by
Rule 144. In computing the holding period of the Allied
World Switzerland voting shares for the purposes of
Rule 144(d), such persons will be permitted to
tack the holding period of their Allied World
Bermuda shares held prior to the effective time of the Scheme of
Arrangement.
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Persons who may be deemed to be affiliates of Allied World
Bermuda and Allied World Switzerland for these purposes
generally include individuals or entities that control, are
controlled by, or are under common control with, Allied World
Bermuda and Allied World Switzerland, and would not include
shareholders who are not executive officers, directors or
significant shareholders of Allied World Bermuda and Allied
World Switzerland.
Allied World Bermuda has not filed a registration statement with
the SEC covering any resales of the Allied World Switzerland
voting shares to be received by Allied World Bermudas
shareholders in connection with the Scheme of Arrangement.
Effective
Date and Transaction Time
If the Scheme of Arrangement is approved by the requisite
shareholder vote and the conditions to the consummation of the
Scheme of Arrangement are satisfied, we anticipate that the
Scheme of Arrangement will become effective as soon as
practicable following approval of the Supreme Court at the
Sanction Hearing scheduled for November 26, 2010, upon our
filing of the court order sanctioning the Scheme of Arrangement
with the Bermuda Registrar of Companies. We expect the issuance
of Allied World Switzerland voting shares and non-voting
participation certificates to occur prior to the opening of
trading on the trading day immediately following effectiveness
of the Scheme of Arrangement. We currently expect to complete
the Scheme of Arrangement as soon as practicable after the
Sanction Hearing.
In the event the conditions to the Scheme of Arrangement are not
satisfied, the Scheme of Arrangement may be abandoned or
delayed, even after approval by our shareholders and the Supreme
Court at the Sanction Hearing. If conditions to the Scheme of
Arrangement are not satisfied or waived on or before 5:00 p.m.
(Bermuda time) on the date nine months after the date on which
the Scheme of Arrangement becomes effective, or such later date
as agreed by Allied World Bermuda and sanctioned by the Supreme
Court, the Scheme of Arrangement will lapse by its terms. In
addition, under Bermuda law, the Scheme of Arrangement may be
abandoned or delayed for any reason by our board of directors at
any time prior to the Sanction Hearing. However, Allied World
Bermuda has determined that, subject to satisfaction of the
conditions to the Scheme of Arrangement, it will not terminate
and abandon the Scheme of Arrangement following the approval of
the Scheme of Arrangement by the holders of common shares.
Management
of Allied World Switzerland
When the Redomestication is completed, the executive officers
and directors of Allied World Bermuda immediately prior to the
completion of the Redomestication are expected to be the
executive officers and directors of Allied World Switzerland.
Following the Redomestication, the executive officers of Allied
World Switzerland not residing in Switzerland will periodically
hold meetings in Switzerland in order to operate Allied World
Switzerland. Allied World Switzerlands articles of
association provide for the same classified board of directors
as Allied World Bermuda currently has, and Allied World
Bermudas directors will carry their terms of office over
to the Allied World Switzerland board of directors.
31
Required
Vote; Board Recommendation
The Special Meetings will be conducted in accordance with the
directions of the Supreme Court. The presence of two or more
persons at each meeting representing in person or by proxy more
than 50% of our total outstanding voting common shares or
non-voting common shares, as appropriate, throughout the
relevant meeting will constitute a quorum. Abstentions and
broker non-votes will be counted toward the presence
of a quorum at, but will not be considered votes cast on any of
the proposals brought before, the Special Meetings.
Assuming the presence of a quorum at the meetings, the Scheme of
Arrangement requires the affirmative vote of a majority in
number of the holders of the Allied World Bermuda voting common
shares present and voting on the proposal at the meeting,
whether in person or by proxy, representing 75% or more in value
of the voting common shares present and voting on the proposal
at the meeting, whether in person or by proxy. The Scheme of
Arrangement also requires the affirmative vote of a majority in
number of the holders of Allied World Bermuda non-voting common
shares present and voting on the proposal at the meeting,
whether in person or by proxy, representing 75% or more in value
of the non-voting common shares present and voting on the
proposal at the meeting, whether in person or by proxy. The
adjournment proposal requires the affirmative vote of holders of
at least a majority of the Allied World Bermuda voting common
shares present and voting at the meeting, whether in person or
by proxy, with respect to the meeting of voting common
shareholders, and the affirmative vote of holders of at least a
majority of the Allied World Bermuda non-voting common shares
present and voting at the meeting, whether in person or by
proxy, with respect to the meeting of non-voting common
shareholders. Our board of directors has unanimously approved
the Scheme of Arrangement and recommends that shareholders vote
FOR approval of both of the proposals.
Regulatory
Matters
We are not aware of any other governmental approvals or actions
that are required to complete the Redomestication other than
compliance with U.S. federal and state securities laws and
Bermuda and Swiss corporate law, including the registration of
the capital increase relating to the issue of Allied World
Switzerland voting shares and non-voting participation
certificates to our shareholders in the commercial register.
No
Appraisal Rights
Under Bermuda law, none of the shareholders of Allied World
Bermuda has any right to an appraisal of the value of their
shares or payment for them in connection with the Scheme of
Arrangement.
No Action
Required to Cancel Allied World Bermuda Shares and Receive
Allied World Switzerland Shares
Assuming the Scheme of Arrangement becomes effective, your
Allied World Bermuda voting common shares will be cancelled and
Allied World Switzerland voting shares will be issued without
any action on your part. All of Allied World Switzerlands
voting shares will be issued in uncertificated book-entry form.
Consequently, if you currently hold Allied World Bermuda shares
in certificated form, following the Redomestication, your Allied
World Bermuda share certificates will cease to have effect as
documents or evidence of title. The transfer agent will make an
electronic book-entry in your name and will mail you a statement
evidencing your ownership of Allied World Switzerland voting
shares.
Dividend
Policy
During the year ended December 31, 2009, Allied World
Bermuda declared a regular quarterly dividend of $0.18 per
common share during the first, second and third quarters, which
was increased to a regular quarterly dividend of $0.20 per
common share for the fourth quarter of 2009 and the first and
second quarters of 2010. Allied World Bermuda expects to declare
and pay a regular quarterly dividend to its shareholders in the
fourth quarter of 2010. Allied World Bermuda also expects the
Redomestication to be effective by the end of the calendar year
2010. Under Swiss law, any dividends declared and paid after the
Redomestication are subject to Allied World Switzerland
shareholder approval, which approval will not be sought until
the next annual meeting of Allied
32
World Switzerland in early May 2011. In order to provide for a
dividend to holders of Allied World Switzerlands voting
shares and non-voting participation certificates in the interim
period, Allied World Bermuda expects that its board of directors
will declare a special dividend approximately equal to its
normal quarterly dividend to be payable in December 2010 along
with the anticipated regularly scheduled fourth quarter 2010
dividend.
Any future declaration and payment of any cash dividends by
Allied World Switzerland following the completion of the
Redomestication will:
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depend upon its results of operations, financial condition, cash
requirements and other relevant factors;
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be subject to shareholder approval;
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be subject to restrictions contained in our credit facilities
and other debt covenants; and
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be subject to other restrictions on dividends imposed by Swiss
law.
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However, Allied World Switzerland shareholders will have the
power to declare dividends without the agreement of the board of
directors. Consequently, dividends may be declared by resolution
of the shareholders even if the board of directors and
management of Allied World Switzerland do not believe it is in
the best interest of shareholders.
For a description of restrictions on dividends imposed by Swiss
law, see Description of Allied World Switzerland
Shares Dividends, Description of Allied
World Switzerland Shares Repurchases of Shares
and Material Tax Considerations Swiss Tax
Considerations Consequences to Shareholders of
Allied World Switzerland Subsequent to the Redomestication.
Share
Compensation Plans
If the Redomestication is completed, Allied World Switzerland
will adopt and assume Allied World Bermudas equity-based
incentive plans, awards and arrangements, and those plans,
awards, and arrangements will be amended as necessary to give
effect to the Scheme of Arrangement, including to provide
(1) that shares of Allied World Switzerland will be issued,
held, made available, or used to measure benefits as appropriate
under the plans, awards and arrangements in lieu of shares of
Allied World Bermuda, including upon exercise of any options or
share appreciation rights, and upon settlement of restricted
stock unit awards, issued under those plans, awards, and
arrangements; and (2) for the appropriate substitution of
Allied World Switzerland for Allied World Bermuda in those
plans, awards and arrangements. Similarly, Allied World
Switzerland voting shares will be substituted for Allied World
Bermuda voting shares under any long-term incentive plans and
awards and other equity-based incentive plans, awards and
arrangements maintained by subsidiaries of Allied World Bermuda
that presently provide for the issuance of Allied World Bermuda
voting shares.
Stock
Exchange Listing
Allied World Bermudas common shares are currently listed
on the NYSE. There is currently no established public trading
market for the voting shares of Allied World Switzerland. We
intend to apply so that, immediately following the consummation
of the Scheme of Arrangement, the voting shares of Allied World
Switzerland will be listed on the NYSE under the symbol
AWH the same symbol under which the Allied World
Bermuda common shares are currently listed.
Accounting
Treatment of the Scheme of Arrangement
Under U.S. GAAP, the Scheme of Arrangement represents a
transaction between entities under common control. Assets and
liabilities transferred between entities under common control
are accounted for at cost. Accordingly, the assets and
liabilities of Allied World Switzerland will be reflected at
their carrying amounts in the accounts of Allied World Bermuda
at the Transaction Time.
33
Treatment
of Non-Voting Shares
The GSCP Funds hold 91.6% of the outstanding non-voting common
shares of Allied World Bermuda as of October 12, 2010. In
light of the requirement that the holders of the Allied World
Bermuda non-voting common shares approve the Scheme of
Arrangement, prior to submitting the Scheme of Arrangement and
related transactions to our shareholders, we inquired of the
GSCP Funds whether they would support the proposed
Redomestication transactions. The GSCP Funds have communicated
to us that they have determined, on a preliminary basis, to
support the transactions. You should note, however, that the
GSCP Funds continue to evaluate the transactions and have not
committed or in any way obligated themselves to vote for the
Scheme of Arrangement, and there is no assurance that the GSCP
Funds will not ultimately determine against supporting the
Redomestication and to withhold their votes from or cast their
votes against the Scheme of Arrangement.
Treatment
of Warrants
If the Scheme of Arrangement is consummated, pursuant to the
Transaction Agreement and the terms of Allied World
Bermudas warrants outstanding on the date of the
consummation of the Scheme of Arrangement, Allied World
Switzerland will assume Allied World Bermudas obligations
under the terms of the warrants and will agree to issue voting
shares (or non-voting participation certificates in the case of
the warrants held by the GSCP Funds) of Allied World Switzerland
(rather than Allied World Bermuda voting common shares) or
Allied World Switzerland non-voting participation certificates
(rather than Allied World Bermuda non-voting common shares) upon
exercise of such warrants in accordance with their terms.
Credit
Facilities
The credit agreements governing Allied World Bermudas
existing syndicated credit facilities will require the lenders
to consent to the Redomestication. We expect to receive the
consent of these lenders prior to the consummation of the
Redomestication and any amendments to these credit agreements
will be subject to, and only be effective upon, the consummation
of the Redomestication.
Senior
Notes
Following the Redomestication, our Senior Notes will remain
outstanding at Allied World Bermuda. Subsequent to the
solicitation of votes pursuant to this proxy statement, Allied
World Bermuda will seek the consent of the noteholders solely
for the purpose of removing the contractual requirement in the
notes indenture that would require Allied World Bermuda to
continue to file periodic reports with the SEC following the
Redomestication (in addition to the SEC reports of Allied World
Switzerland). The consent of the noteholders is not a condition
to the completion of the Scheme of Arrangement. Following the
Redomestication, Allied World Switzerland will fully and
unconditionally guarantee the Senior Notes.
Interests
of Certain Persons in the Redomestication
You should be aware that some of our executive officers and
directors have interests in the Redomestication that are
different from, or in addition to, the interests of our other
shareholders. Our executive officers and directors as a group
beneficially own 1.5% of our outstanding voting common shares.
See Principal Shareholders.
Allied World Switzerland plans to enter into indemnification
agreements with each of its directors and executive officers,
substantially similar to those currently in place with Allied
World Bermuda, upon the completion of the Redomestication that
will provide for indemnification and expense advancement and
include related provisions meant to facilitate the
indemnitees receipt of such benefits.
In connection with our request that the GSCP Funds consider the
Redomestication transactions prior to their final approval by
our board of directors and proposal to our shareholders, we
agreed to reimburse the GSCP Funds for all reasonable costs and
expenses they incur in connection with their consideration and
evaluation of the Redomestication transactions.
34
PRINCIPAL
SHAREHOLDERS
The table below sets forth information as of September 20,
2010 regarding the beneficial ownership of our common shares by:
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each person known by us to beneficially own more than 5% of our
outstanding voting common shares,
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each of our directors,
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our Chief Executive Officer, Chief Financial Officer and our
three other most highly compensated officers who were serving as
executive officers at the end of our 2009 fiscal year, and
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all of our directors and executive officers as a group.
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Beneficial Ownership of Common Shares(1)
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Percent of
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Name and Address of Beneficial Owner
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Voting
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Common Shares
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Artisan Partners Holdings LP(2)
875 East Wisconsin Avenue, Suite 800, Milwaukee, WI 53202
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3,566,252
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8.4
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%
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Blackrock, Inc.(3)
40 E. 52nd
Street, New York, NY 10022
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2,203,095
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5.2
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%
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Wellington Management Company, LLP(4)
75 State Street, Boston, MA 02109
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2,879,714
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6.8
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%
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Barbara T. Alexander
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2,000
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*
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Scott A. Carmilani
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251,900
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(5)
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*
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James F. Duffy
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7,573
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*
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Bart Friedman
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8,865
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*
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Scott Hunter
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6,865
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*
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Mark R. Patterson
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35,865
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*
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Patrick de Saint-Aignan
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2,665
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*
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Samuel J. Weinhoff
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8,428
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*
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Joan H. Dillard
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114,336
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(6)
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*
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Wesley D. Dupont
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56,371
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(7)
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*
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W. Gordon Knight
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13,119
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(8)
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*
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John L. Sennott, Jr.
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4,268
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All directors and executive officers as a group (16 persons)
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634,745
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(9)
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1.5
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%
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(1) |
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Pursuant to the regulations promulgated by the SEC, our common
shares are deemed to be beneficially owned by a
person if such person directly or indirectly has or shares the
power to vote or dispose of our common shares, whether or not
such person has any pecuniary interest in our common shares, or
the right to acquire the power to vote or dispose of our common
shares within 60 days of September 20, 2010, including
any right to acquire through the exercise of any option, warrant
or right. As of September 20, 2010, we had 42,605,678
common shares outstanding (39,155,825 voting common shares and
3,449,853 non-voting common shares). All amounts listed
represent sole voting and dispositive power unless otherwise
indicated. |
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As of September 20, 2010, the GSCP Funds owned in the
aggregate 3,159,793 non-voting common shares, or 7.4% of the
common shares outstanding as of this date. The GSCP Funds also
hold warrants to purchase in the aggregate 1,500,000 non-voting
common shares. Under the terms of these warrants and our
bye-laws, the GSCP Funds are permitted to hold only non-voting
common shares and each warrant is convertible only into
non-voting common shares. Because the GSCP Funds are prohibited
by the terms of our bye-laws from owning voting common shares
(and any shares owned by the GSCP Funds are automatically deemed
non-voting common shares), these funds holdings have not
been included in the table above pursuant to applicable SEC
rules. |
35
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(2) |
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Based on information reported on Schedule 13G, as filed
with the SEC on February 11, 2010 jointly by Artisan
Partners Holdings LP (Artisan Holdings), Artisan
Investment Corporation (Artisan Corp.), Artisan
Partners Limited Partnership (Artisan Partners),
Artisan Investments GP LLC (Artisan Investments),
ZFIC, Inc. (ZFIC) and Andrew A. Ziegler and Carlene
M. Ziegler, the principal stockholders of ZFIC (who, together
with Artisan Holdings, Artisan Corp., Artisan Partners, Artisan
Investments and ZFIC are referred to herein as the Artisan
Parties), the Artisan Parties are the beneficial owners of
3,566,252 voting common shares acquired on behalf of
discretionary clients of Artisan Holdings and Artisan Partners
who have the right to receive, or the power to direct the
receipt of, dividends from, or the proceeds from the sale of,
such securities. According to this Schedule 13G, the
Artisan Parties have the following dispositive powers with
respect to the voting common shares: (a) sole voting power:
none; (b) shared voting power: 3,452,652; (c) sole
dispositive power: none; and (d) shared dispositive power:
3,566,252. |
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(3) |
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Based on information reported on Schedule 13G (Amendment
No. 1), as filed by Blackrock, Inc. (Blackrock)
with the SEC on June 10, 2010, Blackrock has sole voting
power and sole dispositive power over 2,203,095 voting common
shares and has no shared voting power and no shared dispositive
power for any of these shares. |
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(4) |
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Based on information reported on Schedule 13G (Amendment
No. 2) as filed by Wellington Management Company, LLP
(Wellington) with the SEC on February 12, 2010,
Wellington is the beneficial owner of 2,879,714 voting common
shares held by its clients who have the right to receive, or the
power to direct the receipt of, dividends from, or the proceeds
from the sale of, such securities. According to this
Schedule 13G, Wellington has the following dispositive
powers with respect to the voting common shares: (a) sole
voting power: none; (b) shared voting power: 2,339,969;
(c) sole dispositive power: none; and (d) shared
dispositive power: 2,879,714. |
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(5) |
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Includes stock options exercisable to purchase 78,333 voting
common shares. |
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(6) |
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Includes stock options exercisable to purchase 33,333 voting
common shares. |
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(7) |
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Includes stock options exercisable to purchase 25,000 voting
common shares. |
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(8) |
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Includes stock options exercisable to purchase 8,250 voting
common shares. |
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(9) |
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Includes stock options exercisable to purchase 163,498 voting
common shares. |
36
MARKET
PRICE AND DIVIDEND INFORMATION
Allied World Bermuda began publicly trading on the NYSE under
the symbol AWH as of July 12, 2006.
The following table sets forth the high and low sales prices per
share of Allied World Bermuda common shares for the periods
indicated, as reported on the NYSE Composite Tape.
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Price of
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Allied World Bermuda
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Common Shares
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Calendar Year
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High
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Low
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2010
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First quarter
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$
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47.05
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$
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43.77
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Second quarter
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$
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47.96
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$
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40.60
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Third quarter
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$
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57.25
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$
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44.42
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Fourth quarter (through October 12, 2010)
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$
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56.75
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$
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54.53
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2009
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First quarter
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$
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42.68
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$
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32.23
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Second quarter
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$
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41.32
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$
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35.43
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Third quarter
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$
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49.76
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$
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39.93
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Fourth quarter
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$
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49.31
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$
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44.32
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2008
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First quarter
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$
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50.24
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$
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38.29
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Second quarter
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$
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46.82
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$
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39.08
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Third quarter
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$
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42.93
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$
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34.67
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Fourth quarter
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$
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40.60
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$
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21.00
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On September 29, 2010, the last full trading day before we
announced the Scheme of Arrangement, Allied World Bermuda common
shares closed at $56.60 per share. Shareholders are encouraged
to obtain recent stock quotes for Allied World Bermuda common
shares. As of October 12, 2010, the record date for
determining holders of Allied World Bermuda common shares, there
were 38 holders of record of Allied World Bermuda
outstanding voting common shares and 14 holders of record
of Allied World Bermuda outstanding non-voting common shares.
We declared a regular quarterly dividend of $0.20 per common
share during each of the first two quarters of 2010. During the
year ended December 31, 2009, we declared a regular
quarterly dividend of $0.18 per common share for the first,
second and third quarters, and a regular quarterly dividend of
$0.20 per common share for the fourth quarter. During the year
ended December 31, 2008, we declared a regular quarterly
dividend of $0.18 per common share during each quarter. The
continued declaration and payment of dividends to holders of
common shares is expected but will be at the discretion of our
board of directors and subject to specified legal, regulatory,
financial and other restrictions. Following the Redomestication,
future declaration and payment of dividends by Allied World
Switzerland will be subject to shareholder approval.
As a holding company, Allied World Bermudas principal
source of income is dividends or other statutorily permissible
payments from its subsidiaries. The ability of its subsidiaries
to pay dividends is limited by the applicable laws and
regulations of the various countries in which Allied World
Bermuda operates, including Bermuda, the United States and
Ireland.
We intend to list the voting shares of Allied World Switzerland
on the NYSE under the symbol AWH the same symbol
under which the Allied World Bermuda common shares are currently
listed.
37
MATERIAL
TAX CONSIDERATIONS
The information presented under the caption
U.S. Federal Income Tax
Considerations below is a discussion of the material
U.S. federal income tax consequences to U.S. holders
and
non-U.S. holders
(as defined below) of the Redomestication and owning and
disposing of Allied World Switzerland voting shares received
pursuant to the Redomestication. The information presented under
the caption Swiss Tax Considerations is
a discussion of the material Swiss tax consequences (1) to
shareholders resident for tax purposes in a country other than
Switzerland of the Redomestication and of ownership and
disposition of the Allied World Switzerland voting shares and
(2) to Allied World Switzerland of the Redomestication and
subsequent operations. The information presented under the
caption Bermuda Tax Considerations is a
discussion of the material Bermuda tax consequences of the
Redomestication.
You should consult your own tax advisor regarding the
applicable tax consequences to you of the Redomestication and of
ownership and disposition of the Allied World Switzerland voting
shares under the laws of the United States (federal, state and
local), Switzerland, Bermuda and any other applicable foreign
jurisdiction.
U.S.
Federal Income Tax Considerations
Scope of
Discussion
This discussion does not generally address any aspects of
U.S. taxation other than U.S. federal income taxation,
is not a complete analysis or description of all of the possible
tax consequences of the Redomestication or of holding and
disposing of Allied World Switzerland voting shares and does not
address all tax considerations that may be relevant to you.
Special rules that are not discussed in the general descriptions
below may also apply to you. In particular, this discussion
deals only with holders that hold their Allied World Bermuda
shares and will hold their Allied World Switzerland voting
shares as capital assets and does not address the tax treatment
of special classes of holders, such as:
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a holder of Allied World Bermuda shares who, at any time within
the five-year period ending on the date of the Redomestication,
has actually or constructively owned 10% or more of the total
combined voting power of all classes of stock entitled to vote
of Allied World Bermuda or who, immediately before the
Redomestication, actually or constructively owns at least 5% (by
vote or value) of the outstanding stock of Allied World Bermuda,
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a holder of Allied World Switzerland voting shares who,
immediately after the Redomestication, actually or
constructively owns at least 5% of either the total voting power
or the total value of the stock of Allied World Switzerland or
who, at any time after the Redomestication, actually or
constructively owns 10% or more of the total combined voting
power of all classes of stock entitled to vote of Allied World
Switzerland,
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a bank or other financial institution,
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an insurance company,
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a person holding shares as part of a straddle,
hedge, integrated transaction, or
conversion transaction,
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a person holding shares through a partnership or other
pass-through entity,
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a U.S. expatriate,
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a person who is liable for alternative minimum tax,
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a broker-dealer or trader in securities or currencies,
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a U.S. holder whose functional currency is not
the U.S. dollar,
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a regulated investment company,
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a real estate investment trust,
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38
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a trader in securities who has elected the
mark-to-market
method of accounting for its securities, or
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a holder who received the Allied World Bermuda shares through
the exercise of employee stock options or otherwise as
compensation or through a tax qualified retirement plan.
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This discussion is based on the laws of the United States,
including the U.S. Internal Revenue Code of 1986, as
amended, which we refer to as the U.S. Code,
its legislative history, existing and proposed Treasury
regulations promulgated thereunder, judicial decisions,
published rulings, administrative pronouncements and income tax
treaties to which the United States is a party, each as in
effect on the date of this proxy statement. These laws may
change, possibly with retroactive effect. There can be no
assurance that the United States Internal Revenue Service, which
we refer to as the IRS, will not disagree with or
will not successfully challenge any of the conclusions reached
and described in this discussion.
For purposes of this discussion, a U.S. holder
is any beneficial owner of Allied World Bermuda shares, or,
after the completion of the Redomestication, Allied World
Switzerland voting shares, that for U.S. federal income tax
purposes is:
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an individual citizen or resident alien of the United States,
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a corporation (or other entity taxable as a corporation)
organized under the laws of the United States or any state
thereof including the District of Columbia,
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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 if (1) it validly elects to be treated as a United
States person for U.S. federal income tax purposes or
(2)(a) its administration is subject to the primary supervision
of a court within the United States and (b) one or more
United States persons have the authority to control all of its
substantial decisions.
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A
non-U.S. holder
is any beneficial owner of Allied World Bermuda shares, or,
after the completion of the Redomestication, Allied World
Switzerland voting shares, other than an entity or arrangement
treated as a partnership for U.S. federal income tax
purposes, that is not a U.S. holder. For purposes of this
summary, holder or shareholder means
either a U.S. holder or a
non-U.S. holder
or both, as the context may require.
If a partnership (including any entity or arrangement treated as
a partnership for U.S. federal income tax purposes) is a
beneficial owner of Allied World Bermuda shares or Allied World
Switzerland voting shares, the tax treatment of a partner in
that partnership will generally depend on the status of the
partner and the activities of the partnership. Holders of Allied
World Bermuda shares or Allied World Switzerland voting shares
that are partnerships and partners in these partnerships are
urged to consult their tax advisers regarding the
U.S. federal income tax consequences to them of the
Redomestication and the ownership and disposition of the Allied
World Switzerland voting shares.
In the discussion that follows, except as otherwise indicated,
it is assumed, as Allied World Bermuda believes to be the case,
that Allied World Bermuda has not been and will not be a passive
foreign investment company before the Redomestication and that
Allied World Switzerland will not be a passive foreign
investment company after the Redomestication. See
Passive Foreign Investment Company
Considerations. It is also assumed, as Allied World
Bermuda expects to be the case, that Allied World Switzerland
will continue to be a foreign corporation in the future.
Taxation
of Allied World Switzerland Subsequent to the
Redomestication
We do not anticipate any material changes to the taxation of
Allied World Switzerland as a result of the Redomestication. For
further discussion, please refer to U.S. Taxation of
our
Non-U.S. Companies
and U.S. Taxation of our U.S. Subsidiaries
in Allied World Bermudas
Form S-3
filed with the SEC on December 31, 2007.
U.S.
Holders
Consequences of the Redomestication. The
Redomestication, together with the subsequent election by Allied
World Bermuda to be treated as an entity disregarded from its
owner for U.S. federal tax purposes, will
39
constitute a reorganization within the meaning of
Section 368(a)(1)(F) of the U.S. Code. The material
U.S. federal income tax consequences of the Redomestication
to U.S. holders are as follows:
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U.S. holders will recognize no gain or loss in the
Redomestication;
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a U.S. holders tax basis in the Allied World
Switzerland voting shares received in the Redomestication will
equal the U.S. holders tax basis in its shares of
Allied World Bermuda common shares cancelled in the
Redomestication; and
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the holding period of the Allied World Switzerland voting shares
received by a U.S. holder in the Redomestication will
include the period during which the U.S. holder held its
shares of Allied World Bermuda common shares cancelled in the
Redomestication.
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Shareholders who hold their Allied World Bermuda shares with
differing bases or holding periods are urged to consult their
tax advisors with regard to identifying the bases and holding
periods of the particular Allied World Switzerland voting shares
received in the Scheme of Arrangement.
Consequences
to Shareholders of Allied World Switzerland Subsequent to the
Redomestication
Taxation of Distributions. Subject to the
discussions below relating to the potential application of the
controlled foreign corporation, which we refer to as
CFC, related person insurance income, which we refer
to as RPII, and passive foreign investment company,
which we refer to as PFIC, rules, the gross amount
of a distribution paid with respect to Allied World Switzerland,
including the full amount of any Swiss withholding tax thereon,
will be a dividend for U.S. federal income tax purposes to
the extent of current or accumulated earnings and profits of
Allied World Switzerland (as determined for U.S. tax
purposes). With respect to non-corporate U.S. holders,
certain dividends received in taxable years beginning before
January 1, 2011 from a qualified foreign
corporation will be subject to U.S. federal income
tax at a maximum rate of 15%. In general, Allied World
Switzerland will be treated as a qualified foreign corporation
if the Allied World Switzerland voting shares are listed on the
NYSE or certain other exchanges or Allied World Switzerland
qualifies for benefits under the income tax treaty between the
United States and Switzerland. This reduced rate is subject to a
U.S. holders satisfaction of certain significant
holding period and other applicable requirements, including that
Allied World Switzerland cannot be a passive foreign investment
company (as described below), and will not be available in all
situations. Accordingly, U.S. holders are urged to consult
their own tax advisors regarding the application of the relevant
rules to their particular circumstances. As a Swiss corporation,
if Allied World Switzerland is treated as a qualified foreign
corporation such dividends will constitute qualified dividend
income taxed as net capital gain.
To the extent that a distribution exceeds Allied World
Switzerlands current or accumulated earnings and profits
(as determined for U.S tax purposes), it will be treated as a
nontaxable return of capital to the extent of the
taxpayers basis in the stock, and thereafter as a capital
gain. While dividends paid by Allied World Switzerland generally
will be treated as foreign source income, if U.S. holders
own a majority of our voting shares as we expect to continue to
be the case, a portion of the dividends may be treated as
U.S. source income. Allied World Switzerland dividends will
not be eligible for the dividends received deduction allowed to
corporate shareholders under the U.S. Code.
Subject to complex limitations, Swiss withholding tax will be
treated for U.S. tax purposes as a foreign tax that may be
claimed as a foreign tax credit against the U.S. federal
income tax liability of a U.S. holder. Dividends
distributed by Allied World Switzerland will generally be
categorized as passive income or, in the case of
some holders, as financial services income, for
purposes of computing allowable foreign tax credits for
U.S. tax purposes. Certain taxpayers may be able to treat
financial services income as general category income. The rules
relating to the determination of the foreign tax credit are
complex, and you should consult your own tax advisors to
determine whether and to what extent a credit would be
available. In lieu of claiming a credit, U.S. holders may
claim a deduction of foreign taxes paid in the taxable year.
Unlike a tax credit, a deduction generally does not reduce
U.S. tax on a
dollar-for-dollar
basis.
40
Classification of Allied World Switzerland or its
Non-U.S. Subsidiaries
as Controlled Foreign Corporation. Each 10%
U.S. Shareholder (as defined below) of a
non-U.S. corporation
that is a CFC for an uninterrupted period of 30 days or
more during a taxable year, and who owns shares in the CFC,
directly or indirectly through
non-U.S. entities,
on the last day of the CFCs taxable year, must include in
its gross income for U.S. federal income tax purposes its
pro rata share of the CFCs subpart F income,
even if the subpart F income is not distributed. A
non-U.S. corporation
is considered a CFC if 10% U.S. Shareholders own (directly,
indirectly through
non-U.S. entities
or by attribution by application of the constructive ownership
rules of section 958(b) of the U.S. Code
(i.e., constructively)) more than 50% of the
total combined voting power of all classes of voting stock of
such
non-U.S. corporation,
or more than 50% of the total value of all stock of such
corporation on any day during the taxable year of such
corporation. For purposes of taking into account insurance
income, a CFC also includes a
non-U.S. insurance
company in which more than 25% of the total combined voting
power of all classes of stock (or more than 25% of the total
value of the stock) is owned by 10% U.S. Shareholders, on
any day during the taxable year of such corporation. A 10%
U.S. Shareholder is a U.S. Person who owns
(directly, indirectly through
non-U.S. entities
or constructively) at least 10% of the total combined voting
power of all classes of stock entitled to vote of the
non-U.S. corporation.
We believe that because of the dispersion of our share
ownership, provisions in our organizational documents that limit
voting power (these provisions are described in
Description of Allied World Switzerland Shares
Voting), provisions in the bye-laws of our non-
U.S. subsidiaries and other factors, no U.S. Person
who owns shares of Allied World Switzerland directly or
indirectly through one or more
non-U.S. entities
should be treated as owning (directly, indirectly through
non-U.S. entities,
or constructively), 10% or more of the total voting power of all
classes of shares of Allied World Switzerland or any of its
non-U.S. subsidiaries
and, therefore, we believe that Allied World Switzerland and its
non-U.S. subsidiaries
should not be CFCs. It is possible, however, that the IRS could
challenge the effectiveness of these provisions and that a court
could sustain such a challenge.
The RPII CFC Provisions. The following
discussion generally is applicable only if the RPII of any of
the
non-U.S. insurance
subsidiaries, determined on a gross basis, is 20% or more of a
Non-U.S. Insurance
Subsidiarys gross insurance income for the taxable year
and the 20% Ownership Exception (as defined below) is not met.
The following discussion generally would not apply for any
fiscal year in which a
Non-U.S. Insurance
Subsidiarys gross RPII falls below the 20% threshold or
the 20% Ownership Exception is met. Although we cannot be
certain, we believe that each of our
Non-U.S. Insurance
Subsidiaries was in prior years of operations and will be for
the foreseeable future below either the 20% threshold or 20%
Ownership Exception for each tax year.
RPII is any insurance income (as defined below)
attributable to policies of insurance or reinsurance with
respect to which the person (directly or indirectly) insured is
a RPII shareholder (as defined below) or a
related person (as defined below) to such RPII
shareholder. In general, and subject to certain limitations,
insurance income is income (including premium and
investment income) attributable to the issuing of any insurance
or reinsurance contract which would be taxed under the portions
of the U.S. Code relating to insurance companies if the
income were the income of a domestic insurance company. For
purposes of inclusion of the RPII of a Non-U.S Insurance
Subsidiary in the income of RPII shareholders, unless an
exception applies, the term RPII shareholder would
mean any U.S. Person who owns (directly or indirectly
through
non-U.S. entities)
any amount of Allied World Switzerland voting shares. Generally,
the term related person for this purpose means
someone who controls or is controlled by the RPII shareholder or
someone who is controlled by the same person or persons which
control the RPII shareholder. Control is measured by either more
than 50% in value or more than 50% in voting power of stock
applying certain constructive ownership principles. A Non-U.S
Insurance Subsidiary will be treated as a CFC under the RPII
provisions if RPII shareholders are treated as owning (directly,
indirectly through
non-U.S. entities
or constructively) 25% or more of the shares of Allied World
Switzerland by vote or value.
RPII Exceptions. The special RPII rules would
not apply if (i) at all times during the taxable year less
than 20% of the voting power and less than 20% of the value of
the stock of Allied World Switzerland, which we refer to as the
20% Ownership Exception, is owned (directly or
indirectly) by persons who are (directly or indirectly) insured
under any policy of insurance or reinsurance issued by a Non-U.S
Insurance Subsidiary or related persons to any such person,
(ii) RPII, determined on a gross basis, is less than 20% of
a Non-U.S Insurance Subsidiary gross insurance income for the
taxable year (the 20% Gross Income Exception),
(iii) a Non-U.S Insurance Subsidiary elects to be taxed on
its RPII as if the RPII were effectively connected with the
conduct of a U.S. trade or business,
41
and to waive all treaty benefits with respect to RPII and meet
certain other requirements or (iv) a Non-U.S Insurance
Subsidiary elects to be treated as a U.S. corporation and
waive all treaty benefits and meet certain other requirements.
Where none of these exceptions applies, each U.S. Person
owning or treated as owning any voting shares Allied World
Switzerland (and therefore, indirectly, in a Non-U.S Insurance
Subsidiary) on the last day of Allied World Switzerlands
taxable year will be required to include in its gross income for
U.S. federal income tax purposes its share of the RPII for
the portion of the taxable year during which a Non-U.S Insurance
Subsidiary was a CFC under the RPII provisions, determined as if
all such RPII were distributed proportionately only to such
U.S. Persons at that date, but limited by each such
U.S. Persons share of a Non-U.S Insurance
Subsidiarys current-year earnings and profits as reduced
by the U.S. Persons share, if any, of certain
prior-year deficits in earnings and profits. The Non-U.S
Insurance Subsidiaries intend to operate in a manner that is
intended to ensure that each qualifies for either the 20% Gross
Income Exception or 20% Ownership Exception.
Computation of RPII. For any year in which a
Non-U.S Insurance Subsidiarys gross RPII is 20% or more of
its gross insurance income for the year and the Non-U.S
Insurance Subsidiary does not meet the 20% Ownership Exception,
Allied World Switzerland may also seek information from its
shareholders as to whether beneficial owners of voting shares at
the end of the year are U.S. Persons so that the RPII may
be determined and apportioned among such persons; to the extent
Allied World Switzerland is unable to determine whether a
beneficial owner of voting shares is a U.S. Person, we may
assume that such owner is not a U.S. Person, thereby
increasing the per share RPII amount for all known RPII
shareholders. The amount of RPII includable in the income of a
RPII shareholder is based upon the net RPII income for the year
after deducting related expenses such as losses, loss reserves
and operating expenses.
If gross RPII is less than 20% of gross insurance income or the
Non-U.S Insurance Subsidiary meets the 20% Ownership Exception,
RPII shareholders will not be required to include RPII in their
taxable income. The amount of RPII includable in the income of a
RPII shareholder is based upon the net RPII income for the year
after deducting related expenses such as losses, loss reserves
and operating expenses.
Apportionment of RPII to
U.S. Holders. Every RPII shareholder who
owns voting shares on the last day of any taxable year of Allied
World Switzerland in which a Non-U.S Insurance Subsidiarys
gross insurance income constituting RPII for that year equals or
exceeds 20% of the Non-U.S Insurance Subsidiarys gross
insurance income and the Non-U.S Insurance Subsidiary does not
meet the 20% Ownership Exception should expect that for such
year it will be required to include in gross income its share of
the a Non-U.S Insurance Subsidiarys RPII for the portion
of the taxable year during which the Non-U.S Insurance
Subsidiary was a CFC under the RPII provisions, whether or not
distributed, even though it may not have owned the shares
throughout such period. A RPII shareholder who owns voting
shares during such taxable year but not on the last day of the
taxable year is not required to include in gross income any part
of a Non-U.S Insurance Subsidiarys RPII.
Uncertainty as to Application of RPII. The
RPII provisions are complex, have never been interpreted by the
courts or the Treasury Department of the United States (the
Treasury) in final Treasury regulations, and
Treasury regulations interpreting the RPII provisions of the
U.S. Code exist only in proposed form. It is not certain
whether these Treasury regulations will be adopted in their
proposed form or what changes or clarifications might ultimately
be made thereto or whether any such changes, as well as any
interpretation or application of RPII by the IRS, the courts or
otherwise, might have retroactive effect. These provisions
include the grant of authority to the Treasury Department to
prescribe such Treasury regulations as may be necessary to
carry out the purpose of this subsection including Treasury
regulations preventing the avoidance of this subsection through
cross insurance arrangements or otherwise. Accordingly,
the meaning of the RPII provisions and the application thereof
to a Non-U.S Insurance Subsidiary is uncertain. In addition, we
cannot be certain that the amount of RPII or the amounts of the
RPII inclusions for any particular RPII shareholder, if any,
will not be subject to adjustment based upon subsequent IRS
examination. Any prospective investor which does business with a
Non-U.S Insurance Subsidiary and is considering an investment in
voting shares should consult his or her tax advisor as to the
effects of these uncertainties.
Tax-Exempt Shareholders. Tax-exempt entities
will be required to treat certain subpart F insurance income,
including RPII, that is includible in income by the tax-exempt
entity as unrelated business taxable income. Prospective
investors that are tax exempt entities are urged to consult
their tax advisors as to the potential impact of
42
the unrelated business taxable income provisions of the
U.S. Code. A tax-exempt organization that is treated as a
10% U.S. Shareholder or a RPII Shareholder also must file
IRS Form 5471 in certain circumstances.
Dispositions of Allied World Switzerland
Shares. Subject to the discussions below relating
to the potential application of U.S. Code section 1248
and the PFIC rules, a U.S. holder of Allied World
Switzerland voting shares generally should recognize capital
gain or loss for U.S. federal income tax purposes on the
sale, exchange or other disposition of Allied World Switzerland
voting shares in an amount equal to the difference between the
amount realized (i.e., the amount of cash plus the fair market
value of any property received) on such sale, exchange or other
disposition and the holders adjusted tax basis in Allied
World Switzerland voting shares. Such capital gain or loss will
be long-term capital gain or loss if the holders holding
period for Allied World Switzerland voting shares exceeds one
year at the time of the sale, exchange or other disposition.
Under current law, long-term capital gain of non-corporate
U.S. shareholders is subject to tax at a maximum rate of
15%. However, this reduced rate is scheduled to expire effective
for taxable years beginning after December 31, 2010. The
deductibility of capital losses is subject to limitations.
Moreover, gain, if any, generally will be a U.S. source
gain and generally will constitute passive income
for foreign tax credit limitation purposes.
U.S. Code section 1248 provides that if a
U.S. Person sells or exchanges stock in a
non-U.S. corporation
and such person owned, directly, indirectly through certain
non-U.S. entities
or constructively, 10% or more of the voting power of the
corporation at any time during the five-year period ending on
the date of disposition when the corporation was a CFC, any gain
from the sale or exchange of the shares will be treated as a
dividend to the extent of the CFCs earnings and profits
(determined under U.S. federal income tax principles)
during the period that the shareholder held the shares and while
the corporation was a CFC (with certain adjustments). We believe
that because of the dispersion of our share ownership,
provisions in our organizational documents that limit voting
power, provisions in the bye-laws of our non-
U.S. subsidiaries and other factors that no
U.S. Holder of Allied World Switzerland should be treated
as owning (directly, indirectly through
non-U.S. entities
or constructively) 10% of more of the total voting power of
Allied World Switzerland or its
non-U.S. subsidiaries;
to the extent this is the case, this application of
U.S. Code section 1248 under the regular CFC rules
should not apply to dispositions of our voting shares. It is
possible, however, that the IRS could challenge the
effectiveness of these provisions and that a court could sustain
such a challenge. A 10% U.S. Shareholder may in certain
circumstances be required to report a disposition of voting
shares of a CFC by attaching IRS Form 5471 to the
U.S. federal income tax or information return that it would
normally file for the taxable year in which the disposition
occurs. In the event this is determined necessary, Allied World
Switzerland will provide a completed IRS Form 5471 or the
relevant information necessary to complete the Form.
U.S. Code section 1248 also applies to the sale or
exchange of shares in a
non-U.S. corporation
if the
non-U.S. corporation
would be treated as a CFC for RPII purposes regardless of
whether the shareholder is a 10% U.S. Shareholder or
whether RPII constitutes 20% or more of the corporations
gross insurance income or the 20% Ownership Exception applies.
Proposed Treasury regulations do not address whether
U.S. Code section 1248 would apply if a
non-U.S. corporation
is not a CFC but the
non-U.S. corporation
has a subsidiary that is a CFC and that would be taxed as an
insurance company if it were a domestic corporation. We believe,
however, that this application of U.S. Code
section 1248 under the RPII rules should not apply to
dispositions of voting shares because Allied World Switzerland
will not be directly engaged in the insurance business. We
cannot be certain, however, that the IRS will not interpret the
proposed Treasury regulations in a contrary manner or that the
Treasury Department will not amend the proposed Treasury
regulations to provide that these rules will apply to
dispositions of voting shares. Prospective investors should
consult their tax advisors regarding the effects of these rules
on a disposition of voting shares.
Passive Foreign Investment Company
Considerations. The treatment of
U.S. holders could be materially different from that
described above if, at any time during the
U.S. holders holding period, Allied World Bermuda or
Allied World Switzerland were a passive foreign investment
company. For U.S. tax purposes, a foreign corporation, such
as Allied World Bermuda or Allied World Switzerland, is
classified as a PFIC for any taxable year in which either
(1) 75% or more of its gross income is passive income (as
defined for U.S. tax purposes) or (2) the average
percentage of its assets which produce passive income or which
are held for the production of passive income is at least 50%.
For purposes of applying the tests in the preceding sentence,
the foreign corporation is deemed to own its proportionate share
of the assets, and to receive directly its proportionate share
of the income, of any other corporation of which the foreign
corporation owns, directly or indirectly, at least 25% by value
of the stock.
43
For the above purposes, passive income generally includes
interest, dividends, annuities and other investment income. The
PFIC rules provide that income derived in the active
conduct of an insurance business by a corporation which is
predominantly engaged in an insurance business... is not treated
as passive income. The PFIC provisions also contain a
look-through rule under which a
non-U.S. corporation
shall be treated as if it received directly its
proportionate share of the income... and as if it
held its proportionate share of the assets... of any
other corporation in which it owns at least 25% of the value of
the stock.
The insurance income exception is intended to ensure that income
derived by a bona fide insurance company is not treated as
passive income, except to the extent such income is attributable
to financial reserves in excess of the reasonable needs of the
insurance business. We expect, for purposes of the PFIC rules,
that each of our insurance subsidiaries will be predominantly
engaged in an insurance business and is unlikely to have
financial reserves in excess of the reasonable needs of its
insurance business in each year of operations. Accordingly, none
of the income or assets of our insurance subsidiaries should be
treated as passive. Additionally, we expect that the passive
income and assets of our non-insurance subsidiaries will be de
minimis in each year of operations with respect to the overall
income and assets of Allied World Switzerland and its
subsidiaries. Under the look-through rule, Allied World
Switzerland should be deemed to own its proportionate share of
the assets and to have received its proportionate share of the
income of its direct and indirect subsidiaries for purposes of
the 75% test and the 50% test. As a result, we believe that
Allied World Switzerland should not be treated as a PFIC. We
cannot be certain, however, as there are currently no Treasury
regulations regarding the application of the PFIC provisions to
an insurance company and new Treasury regulations or
pronouncements interpreting or clarifying these rules may be
forthcoming, that the IRS will not successfully challenge this
position. Prospective investors are urged to consult their tax
advisors as to the effects of the PFIC rules.
We believe that Allied World Bermuda has not been a PFIC in any
prior taxable year and will not be a PFIC for the taxable year
that includes the Redomestication. In addition, we do not expect
Allied World Switzerland to be or become a PFIC following the
Redomestication. This conclusion, however, is a factual
determination that is made annually and thus is uncertain and
may be subject to change. If Allied World Switzerland were
characterized as a PFIC during a given year, each
U.S. Person holding voting shares would be subject to a
penalty tax at the time of the sale at a gain of, or receipt of
an excess distribution with respect to, their voting
shares, unless such person is a 10% U.S. Shareholder (and
Allied World Switzerland is a CFC) or made a qualified
electing fund election or
mark-to-market
election. It is uncertain that Allied World Switzerland would be
able to provide its shareholders with the information necessary
for a U.S. holder to make a qualified electing fund
election. In addition, if Allied World Switzerland were
considered a PFIC, upon the death of any U.S. individual
owning voting shares, such individuals heirs or estate
would not be entitled to a
step-up
in the basis of the voting shares that might otherwise be
available under U.S. federal income tax laws. In general, a
shareholder receives an excess distribution if the
amount of the distribution is more than 125% of the average
distribution with respect to the voting shares during the three
preceding taxable years (or shorter period during which the
taxpayer held voting shares). In general, the penalty tax is
equivalent to an interest charge on taxes that are deemed due
during the period the shareholder owned the voting shares,
computed by assuming that the excess distribution or gain (in
the case of a sale) with respect to the voting shares was taken
in equal portion at the highest applicable tax rate on ordinary
income throughout the shareholders period of ownership.
The interest charge is equal to the applicable rate imposed on
underpayments of U.S. federal income tax for such period.
In addition, a distribution paid by Allied World Switzerland to
U.S. holders that is characterized as a dividend and is not
characterized as an excess distribution would not be eligible
for reduced rates of tax as qualified dividend income with
respect to dividends paid before 2011.
Foreign Tax Credit. If U.S. holders own a
majority of our voting shares, only a portion of the current
income inclusions, if any, under the CFC, RPII and PFIC rules
and of dividends paid by us (including any gain from the sale of
shares that is treated as a dividend under section 1248 of
the U.S. Code) may be treated as foreign source income for
purposes of computing a shareholders U.S. foreign tax
credit limitations. We will consider providing shareholders with
information regarding the portion of such amounts constituting
foreign source income to the extent such information is
reasonably available. It is also likely that substantially all
of the subpart F income, RPII and dividends that are
foreign source income will constitute either passive
or general income. Thus, it may not be possible for
most shareholders to utilize excess foreign tax credits to
reduce U.S. tax on such income.
44
Information Reporting and Backup
Withholding. Dividends on Allied World
Switzerland voting shares paid within the United States or
through certain
U.S.-related
financial intermediaries are subject to information reporting
and may be subject to backup withholding (currently at a 28%
rate) unless the holder (1) is a corporation or other
exempt recipient or (2) provides a taxpayer identification
number and satisfies certain certification requirements.
Information reporting requirements and backup withholding may
also apply to the cash proceeds of a sale of the Allied World
Switzerland voting shares.
In addition to being subject to backup withholding, if a
U.S. holder of Allied World Switzerland voting shares does
not provide us (or our paying agent) with the holders
correct taxpayer identification number or other required
information, the holder may be subject to penalties imposed by
the IRS. Any amounts withheld under the backup withholding rules
may be allowed as a refund or a credit against the holders
U.S. federal income tax liability, provided that the holder
timely furnishes certain required information to the IRS.
Non-U.S.
Holders
Consequences of the Redomestication and Subsequent
Disposition of the Allied World Switzerland
Shares. In general, a
non-U.S. holder
of Allied World Bermuda shares will not be subject to
U.S. federal income or withholding tax on any gain with
respect to the Redomestication and will not be subject to
U.S. federal income or withholding tax on any gain
recognized on a subsequent disposition of the Allied World
Switzerland voting shares received in the Redomestication,
unless: (1) such gain is effectively connected with the
conduct by the holder of a trade or business within the United
States and, if a tax treaty applies, is attributable to a
permanent establishment or fixed place of business maintained by
such holder in the United States, (2) in the case of a
holder who is an individual, such holder is present in the
United States for 183 days or more during the taxable year
in which the gain is recognized and certain other conditions are
met, or (3) such holder is subject to backup withholding
tax (as described below).
Taxation of Distributions on the Allied World Switzerland
Shares. A
non-U.S. holder
generally will not be subject to U.S. federal income tax on
dividends received on its Allied World Switzerland voting
shares, unless the dividends are effectively connected with the
holders conduct of a trade or business in the United
States and, if a tax treaty applies, the dividends are
attributable to a permanent establishment or fixed place of
business maintained by the holder in the United States, or such
holder is subject to backup withholding tax (as described below).
Except to the extent otherwise provided under an applicable tax
treaty, a
non-U.S. holder
generally will be taxed in the same manner as a U.S. holder
on dividends paid and gains recognized that are effectively
connected with the holders conduct of a trade or business
in the United States. Effectively connected dividends received
and gains recognized by a corporate
non-U.S. holder
may also, under certain circumstances, be subject to an
additional branch profits tax at a 30% rate (or, if
applicable, a lower treaty rate), subject to certain adjustments.
Information Reporting and Backup
Withholding. In order not to be subject to backup
withholding tax on distributions and disposition proceeds with
respect to Allied World Switzerland voting shares, a
non-U.S. holder
may be required to provide a taxpayer identification number,
certify the holders foreign status, or otherwise establish
an exemption.
Non-U.S. holders
of Allied World Switzerland voting shares are urged to consult
their tax advisers regarding the application of information
reporting and backup withholding in their particular situations,
the availability of exemptions, and the procedure for obtaining
such an exemption, if available. Any amount withheld from a
payment to a
non-U.S. holder
under the backup withholding rules will be allowable as a credit
against the holders U.S. federal income tax
liability, provided that the required information is timely
furnished to the IRS.
Swiss Tax
Considerations
Scope of
Discussion
This discussion does not generally address any aspects of Swiss
taxation other than federal, cantonal and communal income
taxation, federal withholding taxation, and federal issuance
stamp tax and transfer stamp tax. This discussion is not a
complete analysis or listing of all of the possible tax
consequences of the Redomestication or of holding and disposing
of Allied World Switzerland voting shares and non-voting
participation certificates and
45
does not address all tax considerations that may be relevant to
you. Special rules that are not discussed in the general
descriptions below may also apply to you.
This discussion is based on the laws of the Confederation of
Switzerland, including the Federal Income Tax Act of 1990, the
Federal Harmonization of Cantonal and Communal Income Tax Act of
1990, The Federal Withholding Tax Act of 1965, the Federal Stamp
Duty Act of 1973, as amended, which we refer to as the
Swiss tax law, existing and proposed regulations
promulgated thereunder, published judicial decisions and
administrative pronouncements, each as in effect on the date of
this proxy statement or with a known future effective date.
These laws may change, possibly with retroactive effect.
For purposes of this discussion, a Swiss holder is
any beneficial owner of Allied World Bermuda shares, or, after
the completion of the Scheme of Arrangement, Allied World
Switzerland voting shares and non-voting participation
certificates, that for Swiss federal income tax purposes is:
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an individual resident of Switzerland or otherwise subject to
Swiss taxation under article 3, 4 or 5 of the Federal
Income Tax Act of 1990, as amended, or article 3 or 4 of
the Federal Harmonization of Cantonal and Communal Income Tax
Act of 1990, as amended,
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a corporation or other entity taxable as a corporation organized
under the laws of Switzerland under article 50 or 51 of the
Federal Income Tax Act of 1990, as amended, or article 20
or 21 of the Federal Harmonization of Cantonal and Communal
Income Tax Act of 1990, as amended, or
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an estate or trust, the income of which is subject to Swiss
income taxation regardless of its source.
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A non-Swiss holder of Allied World Bermuda shares,
or, after the completion of the Scheme of Arrangement, Allied
World Switzerland voting shares or non-voting participation
certificates, is a holder that is not a Swiss holder. For
purposes of this summary, holder or
shareholder means either a Swiss holder or a
non-Swiss holder or both, as the context may require.
Consequences
of the Redomestication
Tax
Consequences
No Swiss tax is due for non-Swiss holders upon the receipt of
Allied World Switzerland voting shares or non-voting
participation certificates pursuant to the Scheme of Arrangement.
If Swiss holders are beneficial owners of Allied World Bermuda
shares or Allied World Switzerland voting shares or non-voting
participation certificates, they are urged to consult their tax
advisers regarding the Swiss tax consequences to them of the
Redomestication.
Swiss
Corporate Tax Consequences
Under Swiss tax law as it applies to corporations, the
Redomestication is considered to be a tax neutral restructuring
for Allied World Bermuda and Allied World Switzerland.
Therefore, no Swiss income taxes will be due with respect to
these companies as a result of the Redomestication. As a tax
neutral restructuring, the Redomestication is also exempt from
the Swiss withholding tax and issuance stamp tax and transfer
stamp tax.
Taxation
of Allied World Switzerland Subsequent to the
Redomestication
Income
Tax
A Swiss resident company is subject to income tax at federal,
cantonal and communal levels on its worldwide income. However, a
holding company, such as Allied World Switzerland, is generally
exempt from cantonal and communal income tax (with the exception
of income generated in relation to Swiss real estate
and/or
income for which taxation is a condition to rely on a
withholding tax relief provided under the applicable double tax
treaty or the applicable bilateral agreement with the respective
source country) and therefore is only subject to Swiss federal
income tax. At the federal level, qualifying net dividend income
and qualifying net capital gains on the sale of qualifying
investments in subsidiaries is exempt from federal income tax.
Consequently, Allied World Switzerland expects dividends from
its subsidiaries and capital gains from sales of investments in
its subsidiaries to be exempt from federal income tax.
46
Issuance
Stamp Tax
Swiss issuance stamp tax is a federal tax levied on the issuance
of shares/participation certificates and increases in the equity
of Swiss corporations. The applicable tax rate is 1% of the fair
market value of the assets contributed to equity. Exemptions are
available in tax neutral restructuring transactions, such as the
Scheme of Arrangement. As a result, any future issuance of
voting shares or non-voting participation certificates by Allied
World Switzerland may be subject to the issuance stamp tax
unless the voting shares or non-voting participation
certificates are issued in the context of the Redomestication or
other qualifying restructuring transaction.
The issuance stamp tax is also levied on the issuance of certain
debt instruments. In such case, the rate would amount to 0.06%
to 0.12% of the par value of the debt issued per year of
duration of the instrument (the rate depending on the type of
debt instrument). No Swiss issuance stamp tax (at the rate
described above) would be due on debt instruments issued by
non-Swiss subsidiaries of Allied World Switzerland, if Allied
World Switzerland (or any of its Swiss resident group entities)
does not guarantee the debt instruments, or if such a guarantee
is provided, the proceeds from the issuance by the non-Swiss
subsidiary are not used for financing activities in Switzerland.
Although Allied World Switzerland (or any of its Swiss resident
group entities) intends to guarantee debt of its direct or
indirect subsidiaries, none of the proceeds has been or is
expected to be used for financing activities in Switzerland.
Consequently, no issuance stamp tax should be due.
Swiss
Transfer Stamp Tax
The transfer of taxable Swiss and foreign securities (e.g.,
voting shares or non-voting participation certificates) in which
a Swiss bank or other Swiss securities dealers (as defined in
the Swiss Federal Stamp Tax Act) participate as contracting
parties or as intermediaries is typically subject to Swiss
transfer tax at the rate of 0.15% (for securities issued by a
resident of Switzerland) and 0.3% (for securities issued by a
resident of a foreign country). However, the transfer of taxable
securities, which is based on a merger or a transaction similar
to a merger (quasi-merger) is exempt from transfer
stamp tax. This exemption is applicable to current Allied World
Bermuda shareholders who receive Allied World Switzerland voting
shares or non-voting participation certificates as a result of
the Redomestication, should one of the contracting parties be
regarded as a Swiss securities dealer according to Swiss stamp
tax law. Based on the above, no Swiss transfer stamp tax is due
in connection with the Redomestication.
Swiss
Withholding Tax on Certain Interest Payments
A federal withholding tax is levied on the interest payments of
certain debt instruments. In such case, the rate would amount to
35% of the gross interest payment to the debtholders. No Swiss
withholding tax would be due on interest payments on debt
instruments issued by non-Swiss subsidiaries of Allied World
Switzerland, provided that Allied World Switzerland (or any of
its Swiss resident group entities) does not guarantee the debt
instruments, or if such a guarantee is provided, the proceeds
from the issuance by the non-Swiss subsidiary are not used for
financing activities in Switzerland. Any such withholding tax
may be fully or partially refundable to qualified debtholders
either based on Swiss domestic tax law or based on existing
double taxation treaties. Although Allied World Switzerland (or
any of its Swiss resident group entities) intends to guarantee
certain debt of its direct or indirect subsidiaries, none of the
proceeds has been or is expected to be used for financing
activities in Switzerland. Consequently, no Swiss withholding
tax should be due with respect to such obligations. In the event
of the imposition of any such withholding tax, the respective
subsidiary would be required under some of its debt obligations
to gross up the interest payments to cover the tax.
Consequences
to Shareholders of Allied World Switzerland Subsequent to the
Redomestication
The tax consequences discussed below are not a complete analysis
or listing of all the possible tax consequences that may be
relevant to you. You should consult your own tax advisor in
respect of the tax consequences related to receipt, ownership,
purchase or sale or other disposition of Allied World
Switzerland voting shares or non-voting participation
certificates and the procedures for claiming a refund of
withholding tax.
47
Swiss
Income Tax on Dividends and Similar Distributions
A non-Swiss holder will not be subject to Swiss income taxes on
dividend income and similar distributions in respect of Allied
World Switzerland voting shares or non-voting participation
certificates, unless the voting shares or non-voting
participation certificates are attributable to a permanent
establishment or a fixed place of business maintained in
Switzerland by such non-Swiss holder. However, dividends and
similar distributions are subject to Swiss withholding tax. See
Swiss Withholding Tax
Distributions to Shareholders.
Swiss
Wealth Tax
A non-Swiss holder will not be subject to Swiss wealth taxes
unless the holders Allied World Switzerland voting shares
or non-voting participation certificates are attributable to a
permanent establishment or a fixed place of business maintained
in Switzerland by such non-Swiss holder.
Swiss
Capital Gains Tax upon Disposal of Allied World Switzerland
Shares
A non-Swiss holder will not be subject to Swiss income taxes for
capital gains unless the holders voting shares or
non-voting participation certificates are attributable to a
permanent establishment or a fixed place of business maintained
in Switzerland by such non-Swiss holder. In such case, the
non-Swiss holder is required to recognize capital gains or
losses on the sale of such voting shares or non-voting
participation certificates, which will be subject to cantonal,
communal and federal income tax as required under the relevant
tax laws.
Swiss
Withholding Tax Distributions to
Shareholders
A Swiss withholding tax of 35% is due on dividends and similar
distributions to Allied World Switzerland shareholders and
holders of non-voting participation certificates from Allied
World Switzerland, regardless of the place of residency of the
shareholder (subject to the exceptions discussed under
Exemption from Swiss Withholding
Tax Distributions to Shareholders below).
Allied World Switzerland will be required to withhold at such
rate and remit on a net basis any payments made to a holder of
Allied World Switzerland voting shares or non-voting
participation certificates and pay such withheld amounts to the
Swiss federal tax authorities. Please see
Refund of Swiss Withholding Tax on Dividends
and Other Distributions.
Exemption
from Swiss Withholding Tax Distributions to
Shareholders
Under present Swiss tax law, distributions to shareholders or
holders of non-voting participation certificates in relation to
a reduction of par value are exempt from Swiss withholding tax.
Beginning on January 1, 2011, distributions to shareholders
or holders of non-voting participation certificates out of
qualifying additional paid-in capital for Swiss statutory
purposes are as a matter of principle exempt from the Swiss
withholding tax. The particulars of this general principle are,
however, subject to regulations still to be promulgated by the
applicable Swiss authorities; it will further require that the
current draft corporate law bill, which proposes an overhaul of
certain aspects of Swiss corporate law, be modified in the
upcoming legislative process to reflect the recent change in the
tax law. Allied World Switzerland expects that its statutory
qualifying additional paid in capital will be sufficient to
allow a substantial amount of any potential future distributions
to be exempt from Swiss withholding tax. For a description of
how qualifying additional paid-in capital can be distributed
under the Swiss Code of Obligations (the Swiss
Code), as in effect as of the date of this proxy
statement, see Description of Allied World Switzerland
Shares Dividends.
Repurchases
of Shares for Cancellation
Under present Swiss tax law, repurchases of voting shares or
non-voting participation certificates for the purposes of
capital reduction are treated as a partial liquidation subject
to the 35% Swiss withholding tax. However, for voting shares or
non-voting participation certificates repurchased for capital
reduction, the portion of the repurchase price attributable to
the par value of the voting shares or non-voting participation
certificates repurchased will not be subject to the Swiss
withholding tax. Beginning on January 1, 2011, subject to
the adoption of implementing regulations by the applicable Swiss
authorities, the portion of the repurchase price attributable to
the qualifying additional paid-in capital for Swiss statutory
reporting purposes of the voting shares or non-voting
48
participation certificates repurchased will also not be subject
to the Swiss withholding tax. Allied World Switzerland would be
required to withhold at such rate the tax from the difference
between the repurchase price and the related amount of par value
and, beginning on January 1, 2011, subject to the adoption
of implementing regulations by the applicable Swiss authorities
and amendments to Swiss corporate law, the related amount of
qualifying additional paid-in capital. Allied World Switzerland
would be required to remit on a net basis the purchase price
with the Swiss withholding tax deducted to a holder of Allied
World Switzerland voting shares or non-voting participation
certificates and pay the withholding tax to the Swiss federal
tax authorities.
With respect to the refund of Swiss withholding tax from the
repurchase of voting shares or non-voting participation
certificates, see Refund of Swiss Withholding
Tax on Dividends and Other Distributions below.
In most instances, Swiss companies listed on the SIX carry out
share repurchase programs through a second trading
line on the SIX. Swiss institutional investors typically
purchase shares from shareholders on the open market and then
sell the shares on the second trading line back to the company.
The Swiss institutional investors are generally able to receive
a full refund of the withholding tax. Due to, among other
things, the time delay between the sale to the company and the
institutional investors receipt of the refund, the price
companies pay to repurchase their shares has historically been
slightly higher than the price of such companies shares in
ordinary trading on the SIX first trading line.
We will not be able to use the SIX second trading line process
to repurchase our shares because we do not intend to list our
shares on the SIX. We do, however, intend to follow an
alternative process whereby we expect to be able to repurchase
our shares in a manner that should allow Swiss institutional
market participants selling the shares to us to receive a refund
of the Swiss withholding tax and, therefore, accomplish the same
purpose as share repurchases on the second trading line at
substantially the same cost to us and such market participants
as share repurchases on a second trading line.
The repurchase of voting shares or non-voting participation
certificates for purposes other than capital reduction, such as
to retain as Treasury Shares for use in connection with stock
incentive plans, convertible debt or other instruments within
certain periods, will generally not be subject to Swiss
withholding tax provided the threshold of 10% of the aggregate
share and participation capital as required by the Swiss Code is
satisfied (see Description of Allied World Switzerland
Shares Repurchases of Shares below) and the
shares are resold within certain periods prescribed by Swiss law
(either six years or, in certain cases, up to twelve years). In
addition, see Comparison of Rights of Shareholders and
Powers of the Board of Directors for a discussion on the
limitations on the amount of repurchased shares that can be held
as Treasury Shares.
Refund
of Swiss Withholding Tax on Dividends and Other
Distributions
Swiss Holders. A Swiss tax resident, corporate
or individual, can recover the withholding tax in full if such
resident is the beneficial owner of the Allied World Switzerland
voting shares or non-voting participation certificates at the
time the dividend or other distribution becomes due and provided
that such resident reports the gross distribution received on
such residents income tax return, or in the case of an
entity, includes the taxable income in such residents
income statement. The claim for a refund must be filed with the
Swiss federal tax authorities (Eigerstrasse 65, 3003 Berne,
Switzerland) not later than December 31 of the third year
following the year in which the dividend payments became due.
Non-Swiss Holders. If the shareholder or
holder of non-voting participation certificates that receives a
distribution from Allied World Switzerland is not a Swiss tax
resident, does not hold the Allied World Switzerland voting
shares or non-voting participation certificates in connection
with a permanent establishment or a fixed place of business
maintained in Switzerland, and resides in a country that has
concluded a treaty for the avoidance of double taxation with
Switzerland for which the conditions for the application and
protection of and by the treaty are met (including residents of
members of the European Union), then the shareholder or holder
of non-voting participation certificates may be entitled to a
full or partial refund of the withholding tax described above.
You should note that the procedures for claiming treaty refunds
(and the time frame required for obtaining a refund) may differ
from country to country.
49
Switzerland has entered into bilateral treaties for the
avoidance of double taxation with respect to income taxes with
numerous countries, including the United States, whereby under
certain circumstances all or part of the withholding tax may be
refunded.
The claim for a refund must be filed with the Swiss federal tax
authorities (Eigerstrasse 65, 3003, Berne, Switzerland) no later
than
December 31st
of the third year following the year in which the dividend
payments became due.
U.S. Residents. The Swiss-U.S. tax
treaty provides that U.S. residents eligible for benefits
under the treaty can seek a refund of the Swiss withholding tax
on dividends for the portion exceeding 15% (leading to a refund
of 20%), for the portion exceeding 5% (leading to a refund of
30% for qualifying corporate shareholders holding at least 10%
of the voting stock of the dividend paying corporation) or a
full refund in the case of qualified pension funds. Please refer
to the discussion under U.S. Federal
Income Tax Considerations, Consequences to Shareholders of
Allied World Switzerland Subsequent to the
Redomestication Taxation of Distributions in the
Form of a Repayment of Par Value, Repayment of Qualifying Paid
in Capital or Dividend for applicability of
U.S. foreign tax credits for any net withholding taxes paid.
As a general rule, the refund will be granted under the treaty
if the U.S. resident can show evidence of:
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beneficial ownership,
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U.S. residency, and
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meeting the
U.S.-Swiss
tax treatys limitation on benefits requirements.
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The claim for refund must be filed with the Swiss federal tax
authorities (Eigerstrasse 65, 3003 Berne, Switzerland), not
later than December 31 of the third year following the year in
which the dividend payments became due. The relevant Swiss tax
form is Form 82C for companies, 82E for other entities and
82I for individuals. These forms can be obtained from any Swiss
Consulate General in the United States or from the Swiss federal
tax authorities at the address mentioned above. Each form needs
to be filled out in triplicate, with each copy duly completed
and signed before a notary public in the United States. You must
also include evidence that the withholding tax was withheld at
the source.
Transfer Stamp Tax. The purchase or sale of
Allied World Switzerland voting shares or non-voting
participation certificates may be subject to Swiss federal
transfer stamp taxes on the transfer of taxable securities
irrespective of the place of residency of the purchaser or
seller if the transaction takes place through or with a Swiss
bank or other Swiss securities dealer, as those terms are
defined in the Swiss Federal Stamp Tax Act, and no exemption
applies in the specific case. If a purchase or sale is not
entered into through or with a Swiss bank or other Swiss
securities dealer, then no stamp tax will be due. The applicable
stamp tax rate is 0.075% (for securities issued by a resident in
Switzerland) or 0.15% (for securities issued by a resident in a
foreign country) for each of the two parties to the transaction
and is calculated on the purchase price or sales proceeds. If
the transaction does not involve cash consideration, the
transfer stamp duty is computed on the basis of the market value
of the consideration.
Bermuda
Tax Considerations
The Redomestication will not result in any income tax
consequences under Bermuda law to Allied World Bermuda or Allied
World Switzerland or their respective shareholders.
50
DESCRIPTION
OF ALLIED WORLD SWITZERLAND SHARES
The following description of Allied World Switzerlands
share capital is a summary. This summary is not complete and is
subject to the complete text of Allied World Switzerlands
form of proposed articles of association and organizational
regulations attached as Annex D and Annex E,
respectively, to this proxy statement as well as Swiss corporate
law. Except where otherwise indicated, the description below
reflects Allied World Switzerlands articles of association
and organizational regulations as those documents will be in
effect upon completion of the Redomestication. We encourage
you to read those documents carefully.
Capital
Structure
Immediately after the consummation of the Scheme of Arrangement,
Allied World Switzerland will only have one class of voting
shares and one class of non-voting participation certificates
(the latter, the Swiss equivalent of the former Allied World
Bermuda non-voting common shares). All references to
voting rights in this Description of Allied
World Switzerland Shares will mean the voting rights of
Allied World Switzerlands voting shares with a par value
CHF 16.28 ($15.00) per share. Allied World
Switzerlands voting shares do not include the non-voting
participation certificates as described below under
Issued Participation Capital.
Issued Share Capital. Immediately prior to the
consummation of the Scheme of Arrangement, the share capital of
Allied World Switzerland will amount to CHF 100,000, composed of
10,000,000 voting shares with a par value of CHF 0.01 per share.
Pursuant to the Scheme of Arrangement, Allied World Switzerland
will issue one voting share for each Allied World Bermuda voting
common share. In exchange for voting common shares held by
Allied World Bermuda in treasury, Allied World Switzerland will
issue a corresponding number of voting shares to be held in
treasury in order to satisfy share delivery obligations under
our equity-based incentive plans and the put agreements that we
may enter into with the holders of the non-voting participation
certificates and warrants with respect to non-voting
participation certificates in order to replicate the conversion
feature to voting shares previously available to the holders of
the Allied World Bermuda non-voting shares. To effect this,
Allied World Bermuda, acting on behalf of its shareholders, will
enter into the
Contribution-in-Kind
Agreement with Allied World Switzerland under which it will
contribute all of its outstanding voting common shares to Allied
World Switzerland against the issuance of new voting shares in
Allied World Switzerland to the holders of voting common shares
of Allied World Bermuda, and Allied World Switzerland will amend
its articles of association to reflect this increase of its
share capital. If the Redomestication had been completed on
September 30, 2010, the share capital of Allied World
Switzerland would have been approximately CHF 634,020,090
($584,170,845), composed of approximately 38,944,723 voting
shares with a par value of CHF 16.28 ($15.00) per share, with
the share capital as of the actual effective time to be
determined based on the number of Allied World Bermuda voting
shares outstanding as of the effectiveness of the Scheme of
Arrangement.
Issued Participation Capital. Immediately
prior to the Redomestication, Allied World Switzerland will not
have any participation capital. In connection with the
Redomestication, Allied World Switzerland will issue one
non-voting participation certificate for each Allied World
Bermuda non-voting common share. To effect this, Allied World
Bermuda, acting on behalf of its shareholders, will enter into
the
Contribution-in-Kind
Agreement with Allied World Switzerland under which it will
contribute all of its outstanding non-voting common shares
(i.e., the non-voting common shares issued after cancelation in
the course of the Scheme of Arrangement) to Allied World
Switzerland against the issuance of new non-voting participation
certificates in Allied World Switzerland to the holders of
non-voting common shares of Allied World Bermuda, and Allied
World Switzerland will amend its articles of association to
reflect this increase of its participation capital. If the
Redomestication had been completed on September 30, 2010,
the participation capital of Allied World Switzerland would have
been approximately CHF 56,163,607 ($51,747,795), composed
of approximately 3,449,853 non-voting participation certificates
with a par value of CHF 16.28 ($15.00) per certificate, with the
participation capital as of the actual effective time to be
determined based on the number of Allied World Bermuda
non-voting shares outstanding as of the effectiveness of the
Scheme of Arrangement.
Increases of Share Capital. Under Swiss law,
Allied World Switzerland may increase its share capital and
issue new shares through an ordinary capital increase, an
authorized capital increase or a conditional capital increase.
In each case the issue price for each share may not be less than
the par value of the newly issued share. The
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ordinary capital increase is resolved by the general meeting.
The required majority is as a general rule the approval by a
majority of the votes cast at the general meeting. A qualified
majority of at least
662/3%
of the votes and the majority of the par value of the voting
shares, each as represented at the general meeting, is required
for capital increases against
contributions-in-kind
or capital increases where the preemptive rights of shareholders
are limited or excluded. The amount by which the capital can be
increased in an ordinary capital increase is unlimited, under
the condition that sufficient funds can be provided to cover the
capital increase. An ordinary capital increase that has been
approved by the shareholders must be executed within three
months of shareholder approval.
The shareholders can further authorize the board of directors by
way of an amendment of the articles of association to increase
the share capital in an amount not to exceed 50% of the share
capital registered in the commercial register for a period of
two years without further shareholder approval. To create
authorized capital, 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 a general meeting is required. Additional
information regarding authorized share capital increases is set
forth below under Authorized Share
Capital.
Under Swiss law, conditional share capital is used to issue new
shares in the context of employee benefit and incentive plans,
debt instruments with conversion rights or warrants granted to
shareholders. To create conditional capital, 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 a general meeting is required. The
requirements for a conditional capital increase are set forth
below under Conditional Share Capital.
Authorized Share Capital. Immediately prior to
completion of the Redomestication, Allied World Switzerland will
not have any share capital authorized for future issuance. Upon
completion of the Redomestication, Allied World
Switzerlands articles of association will authorize our
board of directors to issue new voting shares at any time during
a two-year period and thereby increase the share capital,
without further shareholder approval, by a maximum amount of 20%
of the share capital registered in the commercial register,
which, if the Redomestication had been completed on
September 30, 2010, would have been approximately CHF
126,804,008 ($116,834,160) (assuming a par value of CHF 16.28
($15.00) per voting share), or approximately 7,788,944 voting
shares. After the expiration of the initial two-year period, and
each subsequent two-year period, authorized share capital will
be available to the board of directors for issuance of
additional voting shares only if the authorization is reapproved
by shareholders.
The board of directors determines the time of the issuance, the
issuance price, the manner in which the new voting shares have
to be paid in, the date from which the new voting shares carry
the right to dividends and, subject to the provisions of Allied
World Switzerlands articles of association, the conditions
for the exercise of the preemptive rights with respect to the
issuance as well as the allotment of preemptive rights that are
not exercised. The board of directors may allow preemptive
rights that are not exercised to expire, or it may place such
rights or voting shares, the preemptive rights of which have not
been exercised, at market conditions or use them otherwise in
the interest of Allied World Switzerland.
In an authorized capital increase, holders of Allied World
Switzerland voting shares would have preemptive rights to obtain
newly issued voting shares in an amount proportional to the par
value of the voting shares they already hold. However, the board
of directors may withdraw or limit these preemptive rights in
certain circumstances as set forth in Allied World
Switzerlands articles of association. For further details
on these circumstances, see Preemptive Rights
and Advance Subscription Rights.
Conditional Share Capital. Immediately prior
to completion of the Redomestication, Allied World Switzerland
will not have any conditional share capital. Upon completion of
the Redomestication, Allied World Switzerlands articles of
association will provide for conditional capital that, following
the effectiveness of the Redomestication, will allow the board
of directors to authorize the issuance of up to
7,200,000 of additional voting shares without obtaining
additional shareholder approval as follows:
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up to a maximum amount not exceeding CHF 16,280,000
($15,000,000) (which is expected to be approximately 1,000,000
voting shares and assuming a par value of CHF 16.28 ($15.00) per
voting share) in connection with the exercise of conversion
and/or
option or warrant rights granted in connection with
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bonds, notes or similar instruments, issued or to be issued by
Allied World Switzerland or by subsidiaries of Allied World
Switzerland, including convertible debt instruments;
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up to a maximum amount not exceeding CHF 68,376,000
($63,000,000) (which is expected to be approximately 4,200,000
voting shares and assuming a par value of CHF 16.28 ($15.00) per
voting share) in connection with the exercise of option rights
granted to any employee of Allied World Switzerland or a
subsidiary, and any consultant, director or other person
providing services to Allied World Switzerland or a
subsidiary; or
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up to a maximum amount not exceeding CHF 32,560,000
($30,000,000) (which is expected to be approximately 2,000,000
voting shares and assuming a par value of CHF 16.28
($15.00) per voting share) in connection with the exercise of
the shareholder warrants previously granted at the time of our
formation to AIG. See Certain Relationships and Related
Transactions Founding Shareholders in Allied
World Bermudas definitive proxy statement for its 2010
annual general meeting, filed with the SEC on March 17,
2010, for further information regarding our outstanding
shareholder warrants.
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Shareholders preemptive rights are excluded with respect
to new shares issued out of conditional share capital in
connection with our equity-based incentive plans and the
warrants granted to AIG at the time of our formation.
In connection with the issuance of bonds, notes or other similar
instruments convertible into or exercisable or exchangeable for
Allied World Switzerland voting shares to be issued out of
conditional share capital, the board of directors is authorized
to withdraw or limit the advance subscription rights of
shareholders in certain circumstances. See
Preemptive Rights and Advance Subscription
Rights below.
Conditional Participation Capital. Immediately
prior to completion of the Redomestication, Allied World
Switzerland will not have any conditional participation capital.
Upon completion of the Redomestication, Allied World
Switzerlands articles of association will provide for
conditional participation capital that, following the
effectiveness of the Redomestication, will allow the board of
directors to authorize the issuance of additional non-voting
participation certificates without obtaining additional
shareholder approval as follows:
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up to a maximum amount not exceeding CHF 24,420,000
($22,500,000) (which is expected to be approximately 1,500,000
participation certificates and assuming a par value of
CHF 16.28 ($15.00) per participation certificate) in
connection with the exercise of the shareholder warrants
previously granted at the time of our formation to the GSCP
Funds. See Certain Relationships and Related
Transactions Founding Shareholders in Allied
World Bermudas definitive proxy statement for its 2010
annual general meeting, filed with the SEC on March 17,
2010, for further information regarding our outstanding
shareholder warrants.
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Shareholders preemptive rights are excluded with respect
to new non-voting participation certificates issued out of
conditional participation capital in connection with the
warrants granted to the GSCP Funds at the time of our formation.
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 or
preferred stock (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. To create
preferred stock, a resolution of the general meeting passed by a
majority of the votes cast at the general meeting is required.
Treasury Shares. Treasury Shares held by
Allied World Switzerland or any of its subsidiaries will be
available for future issuances of shares, such as pursuant to
our equity-based incentive plans and under the put agreements we
may enter into with the holders of the Allied World Switzerland
non-voting participation certificates and warrants with respect
to non-voting participation certificates. These Treasury Shares
will not have any voting or other rights while held by Allied
World Switzerland or any of its subsidiaries.
53
Preemptive
Rights and Advance Subscription Rights
Under the Swiss Code, if new voting shares or non-voting
participation certificates are being issued, the existing
shareholders or holders of non-voting participation certificates
will have preemptive rights in relation to such voting shares or
non-voting participation certificates 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,
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. Allied World Switzerlands articles of
association provide for this delegation with respect to Allied
World Switzerlands authorized and conditional share
capital in the circumstances described below under
Authorized Share Capital and
Conditional Share Capital.
Allied World Switzerlands articles of association 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 voting shares and
participants only to non-voting participation certificates.
Pre-emptive and advance subscription rights of participants are
excluded, if and to the extent such rights of the shareholders
are excluded.
Authorized Share Capital. Under the articles
of association, the board of directors is authorized to withdraw
or limit the preemptive rights of shareholders (and to allocate
them to third parties) with respect to the issuance of voting
shares from authorized capital if the issuances are made for the
purpose of:
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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);
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improving the regulatory capital position of Allied World
Switzerland or its subsidiaries (including by way of private
placements);
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broadening the shareholder constituency;
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the participation of employees; or
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exchanging non-voting participation certificates as well as a
buy-back of non-voting participation certificates in exchange
for voting shares out of authorized share capital.
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Conditional Share Capital. In connection with
the issuance of bonds, notes, or similar instruments convertible
into or exercisable or exchangeable for Allied World Switzerland
voting shares, the preemptive rights of shareholders are
excluded and the board of directors is authorized to withdraw or
limit the advance subscription rights of shareholders with
respect to such bonds, notes, or similar instruments convertible
into or exercisable or exchangeable for Allied World Switzerland
voting shares if their issuance is made in order to
(1) finance or re-finance the acquisition of companies,
parts of companies or holdings, or new investments planned by
Allied World Switzerland, or (2) issue convertible bonds
and warrants on the international capital markets or through
private placement.
If the advance subscription rights are to be excluded then:
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the instruments have to be placed at market conditions;
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the exercise period is not to exceed ten years from the date of
issue for warrants and twenty years for conversion
rights; and
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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 and conditional
participation capital created for shareholder warrants
previously granted to AIG and the GSCP Funds at the time of our
formation.
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The preemptive rights of shareholders are excluded with respect
to issuances of new voting shares out of conditional share
capital under an equity-based incentive plan to directors,
employees, contractors or other persons providing services to
Allied World Switzerland or one of its subsidiaries or
affiliates.
Participation
Certificates
Upon completion of the Redomestication, Allied World
Switzerlands articles of association will provide for
participation capital (which if the Redomestication had been
completed on September 30, 2010 would have amounted to
CHF 56,163,607 ($51,747,795) or approximately 3,449,853
non-voting participation certificates, assuming a par value of
CHF 16.28 ($15.00) per participation certificate) that,
upon the effectiveness of the Redomestication, will be issued to
the holders of non-voting shares in exchange for the
cancellation of their Allied World Bermuda
non-voting
shares.
The non-voting participation certificates have the same
entitlement to dividends and liquidation distributions as the
voting shares of Allied World Switzerland. Allied World
Switzerlands articles of association 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 voting shares and participants only to
non-voting participation certificates. 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 non-voting participation certificates or
voting shares) can be limited or withdrawn in accordance with
the same criteria and conditions as are applicable to the voting
shares.
Holders of non-voting participation certificates are not
entitled to attend and 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 law,
however, holders of non-voting participation certificates 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 (very limited under Swiss law);
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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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Allied World Switzerlands articles of association provide
that upon resolution of the general meeting and with the
approval of the holders of non-voting participation
certificates, all or any portion of such holders
non-voting participation certificates may be converted into
voting shares, at any time.
The holders of non-voting participation certificates may also
hold a put right that enables them to require Allied World
Switzerland to issue voting shares of Allied World Switzerland
(to them or their third party designees) on a
one-for-one
basis in exchange for their non-voting participation
certificates. Allied World Switzerland would hold Treasury
Shares for this purpose. The put right would replicate the
conversion feature of the Allied World Bermuda non-voting common
shares. There can be no assurance that Allied World Switzerland
will enter into put agreements with the holder of non-voting
participation certificates.
According to the Swiss Code, resolutions limiting the rights of
the holders of non-voting participation certificates afforded by
law or the articles of association require an affirmative
resolution by a special meeting of the participants.
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Dividends
Under Swiss law, dividends may be paid out only if the
corporation has sufficient distributable profits from previous
fiscal years, or if the corporation has freely distributable
reserves, each as will be presented on the audited annual
stand-alone statutory balance sheet. Payments out of the share
and participation capital (in other words, the aggregate par
value of Allied World Switzerlands 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. See Reduction of Share
Capital for more information. Qualifying additional
paid-in capital may only be paid out as dividends to
shareholders and holders of non-voting participation
certificates following approval by the shareholders of a
reclassification of such qualifying additional paid-in capital
as freely distributable reserves (to the extent permissible
under the Swiss Code). The affirmative vote of shareholders
holding a majority of the votes cast at a general meeting must
approve reserve reclassifications and distributions of
dividends. The board of directors may propose to shareholders
that a dividend be paid but cannot itself authorize the
dividend. In addition, an Allied World Switzerland shareholder
may propose dividends without any dividend proposal by the
board. To the extent that dividends are approved by the
shareholders, they must be paid.
Under the Swiss Code, if Allied World Switzerlands general
capital reserves amount to less than 20% of the share and
participation capital recorded in the commercial register (i.e.,
20% of the aggregate par value of Allied World
Switzerlands capital), then at least 5% of Allied World
Switzerlands annual profit must be retained as general
reserves. The Swiss Code permits Allied World Switzerland to
accrue additional general reserves. In addition, Allied World
Switzerland is required to create a special reserve on its
stand-alone annual statutory balance sheet in the amount of the
purchase price of voting shares and non-voting participation
certificates it or any of its subsidiaries repurchases, which
amount may not be used for dividends or subsequent repurchases.
Swiss companies generally must maintain a separate company,
stand-alone statutory balance sheet for the purpose of, among
other things, determining the amounts available for the return
of capital to shareholders and holders of non-voting
participation certificates, including by way of a distribution
of dividends. Amounts available for the return of capital as
indicated on Allied World Switzerlands statutory balance
sheet may be materially different from amounts reflected in the
consolidated U.S. GAAP financial statements of Allied World
Switzerland. Allied World Switzerlands auditor must
confirm that a dividend proposal made to shareholders conforms
with the requirements of the Swiss Code and Allied World
Switzerlands articles of association. For information
about deduction of the withholding tax from dividend payments,
see Material Tax Considerations Swiss Tax
Considerations.
Allied World Switzerland will be required under Swiss law to
declare any dividends and other capital distributions in Swiss
francs. Allied World Switzerland intends to make any dividend
payments to holders of Allied World Switzerland voting shares
and non-voting participation certificates in U.S. dollars.
Continental Stock Transfer & Trust Company will
be responsible for paying the U.S. dollars to registered
holders of voting shares and non-voting participation
certificates, less amounts subject to withholding for taxes.
Repurchases
of Shares
The Swiss Code limits a companys ability to hold or
repurchase its own voting shares and non-voting participation
certificates. Allied World Switzerland and its subsidiaries may
only repurchase voting shares and non-voting participation
certificates if and to the extent that sufficient freely
distributable equity (including nominal share and participation
capital, legal reserves, reserves for Allied World
Switzerlands own voting shares and non-voting
participation certificates and special reserves) is available,
as described above under Dividends. The
aggregate par value of all Allied World Switzerland voting
shares and non-voting participation certificates held by Allied
World Switzerland and its subsidiaries may not exceed 10% of the
aggregate share and participation capital. However, Allied World
Switzerland may, according to legal doctrine, repurchase its own
voting shares and non-voting participation certificates beyond
the statutory limit of 10%, and the requirement for sufficient
freely distributable equity will not apply, if the shareholders
have passed a resolution at a general meeting of shareholders
authorizing the board of directors to repurchase voting shares
and non-voting participation certificates in an amount in excess
of 10% and the repurchased voting shares and non-voting
participation certificates are dedicated for cancellation. Any
voting
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shares or non-voting participation certificates repurchased
pursuant to such an authorization will then be cancelled at the
next general meeting upon the approval of shareholders holding a
majority of the votes cast at the general meeting.
Repurchased voting shares held by Allied World Switzerland or
its subsidiaries do not carry any rights to vote at a general
meeting of shareholders but are entitled to the economic
benefits generally associated with the voting shares.
Repurchased non-voting participation certificates held by Allied
World Switzerland or its subsidiaries are entitled to the
economic benefits generally associated with the non-voting
participation certificates. For information about Swiss
withholding tax and share repurchases, see Material Tax
Considerations Swiss Tax Considerations.
Reduction
of Share Capital
Capital distributions may also take the form of a distribution
of cash or property that is based upon a reduction of Allied
World Switzerlands share and participation capital
recorded in the commercial register. Such a capital reduction
requires the approval of shareholders holding a majority of the
votes cast at the general meeting. A special audit report must
confirm that creditors claims remain fully covered despite
the reduction in the share and participation capital recorded in
the commercial register. Upon approval by the general meeting of
shareholders of the capital reduction, the 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 the
companys net assets still exceed the share and
participation capital and statutory reserves after a par value
reduction payment to the shareholders has been made.
General
Meetings of Shareholders
The general meeting of shareholders is Allied World
Switzerlands supreme corporate body. Ordinary and
extraordinary shareholders meetings may be held. The following
powers will be vested exclusively in the shareholders meeting:
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adoption and amendment of Allied World Switzerlands
articles of association;
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election and removal of members of the board of directors and
the auditor;
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approval of the statutory required annual report, the annual
accounts and the consolidated financial statements;
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payments of dividends and any other distributions of capital;
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discharge of the members of the board of directors from
liability for business conduct; and
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any other resolutions that are submitted to a general meeting of
shareholders pursuant to law, Allied World Switzerlands
articles of association or by voluntary submission by the board
of directors (unless a matter is within the exclusive competence
of the board of directors pursuant to the Swiss Code).
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Under the Swiss Code and Allied World Switzerlands
articles of association, Allied World Switzerland must hold an
annual, ordinary general meeting of shareholders within six
months after the end of its fiscal year for the purpose, among
other things, of approving the annual financial statements and
the annual report, the annual election of directors for the
class whose term has expired and the annual election of
auditors. The invitation to general meetings must be published
in the Swiss Official Gazette of Commerce at least 20 days
prior to the relevant general meeting of shareholders. The
notice of a meeting must state the items on the agenda and the
proposals of the board of directors and of the shareholders who
demanded that a shareholders meeting be held or that an item be
included on the agenda and, in case of elections, the names of
the nominated candidates. No resolutions may be passed at a
shareholders meeting concerning agenda items for which proper
notice was not given. This does not apply, however, to proposals
made during a shareholders meeting to convene an extraordinary
shareholders meeting or to initiate a special investigation. No
previous notification will be required for proposals concerning
items included on the agenda or for debates as to which no vote
is taken. Pursuant to the Swiss Code, any shareholder may make
proposals for any item included on the agenda of a general
meeting at any time before the taking of the resolution
including the nomination of a director if the election of the
board of directors is an item on the agenda. A shareholder
registered in
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the share register with voting rights may participate in such
meeting either in person or by a third party appointed by way of
a written proxy. Beneficial owners of voting shares held through
a nominee exercise shareholders rights through such
nominee.
Annual general meetings of shareholders may be convened by the
board of directors or, under certain circumstances, by the
auditor. A general meeting of shareholders can be held anywhere
in Switzerland, provided that the selection of the meeting
location does not impair shareholders participation rights.
An extraordinary general meeting of Allied World Switzerland may
be called upon the resolution of the board of directors or,
under certain circumstances, by the auditor. In addition, the
board of directors is required to convene an extraordinary
general meeting of shareholders if so requested by the
shareholders registered in the share register as holding an
aggregate of at least 10% of the voting shares, specifying the
items for the agenda and their proposals, or if it appears from
the stand-alone annual statutory balance sheet that half of the
companys share capital and reserves are not covered by the
companys assets. In the latter case, the board of
directors must immediately convene an extraordinary general
meeting of shareholders and propose financial restructuring
measures.
Under Swiss law and Allied World Switzerlands articles of
association, a shareholder or group of shareholders registered
in Allied World Switzerlands share register representing
voting shares with a par value of at least CHF 1 million
may submit a proposal for consideration by the shareholders at
any annual meeting by giving written notice of such intent in
writing and received by Allied World Switzerland not less than
60 calendar days in advance of the date of the meeting.
The board of directors or chairman of the board of directors may
postpone a shareholders 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. According to legal doctrine, 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.
Shareholders registered with voting rights in the share register
may, at a general meeting, raise new proposals or
counterproposals related to any existing proposal or item
already on the agenda. Except as required by law, no resolution
of the shareholders may be passed on items proposed without
notice at a general meeting and having no bearing on any of the
proposed items of the agenda.
Allied World Switzerlands annual report and auditors
report must be made available for inspection by the shareholders
at Allied World Switzerlands place of incorporation no
later than 20 days prior to the meeting. The annual report
will include Allied World Switzerlands financial
statements (statutory and consolidated) and a description of its
business and economic situation. Each shareholder is entitled to
request immediate delivery of a copy of these documents free of
charge. Shareholders of record will be notified of this in
writing.
Voting
Each Allied World Switzerland voting share carries one vote at a
general meeting of shareholders. Non-voting participation
certificates have no voting rights. Voting rights may be
exercised by shareholders registered in Allied World
Switzerlands share register with voting rights in person
or by a duly appointed proxy of a shareholder registered in the
share register with voting rights, which proxy need not be a
shareholder. Except as described below, Allied World
Switzerlands articles of association do not limit the
number of voting shares that may be voted by a single
shareholder. Beneficial owners of voting shares held through a
nominee exercise shareholders rights through the nominee.
Allied World Switzerlands articles of association limit
the voting rights of voting shares that are controlled
shares of a shareholder to one vote less than 10% of the
total voting rights of Allied World Switzerlands share
capital as registered with the 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
U.S. Code relating to controlled foreign
corporation status but are broader than the U.S. Code
in that the U.S. Code distinguishes in some respects
between U.S. and
non-U.S. persons,
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while Swiss law would not support rules that discriminate based
on citizenship or residence. The board of directors may waive
this restriction.
To be able to exercise voting rights, holders of the voting
shares must apply to us for enrollment in our share register as
shareholders with voting rights. Registered holders of voting
shares may obtain the form of application from our transfer
agent. The form of application includes a representation that
the holder is holding voting shares for his own account. Certain
exceptions exist for nominees. The board of directors will
register Cede & Co., as nominee of The Depository
Trust Company (DTC), with voting rights with
respect to shares held in street name through DTC.
Registration of a shareholder in Allied World Switzerlands
share register can be refused on the following grounds:
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No individual or legal entity may, directly or indirectly,
formally, constructively or beneficially own (as defined in
Article 14 of the articles of association) or otherwise
control voting rights with respect to 10% or more of the 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. Persons holding voting shares exceeding the limit
of 10% shall be entered in the share register with respect to
such shares as shareholders without voting rights;
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The limit of 10% of the share capital also applies to the
subscription for, or acquisition of, voting shares by exercising
option or convertible rights arising from registered or bearer
securities or any other securities issued by Allied World
Switzerland or third parties, as well as by means of exercising
purchased preemptive rights arising from either registered or
bearer shares. Persons holding voting shares exceeding the limit
of 10% shall be entered in the share register with respect to
such excess voting shares as shareholders without voting rights;
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The board of directors shall reject entry of holders of voting
shares as shareholder with voting rights in the share register
or shall decide on their deregistration when the acquirer or
shareholder upon request does not expressly state that she/he
has acquired or holds the voting shares in her/his own name and
for her/his own account.
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The board of directors may record Cede & Co and other
nominees in our share register as shareholders with the right to
vote without limitation when the nominee undertakes the
obligation to disclose at any time to us at our written request
the names, addresses and share holdings of each person for whom
such nominee is holding voting shares. Beneficial owners of
shares who hold their voting shares through nominees exercise
their rights through the intermediation of such nominees.
If the board of directors refuses to register a shareholder in
the share register as a shareholder with voting rights, the
board must notify the shareholder of such refusal within
20 days of the receipt of the application. Furthermore, the
board may cancel, with retroactive application, the registration
of a shareholder with voting rights if the initial registration
was on the basis of false information in the shareholders
application. Shareholders registered without voting rights may
not participate in or vote at Allied World Switzerlands
shareholders meetings, but will be entitled to dividends,
preemptive rights and liquidation proceeds. Only 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.
Treasury Shares, whether owned by Allied World Switzerland or
one of its majority-owned subsidiaries, will not be entitled to
vote at general meetings of shareholders.
Pursuant to Allied World Switzerlands articles of
association, the 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).
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The Swiss Code
and/or
Allied World Switzerlands articles of association require
the affirmative vote of at least
662/3%
of the voting rights and a majority of the par value of the
voting shares, each as represented at a general meeting to
approve the following matters:
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a change of the purpose of Allied World Switzerland;
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the creation of shares with privileged voting rights;
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the restriction on the transferability of voting shares or
non-voting participation certificates;
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an increase of capital, authorized or subject to a condition;
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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;
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the limitation or withdrawal of preemptive rights;
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a change in the domicile of Allied World Switzerland;
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the liquidation of Allied World Switzerland;
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the alleviating or withdrawal of restrictions upon the transfer
of voting shares or non-voting participation certificates;
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the conversion of voting shares into bearer shares and vice
versa as well as the conversion of non-voting participation
certificates into shares;
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the dismissal of any member of the Board of Directors according
to Article 705, paragraph 1 of the Swiss Code; and
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any alteration or amendment of articles 8, 14, 15 or 16 of
the articles of association, which relate to the voting rights
of shareholders of Allied World Switzerland.
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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 (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, 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 Switzerland. See
Compulsory Acquisitions; Appraisal
Rights.
Allied World Switzerlands articles of association require
the affirmative vote of at least
662/3%
of the votes and a majority of the par value of the voting
shares represented at a general meeting to approve the removal
of a member of the board of directors (with or without cause).
Quorum
for General Meetings
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). Allied World Switzerlands articles of
association 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 World Switzerlands total
outstanding voting shares throughout the meeting.
Inspection
of Books and Records
Under the Swiss Code, a shareholder registered in Allied World
Switzerlands share register has a right to inspect the
share register with regard to his own shares and otherwise to
the extent necessary to exercise his
60
shareholder rights. No other person has a right to inspect the
share register. The books and correspondence of a Swiss company
may be inspected with the express authorization of the general
meeting of shareholders or by resolution of the board of
directors (if unlawfully denied, by court order) and subject to
the safeguarding of the companys business secrets. At a
general meeting of shareholders, any shareholder registered in
Allied World Switzerlands share register is entitled to
request information from the board of directors concerning the
affairs of the company. Shareholders registered in Allied World
Switzerlands share register may also ask the auditor
questions regarding its audit of the company. The board of
directors and the auditor must answer shareholders
questions to the extent necessary for the exercise of
shareholders rights and subject to prevailing business
secrets or other material interests of Allied World Switzerland.
Special
Investigation
If the shareholders inspection and information rights as
outlined above prove to be insufficient, any shareholder may
propose to the general meeting of shareholders that specific
facts be examined by a special commissioner in a special
investigation. If the general meeting of shareholders approves
the proposal, Allied World Switzerland or any shareholder may,
within 30 calendar days after the general meeting of
shareholders, request the court at Allied World
Switzerlands registered office to appoint a special
commissioner. If the general meeting of shareholders rejects the
request, one or more shareholders representing at least 10% of
the share capital or holders of voting shares in an aggregate
par value of at least two million Swiss francs may request the
court to appoint a special commissioner. The court will issue
such an order if the petitioners can demonstrate that the board
of directors, any member of the board or an officer of Allied
World Switzerland infringed the law or Allied World
Switzerlands articles of association and thereby damaged
the company or the shareholders. The costs of the investigation
would generally be allocated to Allied World Switzerland and
only in exceptional cases to the petitioners.
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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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
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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).
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If a transaction under the Merger Act receives all of the
necessary consents, all shareholders would be compelled to
participate in the transaction. See
Voting.
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 Switzerland, 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
Switzerland 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.
61
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;
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the companys assets, after the divestment, are not
invested in accordance with the companys statutory
business purpose; and
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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.
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If all of the foregoing apply, a shareholder resolution would
likely be required.
Anti-Takeover
Provisions
Allied World Switzerlands articles of association 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 board of directors and
in the policies formulated by the 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 acquirer prior to its having obtained sufficient
control to adopt a special resolution amending Allied World
Switzerlands articles of association.
The articles of association provide that Allied World
Switzerlands board of directors will be 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 Allied
World Switzerlands articles of association. Allied World
Switzerlands articles of association 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.
Upon completion of the Redomestication, Allied World
Switzerlands articles of association will 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 50% of the
share capital registered in the commercial register and to limit
or withdraw the preemptive rights of the existing shareholders
in various circumstances.
Upon completion of the Redomestication, Allied World
Switzerlands articles of association will 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 Switzerlands share
capital as registered with the 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, under Allied World Switzerlands articles of
association, shareholders whose controlled shares
(as defined in the articles of association) represent 10% or
more of the total voting shares of Allied World Switzerland will
be limited to voting one vote less than 10% of the total voting
rights of Allied World Switzerlands share capital as
registered with the commercial register, which could make it
more difficult for a third party to acquire us without the
consent of our board of directors.
For other provisions that could be considered to have an
anti-takeover effect, see Preemptive Rights
and Advance Subscription Rights, General
Meetings of Shareholders and
Voting above.
62
Legal
Name; Formation; Fiscal Year; Registered Office
The legal and commercial name of Allied World Switzerland is
Allied World Assurance Company Holdings, AG. Allied World
Switzerland was initially formed on May 4, 2010 and
registered with the commercial register of the Canton of Zug on
May 12, 2010. Allied World Switzerland is incorporated and
domiciled in Zug, Switzerland, and operates under the Swiss Code
as a stock corporation (Aktiengesellschaft). Allied World
Switzerland is recorded in the Commercial Register of the Canton
of Zug with the registration number CH-170.3.034.503-3. Allied
World Switzerlands fiscal year is the calendar year.
Allied World Switzerlands current registered office in
Switzerland is
c/o RA
Andreas Durungs, Poststrasse 12, 6301, Zug, Switzerland.
Corporate
Purpose
Currently, Allied World Switzerland is a subsidiary of Allied
World Bermuda, and its business purpose is to acquire, hold,
manage and sell equity participations in businesses in
Switzerland and abroad, including in insurance and reinsurance
companies as well as in other companies. Upon completion of the
Redomestication, Allied World Switzerland will become the new
holding company of Allied World Bermuda and will continue to
have the same business purpose.
Duration;
Dissolution; Rights upon Liquidation
Allied World Switzerlands duration is unlimited. Allied
World Switzerland may be dissolved at any time with the approval
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.
Dissolution by court order is possible if Allied World
Switzerland becomes bankrupt, or for cause at the request of
shareholders holding at least 10% of Allied World
Switzerlands share capital. Under Swiss law, any surplus
arising out of liquidation, after the settlement of all claims
of all creditors, will be distributed to shareholders and
holders of non-voting participation certificates in proportion
to the
paid-up par
value of voting shares and non-voting participation certificates
held, subject to Swiss withholding tax requirements.
Uncertificated
Shares
Allied World Switzerland is authorized to issue voting shares in
certificated or uncertificated form. Allied World Switzerland
currently issues voting shares in uncertificated, book-entry
form.
Stock
Exchange Listing
Allied World Switzerland intends to make application so that,
immediately following the consummation of the Redomestication,
the voting shares of Allied World Switzerland will be listed on
the NYSE under the symbol AWH, the same symbol under
which Allied World Bermudas common shares are currently
listed.
No
Sinking Fund
The voting shares have no sinking fund provisions.
No
Liability for Further Calls or Assessments
The voting shares to be issued in connection with the Scheme of
Arrangement will be duly and validly issued, fully paid and
nonassessable.
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No
Redemption and Conversion
The voting shares are not convertible into shares of any other
class or series or subject to redemption either by Allied World
Switzerland or the holder of the voting shares.
Transfer
and Registration of Ownership of Shares
Allied World Switzerland has not imposed any restrictions
applicable to the transfer of Allied World Switzerland voting
shares. Allied World Switzerlands share register will
initially be kept by Continental Stock Trust &
Transfer Company, which acts as transfer agent and registrar.
The share register reflects only record owners of Allied World
Switzerland voting shares. Swiss law does not recognize
fractional share interests.
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COMPARISON
OF RIGHTS OF SHAREHOLDERS AND
POWERS OF THE BOARD OF DIRECTORS
Your rights as a shareholder of Allied World Bermuda and the
relative powers of Allied World Bermudas board of
directors are governed by Bermuda law and Allied World
Bermudas memorandum of association and bye-laws. After the
Redomestication, you will become a shareholder of Allied World
Switzerland, and your rights and the relative powers of Allied
World Switzerlands board of directors will be governed by
Swiss law and Allied World Switzerlands articles of
association and organizational regulations.
Many of the principal attributes of Allied World Bermudas
voting common shares and Allied World Switzerlands voting
shares will be similar. However, there are differences between
your rights under Swiss law and under the corporate statutory
and common law of Bermuda, which is modeled on certain
provisions of the corporate statutory law of England and Wales
and in respect of which the common law of England and Wales is
highly persuasive authority as to questions of Bermuda law. In
addition, there are differences between Allied World
Bermudas memorandum of association and bye-laws and Allied
World Switzerlands articles of association and
organizational regulations. Furthermore, the counterparts of
some provisions that are included in Allied World Bermudas
bye-laws are included in Allied World Switzerlands
organizational regulations. As a result, Allied World
Switzerlands board of directors will be able to amend
these provisions without shareholder approval, which Allied
World Bermudas board of directors is currently unable to
do.
The following discussion is a summary of material changes in
your rights resulting from the Redomestication. This summary is
not complete and does not cover all of the differences between
Swiss law and Bermuda law affecting companies and their
shareholders or all the differences between Allied World
Bermudas memorandum of association and bye-laws and Allied
World Switzerlands articles of association and
organizational regulations. We believe this summary is accurate.
It is, however, subject to the complete text of the relevant
provisions of the Swiss Code, in particular articles 620
through 763 of the Swiss Code, and the Merger Act, the Bermuda
Companies Act 1981 (the Companies Act), Allied World
Bermudas memorandum of association and bye-laws and Allied
World Switzerlands articles of association and
organizational regulations. We encourage you to read those laws
and documents. Allied World Switzerlands form of proposed
articles of association and organizational regulations are
attached to this proxy statement as Annex D and
Annex E, respectively. For information as to how you can
obtain Allied World Bermudas memorandum of association,
see Where You Can Find More Information.
Capitalization
Allied World Bermuda. As of October 12,
2010, the authorized share capital of Allied World Bermuda was
composed of 333,333,333 common shares, par value $0.03 per
share, and there were 38,896,801 voting common shares and
3,449,853 non-voting common shares outstanding. In addition, as
of such date, Allied World Bermuda held 8,465,456 common shares
in treasury. The board of directors of Allied World Bermuda may
authorize the issuance of additional shares up to the amount of
the authorized capital without obtaining additional shareholder
approval (subject to any applicable requirements of the NYSE).
The board of directors of Allied World Bermuda may also approve
the issuance of partly paid and unpaid common shares, as well as
fractional common shares.
Allied World Switzerland. If the
Redomestication had been completed on September 30, 2010,
the total share and participation capital of Allied World
Switzerland would have been approximately CHF 690,183,697
($635,918,640), and would have consisted of share capital of
approximately CHF 634,020,090 ($584,170,845) (composed of
approximately 38,944,723 voting shares with a par value of CHF
16.28 ($15.00) per share) and participation capital of
approximately CHF 56,163,607 ($51,747,795) (composed of
approximately 3,449,853 non-voting participation certificates
with a par value of CHF 16.28 ($15.00) per non-voting
participation certificate). Allied World Switzerlands
voting shares do not include the non-voting participation
certificates as described under Description of Allied
World Switzerland Shares Capital
Structure Issued Participation Capital, which
are the Swiss equivalent of Allied World Bermudas
non-voting shares. The board of directors may not create shares
with increased voting powers without the affirmative resolution
adopted by shareholders holding at least
662/3%
of the voting rights and a majority of the par value of the
voting shares, each as represented at a general meeting. In
addition, the board of directors may not create preferred stock
(Vorzugsaktien) without the vote of a majority of the
voting shares cast at a general meeting.
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Immediately prior to the Redomestication, Allied World
Switzerland will not have any share capital authorized for
future issuance. Upon completion of the Redomestication, the
board of directors will be authorized to issue new voting shares
at any time during a two-year period and thereby increase the
share capital, without shareholder approval, by a maximum amount
of 20% of the voting share capital registered in the commercial
register, which, if the Redomestication had been completed on
September 30, 2010, would have been approximately CHF
126,804,008 ($116,870,054), or approximately 7,788,944 voting
shares (assuming a par value of CHF 16.28 ($15.00) per voting
share). After the expiration of the initial two-year period, and
each subsequent two-year period, authorized share capital will
be available to the board of directors for issuance of
additional voting shares only if the authorization is
re-approved by shareholders.
In an authorized capital increase, as in an ordinary capital
increase, Allied World Switzerland shareholders and, if and to
the extent the participation capital is not increased
proportionally, the holders of non-voting participation
certificates, would have preemptive rights to obtain newly
issued voting shares in an amount proportional to the number of
the voting shares and non-voting participation certificates,
respectively, they already hold. However, the board of directors
may withdraw or limit these preemptive rights in certain
circumstances as set forth in Allied World Switzerlands
articles of association. For further details on these
circumstances, see Preemptive Rights and
Advance Subscription Rights below and Description of
Allied World Switzerland Shares Participation
Certificates above.
Immediately prior to the Redomestication, Allied World
Switzerland will not have any conditional share capital. Upon
completion of the Redomestication, Allied World
Switzerlands articles of association will provide for a
conditional share capital that, following the effectiveness of
the Redomestication, will allow the board of directors to
authorize the issuance of additional voting shares up to a
maximum amount of up to 7,200,000 voting shares without
obtaining additional shareholder approval. These voting shares
may be issued in connection with:
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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
Switzerland or by subsidiaries of Allied World Switzerland,
including convertible debt instruments (up to 1,000,000 voting
shares);
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the exercise of option rights granted to any employee of Allied
World Switzerland or a subsidiary, and any consultant, director
or other person providing services to Allied World Switzerland
or a subsidiary (up to 4,200,000 voting shares); or
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the exercise of shareholder warrants previously granted to AIG
(up to 2,000,000 voting shares).
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Shareholders and participation certificate holders
preemptive rights are excluded with respect to any new shares
issued out of conditional share capital.
In connection with the issuance of bonds, notes, or other
similar instruments convertible into or exercisable or
exchangeable for Allied World Switzerland voting shares to be
issued out of conditional share capital, shareholders and
holders of non-voting participation certificates have advance
subscription rights with regard to these instruments; however,
the board of directors is authorized to withdraw or limit the
advance subscription rights of shareholders and holders of
non-voting participation certificates in certain circumstances.
See Preemptive Rights and Advance Subscription
Rights below.
In addition, Allied World Switzerlands amended and
restated articles of association will provide for conditional
participation capital for non-voting participation certificates
that may be issued in connection with the exercise of
shareholder warrants previously granted to the GSCP Funds.
Preemptive
Rights and Advance Subscription Rights
Allied World Bermuda. Holders of Allied World
Bermuda common shares have no preemptive or preferential right
to purchase any securities of Allied World Bermuda. As a result,
as described below under Other Anti-Takeover
Measures, the board of directors may authorize the
issuance of securities that could discourage a takeover or other
transaction without offering the securities to each holder of
Allied World Bermuda common shares.
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Allied World Switzerland. Under the Swiss
Code, the prior approval of a general meeting of shareholders is
generally required to authorize, for later issuance, the
issuance of voting shares, or rights to subscribe for, or
convert into, voting shares (which rights may be connected to
debt instruments or other obligations). In addition, the
existing shareholders will have preemptive rights in relation to
such voting shares or rights in proportion to the respective par
values of their holdings. The shareholders may, with the
affirmative 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 the general meeting,
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 has approved the creation
of authorized or conditional capital, it can thereby also
delegate the decision whether or not to withdraw or limit the
preemptive and advance subscription rights for valid reasons to
the board of directors. Allied World Switzerlands articles
of association provide for this delegation with respect to
Allied World Switzerlands authorized and conditional share
capital in the circumstances described below.
Authorized Share Capital. Under the articles
of association, the board of directors of Allied World
Switzerland is authorized to withdraw or limit the preemptive
rights with respect to the issuance of voting shares from
authorized capital if the issuances are made in connection with:
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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);
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improving the regulatory capital position of Allied World
Switzerland or its subsidiaries (including by way of private
placements);
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broadening the shareholder constituency;
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the participation of employees; or
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exchanging non-voting participation certificates as well as a
buy-back of non-voting participation certificates in exchange
for voting shares out of authorized share capital.
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For more information on authorized capital, see
Allied World Switzerland above.
Conditional Share Capital. The preemptive
rights of shareholders and holders of non-voting participation
certificates are excluded with respect to voting shares issued
from Allied World Switzerlands conditional share capital.
For more information on conditional capital, see
Allied World Switzerland above.
In connection with the issuance of bonds, notes, or other
similar instruments convertible into or exercisable or
exchangeable for Allied World Switzerland voting shares,
shareholders and holders of non-voting participation
certificates have advance subscription rights allowing them to
participate on a pro rata basis in the issuance of these debt
instruments to the extent the underlying shares are sourced from
conditional capital. The board of directors of Allied World
Switzerland is authorized to withdraw or limit the advance
subscription rights of shareholders with respect to such
convertible or exchangeable debt instruments if the issuance is
made in order to (1) finance or re-finance the acquisition
of companies, parts of companies or holdings, or new investments
planned by Allied World Switzerland, or (2) issue
convertible bonds and warrants on the international capital
markets or through private placement.
If the advance subscription rights are to be excluded then:
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the instruments have to be placed at market conditions;
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the exercise period is not to exceed ten years from the date of
issue for warrants and twenty years for conversion
rights; and
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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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Distributions
and Dividends; Repurchases and Redemptions
Allied World Bermuda. Allied World Bermuda is
not required to present proposed dividends or distributions from
contributed surplus to its shareholders for approval or
adoption. Under the Companies Act, the board of directors of
Allied World Bermuda may not declare the payment of dividends or
distributions from contributed surplus to the common
shareholders if there are reasonable grounds for believing that:
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Allied World Bermuda is, or would after the payment be, unable
to pay its liabilities as they become due; or
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the realizable value of Allied World Bermudas assets would
thereby be less than the aggregate of its liabilities and its
issued share capital and share premium accounts.
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Contributed surplus includes proceeds arising from donated
shares, credits resulting from the redemption or conversion of
shares at less than the amount set up as a nominal capital and
donations of cash and other assets of the company.
Under the Companies Act, shares of a Bermuda company may be
redeemed or repurchased if so authorized by its bye-laws or
memorandum of association, provided that:
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no such shares shall be repurchased or redeemed except out of
the capital paid thereon, the funds of the company available for
dividend or distribution, or out of the proceeds of a fresh
issue of shares made for the purposes of redemption;
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the premium, if any, payable on redemption, is provided for out
of Allied World Bermudas funds which would be otherwise
available for dividend or distribution or out of Allied World
Bermudas share premium account before the shares are
repurchased or redeemed; and
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there are no reasonable grounds for believing that Allied World
Bermuda is, or after such redemption or repurchase would be,
unable to repay its liabilities as they become due.
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Under Allied World Bermudas bye-laws, Allied World Bermuda
may, upon the agreement of a shareholder, repurchase all or part
of the common shares of such shareholder, whether or not the
company has made a similar offer to all or any of the other
shareholders. Allied World Bermudas common shares are not
redeemable.
In addition, Allied World Bermudas bye-laws give the board
the authority to exercise all of the powers of the company to
purchase all or any part of the outstanding shares in accordance
with law and any designated stock exchange.
Allied World Switzerland. Under Swiss law,
dividends may be paid out only if the corporation has freely
distributable reserves, from sufficient distributable profits
from either the last fiscal year or from previous fiscal years,
as will be presented on the audited annual stand-alone statutory
balance sheet. Payments out of the share and participation
capital (in other words, the aggregate par value of Allied World
Switzerlands 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, as
described below. Qualifying additional paid-in capital may only
be paid out as dividends to shareholders and participants
following approval by the shareholders of a reclassification of
such qualifying additional paid-in capital as freely
distributable reserves (to the extent permissible under the
Swiss Code). Allied World Switzerland may seek to reclassify its
qualifying additional paid-in capital to freely distributable
reserves as early as its first general meeting following
completion of the Scheme of Arrangement. The affirmative vote of
shareholders holding a majority of the votes cast at a general
meeting must approve reserve reclassifications and distributions
of dividends. The board of directors may propose to shareholders
that a dividend be paid but cannot itself authorize the
dividend. However, the shareholders may approve a dividend
without the approval of the board of directors.
Under the Swiss Code, if Allied World Switzerlands general
capital reserves amount to less than 20% of the share and
participation capital recorded in the commercial register (i.e.,
20% of the aggregate par value of Allied World
Switzerlands capital), then at least 5% of Allied World
Switzerlands annual profit must be retained as general
reserves. The Swiss Code permits Allied World Switzerland to
accrue additional general reserves. In addition, Allied World
Switzerland is required to create a special reserve on its
stand-alone annual statutory balance
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sheet in the amount of the purchase price of voting shares it or
any of its subsidiaries repurchases, which amount may not be
used for dividends or subsequent repurchases.
Swiss companies generally must maintain a separate company,
stand-alone statutory balance sheet for the purpose of, among
other things, determining the amounts available for the return
of capital to shareholders and holders of non-voting
participation certificates, including by way of a distribution
of dividends. Allied World Switzerlands auditor must
confirm that a dividend proposal made to shareholders conforms
with the requirements of the Swiss Code and Allied World
Switzerlands articles of association. Dividends are
usually due and payable shortly after the shareholders have
passed a resolution approving the payment, and it may not be
feasible, without separate shareholder approvals, to pay
dividends on a quarterly basis instead of in a single payment.
For information about deduction of the withholding tax from
dividend payments, see Material Tax
Considerations Swiss Tax Considerations.
The Swiss Code limits a companys ability to hold or
repurchase its own voting shares and non-voting participation
certificates. Allied World Switzerland and its subsidiaries may
only repurchase voting shares and non-voting participation
certificates if and to the extent that sufficient freely
distributable reserves are available, as described above. The
aggregate par value of all Allied World Switzerland voting
shares and non-voting participation certificates held by Allied
World Switzerland and its subsidiaries may not exceed 10% of the
aggregate share and participation capital. However, Allied World
Switzerland may, according to the prevailing view, repurchase
its own voting shares and non-voting participation certificates
beyond the statutory limit of 10% if the shareholders have
passed a resolution at a general meeting of shareholders
authorizing the board of directors to repurchase voting shares
and/or
non-voting participation certificates in an amount in excess of
10% and the repurchased voting shares and non-voting
participation certificates are dedicated for cancellation. Any
voting shares and non-voting participation certificates
repurchased pursuant to such an authorization will then be
cancelled at the next general meeting upon the approval of
shareholders holding a majority of the votes cast at the general
meeting. Repurchased voting shares held by Allied World
Switzerland or its subsidiaries do not carry any rights to vote
at a general meeting of shareholders but are entitled to the
economic benefits generally associated with the shares.
Repurchased non-voting participation certificates held by Allied
World Switzerland or its subsidiaries are entitled to the
economic benefits generally associated with the non-voting
participation certificates. For information about withholding
tax and share repurchases, see Material Tax
Considerations Swiss Tax Considerations.
Capital distributions may also take the form of a distribution
of cash or property that is based upon a reduction of Allied
World Switzerlands share and participation capital
recorded in the commercial register. Such a capital reduction
requires the approval of shareholders holding a majority of the
votes cast at the general meeting. A special audit report must
confirm that creditors claims remain fully covered despite
the reduction in the share and participation capital recorded in
the commercial register. Upon approval by the general meeting of
shareholders of the capital reduction, the 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.
Allied World Switzerland will be required under Swiss law to
declare any dividends and other capital distributions in Swiss
francs. Allied World Switzerland intends to make any dividend
payments to holders of Allied World Switzerland voting shares
and non-voting participation certificates in U.S. dollars.
Continental Stock Transfer & Trust Company will
be responsible for paying the U.S. dollars to registered
holders of voting shares, less amounts subject to withholding
for taxes.
Shareholder
Approval of Business Combinations
Allied World Bermuda. Bermuda law provides for
a procedure known as a scheme of arrangement that
allows for compromises or arrangements between a company and its
creditors or any class of them or between a company and its
shareholders or any class of them. A scheme of arrangement
relating to the common shareholders of a company is effected by
the relevant Bermuda company applying for the consent of the
Bermuda court to seek, and subsequently obtaining, the approval
of holders of the common shares (1) representing a majority
in number of the holders of common shares present and voting on
the scheme of arrangement, whether in person or by proxy, and
(2) representing 75% or more in value of the common shares
present and voting on the scheme of arrangement,
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whether in person or by proxy, in each case excluding any shares
held by the acquiring party. If a scheme of arrangement relating
to the common shares receives the approval of holders of common
shares and is subsequently sanctioned by the Bermuda court, all
holders of common shares of a company will be bound by the terms
of the scheme of arrangement. Allied World Bermudas
Bermuda counsel has advised that where the statutory procedures
have been complied with, the Bermuda court is likely to sanction
such a scheme of arrangement that has been approved by the
requisite votes of shareholders in the absence of bad faith,
fraud or unequal treatment of shareholders.
Bermuda companies may also engage in a business combination
through the direct acquisition by an acquirer of the share
capital of the Bermuda company. The Companies Act provides that
when an offer is made for common shares of a Bermuda company
and, within four months of the offer, the holders of not less
than 90% of those shares accept, the offeror may, for two months
after that four-month period, require the remaining common
shareholders to transfer their common shares on the same terms
as the original offer. In those circumstances, nontendering
shareholders will be compelled to sell their shares, unless
within one month from the date on which the notice to
compulsorily acquire was given to the nontendering shareholder,
the nontendering shareholder is able to convince a Bermuda court
to order otherwise.
The Companies Act also allows the holders of not less than 95%
of the shares of any class of a company (referred to as the
purchasers) to give notice to the remaining
shareholders of such class of their intention to acquire the
shares of the remaining shareholders on the terms set forth in
the notice. When such notice is given, the purchasers are
entitled to acquire the shares of the remaining shareholders and
are bound by the terms set forth in the notice, unless a
remaining shareholder applies to a Bermuda court for an
appraisal of the value of the shares to be purchased from him or
her within one month of receiving the notice. Within one month
of the court appraising the value of the shares, which appraisal
may not be appealed, the purchasers are entitled to acquire the
remaining shares at the price fixed by the court or cancel the
acquisition notice.
Under Bermuda law, two or more companies can amalgamate and
continue as one company. The Companies Act provides for a
Bermuda exempt company to amalgamate with (i) a Bermuda
local company, (ii) a Bermuda exempt company, or
(iii) a foreign corporation. In each case, the surviving
entity can take the form of either of the amalgamating entities.
The statutory threshold for approval of an amalgamation is 75%
of shareholders voting at a special general meeting or such
lower majority as is stipulated in the bye-laws of the company.
Allied World Bermudas bye-laws provide that any matter
submitted to the shareholders at a general meeting for approval,
including for the amalgamation, merger or consolidation of the
company with another company, or the sale, lease or exchange of
all or substantially all of the assets of the company, must be
approved by a majority of the votes cast.
Although Allied World Bermudas bye-laws contain the
provision described above, Bermuda law does not impose a
separate shareholder approval requirement for a sale of
substantially all of a companys assets.
Allied World Switzerland. 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 votes 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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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
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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).
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If a transaction under the Merger Act receives all of the
necessary consents, all shareholders would be compelled to
participate in the transaction. See Voting
Rights.
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 Switzerland, the Merger Act
70
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). Under the Merger Act, a shareholder has the
right to request a court to review the adequacy of the
compensation. For more information, see
Appraisal Rights and Compulsory
Acquisitions.
In addition, under Swiss law, the sale of all or
substantially all of its assets by Allied World
Switzerland may require a resolution of the general meeting of
shareholders passed by holders of 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.
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;
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the companys assets, after the divestment, are not
invested in accordance with the companys statutory
business purpose; and
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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.
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If all of the foregoing apply, a shareholder resolution would
likely be required.
Other
Anti-Takeover Measures
Allied World Bermuda. Bermuda law does not
expressly prohibit companies from issuing share purchase rights
or adopting a shareholder rights plan. However, there is little
case law on the enforceability of such plans under Bermuda law.
In the adoption of such a plan, the following principles should
be observed: (1) the directors take bona fide actions in
the best interest of the company as a whole, (2) the powers
of the directors are used for a proper purpose, (3) the
directors exercise their powers fairly between shareholders and
(4) the plan does not penalize any existing shareholders.
Under Allied World Bermudas bye-laws, Allied World
Bermudas board of directors could authorize, without
shareholder approval, the issuance of a preferred share purchase
right to be attached to each outstanding common share with such
terms and for such purposes, including the influencing of
takeovers, as determined by the board of directors.
The board of directors of Allied World Bermuda is also
authorized, without obtaining any vote or consent of the holders
of any class or series of shares unless expressly provided by
the terms of a class or series, to issue from time to time any
other classes or series of shares with the designations and
relative powers, preferences, conversion or other rights, voting
powers, restrictions, limitations as to dividends or terms or
conditions of redemption as it considers fit. The board of
directors could authorize the issuance of preference shares with
terms and conditions that could discourage a takeover or other
transaction that holders of some or a majority of the common
shares might believe to be in their best interests or in which
holders might receive a premium for their shares over the then
market price of the shares.
For other provisions that could be considered to have an
anti-takeover effect, in addition to
Preemptive Rights and Advance Subscription
Rights above, see Special Meetings of
Shareholders, Election of Directors;
Staggered Terms of Directors, Removal of
Directors, Amendment of Governing
Documents, Director Nominations;
Proposals of Shareholders, Voting
Rights and Transfer and Registration of Ownership of
Shares below.
Allied World Switzerland. Allied World
Switzerland does not have a shareholder rights plan. Rights
plans generally discriminate in the treatment of shareholders by
imposing restrictions on any shareholder who exceeds a level of
ownership interest without the approval of the board of
directors. Anti-takeover measures such as rights plans that are
implemented by the board of directors would be restricted under
Swiss corporate law by the principle of equal treatment of
shareholders and the general rule that new shares may only be
issued based on a shareholders resolution. However, upon
completion of the Redomestication, Allied World
Switzerlands articles of association
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will 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 of up to 50%
of the share capital registered in the commercial register and
to limit or withdraw the preemptive rights of the existing
shareholders in various circumstances.
Under the articles of association of Allied World Switzerland
acquirers of voting shares applying to be registered as
shareholders of record with voting rights and who not expressly
declare themselves to be holding voting shares for their own
account in the application for registration in the share
register will not be registered as shareholders with voting
rights. Nominees are exempted to the extent they undertake to
disclose at any time to the company at its written request the
names, addresses and shareholding of each person for whom such
nominee is holding shares. In addition, the articles of
association of Allied World Switzerland provide that no acquirer
of voting shares applying to be registered as a shareholder with
voting rights will be registered as a shareholder with voting
rights for 10% or more of the share capital as recorded in the
commercial register. Legal entities that are linked to one
another through capital, voting rights, management or in any
other manner, as well as all natural persons or legal entities
achieving an understanding or forming a syndicate or otherwise
acting in concert to circumvent the limitation on registration,
are considered one shareholder. The board of directors is
authorized to grant exemptions from these requirements under
certain circumstances. Further, under Allied World
Switzerlands articles of association, shareholders whose
controlled shares (as defined in the articles of
association) represent 10% or more of the total voting shares of
Allied World Switzerland will be limited to voting one vote less
than 10% of the total voting rights of Allied World
Switzerlands share capital as registered with the
commercial register.
The above transfer and voting limitations could make it more
difficult for a third party to acquire control over us. See
Voting Rights.
For other provisions that could be considered to have an
anti-takeover effect, in addition to
Preemptive Rights and Advance Subscription
Rights above, see Special Meetings of
Shareholders, Election of Directors;
Staggered Terms of Directors, Removal of
Directors, Amendment of Governing
Documents, Director Nominations;
Proposals of Shareholders, Voting
Rights and Transfer and Registration of
Ownership of Shares below.
Appraisal
Rights and Compulsory Acquisitions
Allied World Bermuda. Under the Companies Act,
a dissenting shareholder of a company participating in an
amalgamation (other than an amalgamation between a company and
its wholly-owned subsidiary or between two or more subsidiaries
of the same holding company) may apply to the court to appraise
the fair value of his or her shares. In connection with the
compulsory transfer of shares to a 90% shareholder of a Bermuda
company as described under Shareholder
Approval of Business Combinations, a minority shareholder
may apply to the court within one month of receiving notice of
the compulsory transfer objecting to that transfer. In
connection with the compulsory transfer of shares to a 95%
shareholder of a Bermuda company, a minority shareholder may
apply to the court within one month of receiving notice of the
compulsory transfer to have the value of his or her shares
appraised by the court.
Allied World Switzerland. 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 a competent court to determine a
reasonable amount of compensation.
Election
of Directors; Staggered Terms of Directors
Allied World Bermuda. Allied World
Bermudas bye-laws provide that the number of directors of
Allied World Bermuda shall be not less than seven or more than
thirteen. The board has the exclusive power to set the exact
number of directors within that range. The board currently has
eight directors. The Companies Act does not contain provisions
specifically related to classified boards of directors. However,
Allied World Bermudas bye-laws provide for a classified
board of directors.
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Allied World Bermudas bye-laws provide that directors may
be elected at a general meeting by a plurality of the votes cast
by the shareholders present in person or by proxy at the meeting.
Allied World Switzerland. Allied World
Switzerlands articles of association provide for the
number of directors of Allied World Switzerland to be not less
than three or more than 13. Upon completion of the
Redomestication, Allied World Switzerland will have the same
directors as Allied World Bermuda.
Allied World Switzerlands articles of association provide
for a classified board of directors. At each annual general
meeting, each class of the directors whose term then expires
shall be elected to hold office for a three-year term.
With respect to the election of directors, each holder of voting
shares entitled to vote at the general meeting has, subject to
the limitation for shareholders whose controlled
shares represent 10% or more of Allied World
Switzerlands voting shares, the right to vote, in person
or by proxy, the number of voting shares held by him for each
person to be elected.
Allied World Switzerlands articles of association further
provide that directors may be elected at a general meeting of
shareholders by a majority of the votes cast at the meeting
(whereby abstentions, broker non-votes, blank or invalid ballots
shall be disregarded for purposes of establishing the majority).
Under the Swiss Code, board members may at any time, with or
without cause and with immediate effect, resign from office.
Vacancies
on Board of Directors
Allied World Bermuda. Allied World
Bermudas bye-laws provide that a vacancy or a newly
created directorship as proposed by Allied World Bermudas
board of directors shall be filled by the decision of a majority
of the votes cast at a duly constituted meeting of the board at
which a quorum is present.
Allied World Switzerland. The Swiss Code
provides that a vacancy or a newly created directorship as
proposed by Allied World Switzerlands board of directors
may only be filled upon approval by shareholders at a general
meeting.
Removal
of Directors
Allied World Bermuda. Allied World
Bermudas bye-laws provide that directors may only be
removed for cause, and such removal requires the
affirmative vote of a majority of the votes cast by the
shareholders present in person or by proxy at the meeting.
Allied World Switzerland. 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, 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 Allied World
Switzerlands articles of association. Allied World
Switzerlands articles of association provide that a
decision of the shareholders at a general meeting to remove a
director (with or without cause) requires the vote of
shareholders holding at least
662/3%
of the votes and a majority of the par value of the voting
shares, each as represented at a general meeting.
Alternate
Directors
Allied World Bermuda. Under the bye-laws of
Allied World Bermuda, no director has the right to appoint
another person to act as his alternate director.
Allied World Switzerland. Allied World
Switzerlands articles of association and the Swiss Code do
not allow for the election or appointment of alternate directors.
73
Duties of
the Board of Directors
Allied World Bermuda. The Companies Act
includes a statutory duty of care, requiring directors to act
honestly and in good faith with a view to the best interests of
the company and to exercise the care, diligence and skill that a
reasonably prudent person would exercise in comparable
circumstances. In addition to the statutory duty of care,
judicial precedent in Bermuda has defined the duties of a
director as being the exercise of reasonable skill, care and
diligence, to take actions in the bona fide best interests of
the company, to exercise powers for proper purposes and to
observe general standards of loyalty, good faith, and the
avoidance of a conflict of duty and self-interest. In the
absence of a developed body of Bermuda law in this regard, the
principles outlined by English common law are highly persuasive
in Bermuda courts. The standard of skill and care expected of a
director of a Bermuda company may be summarized as follows:
Historically, the standard of care expected of directors in
Bermuda was entirely subjective. In recent years the English and
Commonwealth common law authorities have moved towards an
objective test for the standard of skill and care that should be
exercised by directors. It is likely that Bermuda courts will
follow these authorities. In consequence, it is probable that
the standard of care required to be met by the director of a
Bermuda company is that of a reasonably diligent person having
both (1) the general knowledge, skill and experience that
may reasonably be expected of a person carrying out the same
functions as are carried out by that director in relation to
that company, and (2) the specific knowledge, skill and
experience that such director actually has. In consequence,
there is a minimum objective standard based upon the functions
given to the director in question but the standard may be raised
where the director in question has more knowledge, skill and
experience than would normally be expected. In addition, and
based on a growing body of judicial precedent in England and the
Commonwealth, the responsibilities of directors require that
they take reasonable steps to place themselves in a position to
guide and monitor the management of the company without relying
blindly on the judgment of others. The foregoing
notwithstanding, the duty of care is not absolute and it is
still proper for directors to delegate management functions,
especially in large companies such as Allied World Bermuda.
Under the Companies Act, a director must observe the statutory
duty of care, which requires such director to act honestly and
in good faith with a view to the best interests of the company
and to exercise the care, diligence and skill that a reasonably
prudent person would exercise in comparable circumstances.
Directors are also subject to common law fiduciary duties which
require directors to act in good faith and in the best interests
of the company and to exercise the powers and fulfill the duties
of the office honestly and within the powers set forth in the
companys memorandum and bye-laws. Further, directors must
not put themselves in a position of conflict with the company.
Allied World Switzerland. A director of a
Swiss company is bound to performance standards as specified in
the Swiss Code. Under these standards, a director must act in
accordance with the duties imposed by statutory law, in
accordance with the companys articles of association and
in the best interest of the company. A director is generally
disqualified from participating in a decision that directly
affects him or her. A director must generally safeguard the
interest of the company in good faith, adhere to a duty of
loyalty and a duty of care and, absent special circumstances,
extend equal treatment to all shareholders in like
circumstances. The test for the duty of care is primarily
objective: a director is required to apply the care a reasonable
person would apply under the same circumstances. To some extent,
particular skills and functions of a board member may be taken
into consideration. The members of the board of directors of
Allied World Switzerland are liable to Allied World Switzerland,
its shareholders and, in bankruptcy, its creditors for damage
caused by the violation of their duties.
To the extent that the Swiss Code and Allied World
Switzerlands articles of associate allow the delegation by
the board of directors of the
day-to-day
management to executive management, and such delegation is
actually made by virtue of Allied World Switzerlands
organizational regulations, the responsibility of the board of
directors is reduced with regard to the delegated task to the
due election, instruction and supervision of the executive
management.
Indemnification
of Directors and Officers; Insurance
Allied World Bermuda. Under the Companies Act,
a company may indemnify its directors and officers against any
liability which by virtue of any rule of law would otherwise be
imposed on them in respect of any negligence, default, breach of
duty or breach of trust, except in cases where such liability
arises from fraud or dishonesty of which such director or
officer may be guilty in relation to the company or any of its
subsidiaries.
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The bye-laws of Allied World Bermuda provide that Allied World
Bermuda shall indemnify its officers and directors in respect of
their actions and omissions, except in respect of their fraud or
dishonesty. Allied World Bermuda has entered into
indemnification agreements with its directors and executive
officers that provide for indemnification and expense
reimbursement to the fullest extent permitted by law.
The Companies Act permits a company to purchase and maintain
insurance for the benefit of any officer or director in respect
of any loss or liability attaching to him in respect of any
negligence, default, breach of duty or breach of trust, whether
or not the company may otherwise indemnify such officer or
director. Allied World Bermuda has purchased and maintains a
directors and officers liability policy for such a
purpose.
Allied World Switzerland. Although this area
of law is unsettled in Switzerland, we believe, based on the
interpretation of certain leading Swiss legal scholars (the
opinions of which are persuasive authority in Switzerland), that
under Swiss law, the company may indemnify its directors and
officers unless the indemnification results from a breach of
their duties, which breach constitutes gross negligence or
intentional breach of duty. Allied World Switzerlands
articles of association authorize the company to indemnify its
directors and officers and to advance expenses (except in cases
where Allied World Switzerland is proceeding against an officer
or director) to defend claims against directors and officers
mandatory on the part of Allied World Switzerland to the fullest
extent allowed by law. Under Allied World Switzerlands
articles of association, a director or officer may not be
indemnified if such person is found, in a final judgment or
decree not subject to appeal, to have committed an intentional
or grossly negligent breach of his or her statutory duties as a
director or officer. Swiss law permits the company, or each
director or officer individually, to purchase and maintain
insurance on behalf of such directors and officers. Allied World
Switzerland may obtain such insurance from one or more third
party insurers or captive insurance companies.
Allied World Switzerland also plans to enter into
indemnification agreements with each of its directors and
executive officers, upon the completion of the Redomestication,
in substantially similar form to those in place at Allied World
Bermuda, that will provide for indemnification and expense
advancement and include related provisions meant to facilitate
the indemnitees receipt of such benefits. We expect the
agreements to provide that Allied World Switzerland will
indemnify each director and executive officer against claims
arising out of such director or executive officers service
to the company to the fullest extent permitted by law; provided
that such director or executive officer acted in good faith and
reasonably believed that he was acting in the best interests of
Allied World Switzerland and, in addition, with respect to any
criminal proceeding, that he had no reasonable cause to believe
that his conduct was unlawful. A director or executive officer
will not be entitled to indemnification in respect of any claim
as to which the director or executive officer is adjudged in a
final and non-appealable judgment to have committed an
intentional or grossly negligent breach of his duties. We expect
the agreements to provide that expense advancement is provided
subject to an undertaking by the indemnitee to repay amounts
advanced if it is ultimately determined that he is not entitled
to indemnification. The board of directors of Allied World
Switzerland (if a majority of the board is disinterested in the
claim under which the officer or director is seeking
indemnification) or an independent counsel will determine
whether an indemnification payment or expense advance should be
made in any particular instance and the executive officer or
director seeking indemnification may challenge such
determination.
Limitation
on Director Liability
Allied World Bermuda. Under the Companies Act,
a company may exempt its directors against any liability which
by virtue of any rule of law would otherwise be imposed on them
in respect of any negligence, default, breach of duty or breach
of trust, except in cases where such liability arises from fraud
or dishonesty of which such director may be guilty in relation
to the company or any of its subsidiaries.
The Companies Act renders void any provision in the bye-laws or
any contract between a company and any such director exempting
him or her from or indemnifying him or her against any liability
in respect of any fraud or dishonesty of which he or she may be
guilty in relation to the company. Further, a Bermuda court may
not enforce a provision purporting to limit a directors
liability if to do so was contrary to public policy, such as, if
the provision attempted to relieve a director of criminal
liability. The Allied World Bermuda bye-laws provide that the
shareholders waive all claims or rights of action that they
might have, individually or in right of the company, against any
of the companys directors or officers for any act or
failure to act in the performance of such directors or
officers duties, except in respect of any fraud or
dishonesty of such director or officer.
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Allied World Switzerland. Swiss law does not
permit a company to exempt any member of its board of directors
from any liability for damages suffered by the company, the
shareholders or the companys creditors caused by
intentional or negligent violation of that directors
duties. However, the general meeting of shareholders may pass a
resolution discharging the members of the board of directors
from liability for certain limited actions. Such release is
effective only for facts that have been disclosed to the
shareholders and only vis-à-vis the company and those
shareholders who have consented to the resolution or who
acquired shares subsequently with knowledge of the resolution.
Swiss law does not allow prospective waivers of liability of
directors.
Directors
Conflicts of Interest
Allied World Bermuda. As a matter of the
common law applied in Bermuda, the director of a Bermuda company
should seek to avoid placing himself in a position where there
is a conflict, or a possible conflict, between the duties he
owes to the company and either his personal interest or other
duties that he owes to a third party, and if a director is in
any way, directly or indirectly, interested in a proposed
transaction or arrangement with the company, he must declare the
nature and extent of that interest to the other directors at the
first opportunity. The duty extends to not making personal
profit from opportunities that result from directorship.
This common law duty of a director to avoid conflicts of
interest generally is not breached in respect of matters that
have been declared by the director at the appropriate time and
(i) authorized by the directors generally or
(ii) authorized by the provisions of the companys
memorandum of association and bye-laws. Allied World
Bermudas bye-laws provide that a director who is directly
or indirectly interested in a contract or proposed contract or
arrangement with the company shall declare the nature of such
interest as required by the Companies Act and, following a
declaration being made pursuant to the bye-laws, and unless
disqualified by a majority of the board present at the relevant
board meeting, a director may vote in respect of any contract or
proposed contract or arrangement in which such director is
interested and may be counted in the quorum at such meeting.
Allied World Switzerland. Swiss law does not
have a general provision on conflicts of interest. However,
under the Swiss Code a director is required to safeguard the
interests of the company and to adhere to a duty of loyalty and
a duty of care. This requirement generally disqualifies a
director from participating in decisions directly affecting him.
Further, under Allied World Switzerlands organizational
regulations, each director must disclose to the chairman of the
board of directors all board memberships
he/she
holds, as well as any other interests, mandates, functions or
activities which could lead to a conflict of interest with
Allied World Switzerland and its subsidiaries. Breach of the
above principles may entail personal liability of the directors
to the company. In addition, the Swiss Code requires a director
to return to the company payments made to a director if such
payments are not made on an arms length basis or if the
recipient of the payment was acting in bad faith.
Shareholders
Suits
Allied World Bermuda. Under Bermuda law, a
court will generally refuse to interfere with the management of
a company on behalf of minority shareholders who are
dissatisfied with the conduct of a companys affairs by its
board of directors. However, each shareholder is entitled to
have the affairs of the company properly conducted in accordance
with law. Therefore, if those who control the company
persistently disregard the requirements of law or of the
companys memorandum of association or bye-laws, the court
may grant relief. Bermuda courts ordinarily would be expected to
follow English precedent, which would permit the court to
intervene in any of the following circumstances: (i) where
the act complained of is alleged to be beyond the corporate
power of the company or illegal; (ii) where the act
complained of is alleged to constitute a fraud against the
minority shareholders by those controlling the company; provided
that the majority shareholders have used their controlling
position to prevent the company from taking action against the
wrongdoers; (iii) where an act requires approval by a
greater percentage of the companys shareholders than
actually approved it; or (iv) where such an action is
necessary in order that there not be a violation of the
companys memorandum of association or bye-laws.
Under the Companies Act, a shareholder is entitled to complain
to the court that the affairs of the company are being conducted
in a manner which is oppressive or unfairly prejudicial to the
shareholders, or some of them, and seek a
winding-up
of the company or an alternative remedy.
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An individual shareholder may seek to bring an action on behalf
of the company to enforce the companys rights, and
judgment in such a case would be in favor of the company.
An individual shareholder may be permitted to bring an action on
behalf of himself and his fellow shareholders to remedy a wrong
done to the company or to compel the company to conduct its
affairs in accordance with the rules governing it.
A shareholder also may be permitted to bring an action in his
own name on his own behalf against a Bermuda company or another
shareholder. In any such action, however, a loss suffered by the
company will not be regarded as a direct loss suffered by the
individual shareholder. Remedies for such an action are
generally limited to declarations or injunctions.
Allied World Switzerland. Under Swiss law,
each shareholder is entitled to file an action for damage caused
to the company. The claim of the shareholder is for performance
to the company. If the shareholder, based upon the factual and
legal situation, had sufficient cause to file an action, the
judge has discretion to impose all costs the plaintiff incurred
in prosecuting the action on the company.
Shareholders who suffer a direct loss due to an intentional or
negligent breach of a directors or senior officers
duties may sue in their personal capacity for monetary
compensation.
Under Swiss law, any shareholder may challenge actions by the
general meeting of shareholders that violate the law or the
articles of association, including, for example, actions that
withdraw or limit shareholders preemptive rights without a
valid reason, violate the principle of equal treatment or
withdraw the profit orientation of the company without the
consent of all shareholders.
Shareholder
Consent to Action Without Meeting
Allied World Bermuda. The Companies Act
provides that anything which may be done by resolution of a
company at a general meeting or a meeting of any class of
members may also be done by resolution in writing; however,
Allied World Bermudas bye-laws do not provide for
shareholder action by written consent.
Allied World Switzerland. Under Swiss
corporate law, shareholders are not permitted to act by written
consent in lieu of a general meeting of shareholders.
Annual
Meetings of Shareholders
Allied World Bermuda. The Companies Act and
Allied World Bermudas bye-laws require that a general
meeting of shareholders be held at least annually. Allied World
Bermudas bye-laws provide that the annual meeting can be
held at any location as specified in the notice of the meeting.
At such meeting, elections will be held for directors whose
terms have expired and such other business may be transacted as
may properly be brought before such meeting. The shareholders
are also required to appoint an auditor at the annual general
meeting (or, if necessary, at a subsequent special general
meeting). In addition, the Companies Act and Allied World
Bermudas bye-laws require, subject to waiver by all of the
members and directors of a company, that the financial
statements required by the Companies Act be laid before the
company at the general meeting.
Allied World Switzerland. Under the Swiss Code
and Allied World Switzerlands articles of association,
Allied World Switzerland must hold an annual, ordinary general
meeting of shareholders within six months after the end of its
fiscal year for the purpose, among other things, of approving
the statutory required annual report, the statutory annual
accounts and the consolidated financial statements, the annual
election of directors for the class whose term has expired and
the election of the auditor. The invitation to general meetings
must be published in the Swiss Official Gazette of Commerce at
least 20 calendar days prior to the relevant general meeting of
shareholders. Annual general meetings of shareholders may be
convened by the board of directors or, under certain
circumstances, by the auditor. A general meeting of shareholders
may, as a general rule, be held anywhere in Switzerland,
provided that the selection of the meeting place does not impair
shareholders participation rights.
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The statutory required annual report and the auditors
report must be submitted for examination by the shareholders at
the registered office of the company at least 20 calendar days
prior to the ordinary general meeting of shareholders.
Special
Meetings of Shareholders
Allied World Bermuda. The Companies Act and
Allied World Bermudas bye-laws provide that a special
general meeting of Allied World Bermuda may be called by the
chairman or any two directors or any director and the secretary
or the board of directors as a whole. In addition, the board of
directors must convene a special general meeting upon request by
one or more shareholders holding at least 10% of the shares
having the right to vote at general meetings at the time of the
request.
Allied World Switzerland. An extraordinary
general meeting of Allied World Switzerland may be called upon
the resolution of the board of directors or, under certain
circumstances, by the auditor. In addition, the board of
directors is required to convene an extraordinary general
meeting of shareholders if so resolved by the general meeting of
shareholders, or if so requested by shareholders holding an
aggregate of at least 10% of the voting shares, specifying the
items for the agenda and their proposals, or if it appears from
the stand-alone annual statutory balance sheet that half of the
companys share capital and reserves are not covered by the
companys assets. In the latter case, the board of
directors must immediately convene an extraordinary general
meeting of shareholders and propose financial restructuring
measures. 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 of a general meeting of shareholders. See
Director Nominations; Proposals of
Shareholders for more information.
Record
Dates for Shareholder Meetings
Allied World Bermuda. Allied World
Bermudas bye-laws provide that the board of directors may
fix any date as the record date for determining the shareholders
entitled to receive notice of and to vote at any general meeting.
Allied World Switzerland. Allied World
Switzerland expects to set the record date for each general
meeting of shareholders on a date of not more than 20 calendar
days prior to the date of each general meeting and announce the
date of the general meeting of shareholders prior to the record
date.
Director
Nominations; Proposals of Shareholders
Allied World Bermuda. Allied World
Bermudas bye-laws require that a shareholder desiring to
nominate directors or submit a proposal for consideration by the
shareholders at any annual general meeting must give written
notice of such intent, which notice must be received by the
secretary of Allied World Bermuda no less than 90 and no later
than 120 calendar days in advance of the first anniversary date
of the annual general meeting of the preceding year (subject to
limited exceptions) in order for such nomination or proposal to
be included in the proxy statement issued to shareholders in
connection with the current years annual general meeting.
Allied World Switzerland. 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 of a general meeting of shareholders. According to Allied
Worlds articles of association, such request for inclusion
of an item on the agenda must be in writing and received by
Allied World Switzerland at least 60 calendar days prior to the
general meeting. Furthermore, pursuant to the Swiss Code, any
shareholder may make proposals for any item included on the
agenda of a general meeting at any time before the taking of the
resolution including the nomination of a director if the
election of the board of directors is an item on the agenda.
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Adjournment
of Shareholder Meetings
Allied World Bermuda. Allied World
Bermudas bye-laws provide that the chairman of any
shareholder meeting may, with the consent of a majority of the
shareholders present and entitled to vote at the meeting,
adjourn the meeting. New notice of the date, time, and place for
the resumption of the meeting must be given if the meeting is
not adjourned to a specific date and time.
Allied World Switzerland. According to legal
doctrine, 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.
Voting
Rights
Allied World Bermuda. The holders of common
shares of Allied World Bermuda are entitled to one vote per
share. Any matter submitted to shareholders at a general meeting
requires the affirmative vote of a majority of the votes cast
unless otherwise required by the Companies Act or the bye-laws.
Allied World Bermudas bye-laws provide that any matter
submitted to the shareholders at a general meeting for approval
requires the approval of a majority of the votes cast (other
than in the election of directors).
The rights attached to any separate class or series of shares,
unless otherwise provided by the terms of the shares of that
class or series, may be varied only with the consent in writing
of the holders of all of the outstanding shares of that class or
series or by a resolution passed at a separate general meeting
of holders of shares equal to 75% of the outstanding shares of
that class or series. The necessary quorum for that meeting is
the presence of at least two persons, in person or by proxy, of
holders of at least one-third of the shares of that class or
series. Each holder of shares of the class or series present, in
person or by proxy, will have one vote for each share of the
class or series of which he is the holder. Outstanding shares
will not be deemed to be varied by the creation or issuance of
additional shares that rank in any respect prior to or
equivalent with those shares.
Allied World Bermuda bye-laws provide that each voting share
entitles the holder of record on such date to one vote on a
poll; provided, however, if the number of
controlled shares of any holder would constitute 10%
or more of the total combined voting power of the outstanding
voting shares, such holder will have the voting rights attached
to its voting shares reduced to less than 10% of the total
voting rights attached to the outstanding voting shares, in the
manner provided in the Allied World Bermudas bye-laws.
Controlled shares of any person under the Allied
World Bermuda bye-laws refers to all voting shares owned by such
person, whether (i) directly; (ii) with respect to
persons who are United States persons, by application of the
attribution and constructive ownership rules of
Section 958(a) and 958(b) of the U.S. Code; or
(iii) beneficially, directly or indirectly, within the
meaning of Section 13(d)(3) of the Exchange Act and the
rules and regulations thereunder.
Allied World Switzerland. Each Allied World
Switzerland voting share carries one vote at a general meeting
of shareholders. Voting rights and all other related rights may
be exercised by shareholders registered as shareholders of
record in Allied World Switzerlands share register or by a
duly appointed proxy of a registered shareholder, which proxy
need not be a shareholder. Except as described below, Allied
World Switzerlands articles of association do not limit
the number of voting shares that may be voted by a single
shareholder. Beneficial owners of shares who hold voting shares
though a nominee exercise shareholders rights through the
nominee.
To be able to exercise voting rights as shareholders of record,
holders must own the voting shares directly (as opposed to
beneficial ownership with respect to shares held in street
name) and apply to us for enrollment in our share register
as shareholders with voting rights. The form of application from
our transfer agent. The form of application includes a
representation that the holder is holding voting shares for his
own account. Certain exceptions exist for nominees. The board of
directors will register Cede & Co., as nominee of The
Depository Trust Company, or DTC, with voting rights with
respect to shares held in street name through DTC.
If the board of directors refuses to register a shareholder with
voting rights, it must notify the shareholder of such refusal
within 20 days of the receipt of the application.
Furthermore, the board may cancel, with retroactive application,
the registration of a shareholder with voting rights if the
initial registration was on the basis of false information in
the shareholders application. Shareholders registered
without voting rights may not participate in or vote at Allied
World Switzerlands shareholders meetings, but will
be entitled to dividends, preemptive rights and
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liquidation proceeds. Only 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.
Treasury Shares, whether owned by Allied World Switzerland or
one of its majority-owned subsidiaries, will not be entitled to
vote at general meetings of shareholders.
Allied World Switzerlands articles of association limit
the voting rights of voting shares that are controlled
shares of a shareholder to one vote less than 10% of the
total voting rights of Allied World Switzerlands share
capital as registered with the commercial register.
Controlled shares of a shareholder under the Allied
World Switzerland articles of incorporation consist of voting
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 U.S. Code relating to controlled
foreign corporation status but are broader than the
U.S. Code in that the U.S. 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 board of directors may waive
these restrictions.
Holders not expressly declaring themselves to be holding voting
shares for their own account in the application for registration
in the share register will not be registered as shareholders
with voting rights. Nominees are exempted to the extent they
undertake to disclose at any time to the company at its written
request the name, address and shareholding of each person for
whom such nominee is holding shares. In addition, no shareholder
will be registered as shareholder with voting rights for 10% or
more of the share capital as recorded in the commercial
register. Legal entities that are linked to one another through
capital, voting rights, management or in any other manner, as
well as all natural persons or legal entities achieving an
understanding or forming a syndicate or otherwise acting in
concert to circumvent the limitation on registration, are
considered one shareholder. The board of directors is authorized
to grant exemptions from these requirements in special cases.
Pursuant to the Swiss Code, registered shareholders have the
exclusive right to determine the following matters:
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adoption and amendment of Allied World Switzerlands
articles of association;
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election and removal of members of the board of directors and
the auditor;
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approval of the statutory required annual report, the annual
accounts and the consolidated financial statements;
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payments of dividends and any other distributions of capital to
shareholders;
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discharge of the members of the board of directors from
liability for business conduct; and
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any other resolutions that are submitted to a general meeting of
shareholders pursuant to law, Allied World Switzerlands
articles of association or by voluntary submission by the board
of directors (unless a matter is within the exclusive competence
of the board of directors pursuant to the Swiss Code).
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Pursuant to Allied World Switzerlands articles of
association, the shareholders generally pass resolutions by the
affirmative vote of a majority of the votes cast at the general
meeting (whereby abstentions, broker non-votes, blank or invalid
ballots shall be disregarded for purposes of establishing the
majority), unless otherwise provided by law or Allied World
Switzerlands articles of association. Allied World
Switzerlands articles of association provide that
directors may be elected by the affirmative vote of a majority
of the votes cast at the general meeting of shareholders. See
Election of Directors; Staggered Terms of
Directors for a discussion of voting for the election of
directors.
The Swiss Code
and/or
Allied World Switzerlands articles of association require
the affirmative vote of
662/3%
of the voting rights and a majority of the par value of the
voting shares, each as represented at a general meeting, to
approve the following matters:
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a change of the purpose of Allied World Switzerland;
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the creation of shares with privileged voting rights;
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the restriction on the transferability of voting shares or
non-voting participation certificates;
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an increase of capital, authorized or subject to a condition;
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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;
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the limitation or withdrawal of preemptive rights;
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a change in the domicile of Allied World Switzerland;
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the liquidation of Allied World Switzerland;
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the alleviating or withdrawal of restrictions upon the transfer
of voting shares or non-voting participation certificates;
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the conversion of voting shares into bearer shares and vice
versa as well as the conversion of non-voting participation
certificates into bearer shares; and
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any alteration or amendment of articles 8, 14 or 15 of the
articles of association, which relate to the voting rights of
shareholders of Allied World Switzerland and of article 16,
which provides the abovementioned matters for which a
supermajority is required.
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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, 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 Switzerland. See
Description of Allied World Switzerland
Shares Compulsory Acquisitions; Appraisal
Rights and Shareholder Approval of
Business Combinations.
Allied World Switzerlands articles of association require
the affirmative vote of at least
662/3%
of the votes and a majority of the par value of the voting
shares represented at a general meeting to approve the removal
of a member of the board of directors (with or without cause).
Amendment
of Governing Documents
Allied World Bermuda. Under the Companies Act,
amendments to the memorandum of association of a Bermuda company
must be approved by a majority of the shareholders voting on the
amendments and amendments to the companys objects (i.e.,
business purposes) may require approval by the Bermuda Minister
of Finance. Usually, the memorandum of association of a Bermuda
company contains only the name, type of company, objects and
powers and authorized share capital of a company. Under the
Companies Act and Allied World Bermudas bye-laws, the
bye-laws may be amended by a resolution of the board of
directors and a resolution of the shareholders approved by a
majority of the shareholders voting on the amendment.
Allied World Switzerland. Under the Swiss Code
and Allied World Switzerlands articles of association,
Allied World Switzerlands articles of association may only
be amended by a resolution of its shareholders at a general
meeting of shareholders. See Voting
Rights. Save for limited exceptions provided for in the
Swiss Code, Allied World Switzerlands board of directors
may not effect amendments to Allied World Switzerlands
articles of association on its own. The board of directors may
pass and amend its organizational regulations without the
approval of shareholders. Under Swiss law, shareholders may not
pass or amend organizational regulations but may pass
resolutions amending the articles of association to effectively
supersede certain provisions in the organizational regulations.
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Quorum
Requirements
Allied World Bermuda. The presence of
shareholders, in person or by proxy, holding at least a majority
of the outstanding shares generally entitled to vote at a
meeting, is a quorum for the transaction of business (including
the approval of an amalgamation) except as otherwise provided by
the Companies Act.
Allied World Switzerland. The articles of
association of Allied World Switzerland provide for a quorum
requirement of the presence of two or more persons at the
meeting representing in person or by proxy more than 50% of
Allied World Switzerlands total issued and outstanding
voting shares throughout the meeting.
Inspection
of Books and Records; Special Investigation
Allied World Bermuda. Shareholders of a
Bermuda company have the right to inspect or obtain copies of
the minutes of general meetings of the company. Shareholders may
also inspect the share register on any business day, subject to
reasonable restrictions imposed by the board of directors.
Allied World Switzerland. Under the Swiss
Code, a shareholder has a right to inspect the share register
with regard to his own shares and otherwise to the extent
necessary to exercise his shareholder rights. No other person
has a right to inspect the share register. The books and
correspondence of a Swiss company may be inspected with the
express authorization of the general meeting of shareholders or
by resolution of the board of directors and subject to the
safeguarding of the companys business secrets. At a
general meeting of shareholders, any shareholder is entitled to
request information from the board of directors concerning the
affairs of the company. Shareholders may also ask the auditor
questions regarding its audit of the company. The board of
directors and the auditor must answer shareholders
questions to the extent necessary for the exercise of
shareholders rights and subject to prevailing business
secrets or other material interests of Allied World Switzerland.
In addition, if the shareholders inspection and
information rights as outlined above prove to be insufficient,
any shareholder may propose to the general meeting of
shareholders that specific facts be examined by a special
commissioner in a special investigation. If the general meeting
of shareholders approves the proposal, Allied World Switzerland
or any shareholder may, within 30 calendar days after the
general meeting of shareholders, request the court at Allied
World Switzerlands registered office to appoint a special
commissioner. If the general meeting of shareholders rejects the
request, one or more shareholders representing at least 10% of
the share capital or holders of voting shares in an aggregate
par value of at least two million Swiss francs may request the
court to appoint a special commissioner. The court will issue
such an order if the petitioners can demonstrate that the board
of directors, any member of the board or an officer of Allied
World Switzerland infringed the law or Allied World
Switzerlands articles of association and thereby damaged
the company or the shareholders. The costs of the investigation
would generally be allocated to Allied World Switzerland and
only in exceptional cases to the petitioners.
Transfer
and Registration of Ownership of Shares
Allied World Bermuda. Allied World
Bermudas bye-laws contain several provisions restricting
the transferability of common shares. The directors are required
to decline to register a transfer of common shares if they have
reason to believe that the result of that transfer would be to
cause (1) any U.S. person to become a 10% shareholder
(as defined therein) other than a person who does not own any of
our shares directly or through
non-U.S. entities,
(2) any of AIG, Chubb or the GSCP Funds, any affiliate of a
founder or any person to whom shares owned by a founder are
attributed by reason of the ownership of person by such founder,
to own (after taking into account the founder back-attribution
convention), directly, through
non-U.S. entities
or constructively under the U.S. Code, a greater percentage
of the common shares and our shares of any other class or
classes as determined by the proportionate value of such shares
the greater of (x) 9.99% and (y) the percentage of
shares than such person owned as of the effective date of the
bye-laws (other than as a result of any affiliate of a GSCP Fund
holding shares as an underwriter, market maker, broker, dealer
or investment adviser, up to 24.5%), or (3) any
U.S. person, other than a founder, to own directly, through
non-U.S. entities
or constructively under the U.S. Code, 10% or more of
common shares and our shares of any other class or classes as
determined by the aggregate value of such shares. Similar
restrictions apply to our ability to issue or repurchase shares.
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Allied World Bermudas bye-laws expressly provide for the
issuance of fractional shares which may be dealt with to the
same extent as whole shares.
Allied World Switzerland. Under the articles
of association of Allied World Switzerland, acquirers of voting
shares applying to be registered as shareholders of record with
voting rights and who not expressly declare themselves to be
holding voting shares for their own account in the application
for registration in the share register will not be registered as
shareholders with voting rights. Nominees are exempted to the
extent they undertake to disclose at any time to the company at
its written request the name, address and shareholdings of each
person for whom such nominee is holding shares.
In addition, the articles of association of Allied World
Switzerland provide that no acquirer of voting shares applying
to be registered as shareholder with voting rights will be
registered as a shareholder with voting rights for 10% or more
of the share capital as recorded in the commercial register.
Legal entities that are linked to one another through capital,
voting rights, management or in any other manner, as well as all
natural persons or legal entities achieving an understanding or
forming a syndicate or otherwise acting in concert to circumvent
the limitation on registration, are considered one shareholder.
The board of directors may make exceptions to such limitations
on voting rights in special cases.
Allied World Switzerlands share register will initially be
kept by Continental Stock Transfer &
Trust Company, which acts as transfer agent and registrar.
The share register reflects only record owners of Allied World
Switzerland voting shares who own such shares directly (as
opposed to beneficially owned shares held in street
name). Swiss law does not recognize fractional share
interests.
Rights
upon Liquidation
Allied World Bermuda. Upon a liquidation of
Allied World Bermuda, after creditors have been paid the full
amounts owing to them, the holders of Allied World
Bermudas common shares would be entitled to receive, pro
rata, any remaining assets available for distribution to the
holders of common shares. The liquidator may deduct from the
amount payable in respect of those common shares any liabilities
the holder has to or with Allied World Bermuda. The assets
received by the holders of Allied World Bermuda common shares in
liquidation may consist in whole or in part of property. That
property is not required to be of the same kind for all
shareholders. The shareholders may resolve that the company be
wound up by the court, or be wound up voluntarily, with the vote
of holders of at least 75% of the voting shares of the company.
The board may also present a petition to the court for the
company to be wound up.
Allied World Switzerland. Allied World
Switzerlands duration is unlimited. Allied World
Switzerland may be dissolved by way of shareholders resolution
at any time with the approval of
662/3%
of the voting rights and a majority of the par value of the
voting shares represented at a general meeting. Dissolution by
court order is possible if Allied World Switzerland becomes
bankrupt, or for cause at the request of shareholders holding at
least 10% of Allied World Switzerlands share capital.
Under Swiss law, any surplus arising out of liquidation, after
the settlement of all claims of all creditors, will be
distributed to shareholders and holders of non-voting
participation certificates in proportion to the
paid-up par
value of voting shares and non-voting participation certificates
held, subject to Swiss withholding tax requirements.
Enforcement
of Civil Liabilities Against Foreign Persons
Allied World Bermuda. Allied World Bermuda has
been advised by its Bermuda counsel, Conyers Dill &
Pearman Limited, that a judgment for the payment of money
rendered by a court in the United States based on civil
liability would not be automatically enforceable in Bermuda.
There is no treaty between Bermuda and the United States
providing for the reciprocal enforcement of foreign judgments.
Allied World Bermuda has also been advised by Conyers
Dill & Pearman Limited that a final and conclusive
judgment obtained in a court in the United States under which a
sum of money is payable as compensatory damages may be the
subject of an action in the Supreme Court of Bermuda under the
common law doctrine of obligation. Such an action should be
successful upon proof that the sum of money is due and payable,
and without having to prove the facts supporting the underlying
judgment, as long as: (i) the court that gave the judgment
was competent to hear the action in accordance with
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private international law principles as applied by the courts in
Bermuda; and (ii) the judgment is not contrary to public
policy in Bermuda, was not obtained by fraud or in proceedings
contrary to natural justice of Bermuda and is not based on an
error in Bermuda law.
Allied World Switzerland. Switzerland and the
United States do not have a treaty providing for reciprocal
recognition and enforcement of judgments in civil and commercial
matters. The recognition and enforcement of a judgment of the
courts of the United States in Switzerland is governed by the
principles set forth in the Swiss Federal Act on Private
International Law. This statute provides in principle that a
judgment rendered by a non-Swiss court may be enforced in
Switzerland only if:
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the foreign court had jurisdiction pursuant to the Swiss Federal
Act on Private International Law;
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the judgment of such foreign court has become final and
non-appealable;
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no reason for refusal in the sense of Article 27 Swiss
Federal Act on Private International Law is given (in
particular, but not limited to, the decision does not contravene
Swiss public policy); and
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the court procedures and the service of documents leading to the
judgment were in accordance with the due process of law, legal
precedent and similar requirements.
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INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM
The consolidated financial statements of Allied World Bermuda as
of December 31, 2009 and December 31, 2008 and for
each of the three years ended December 31, 2009, 2008 and
2007 incorporated by reference in this proxy statement from
Allied World Bermudas Annual Report (on
Form 10-K)
for the year ended December 31, 2009 and the effectiveness
of Allied World Bermudas internal control over financial
reporting as of December 31, 2009, have been audited by
Deloitte & Touche, an independent registered public
accounting firm, as stated in their report incorporated herein
by reference.
LEGAL AND
TAX MATTERS
Willkie Farr & Gallagher LLP will pass upon certain
U.S. federal income tax consequences of the
Redomestication. PricewaterhouseCoopers AG, Zurich, Switzerland,
will pass upon certain Swiss tax consequences of the
Redomestication.
FUTURE
SHAREHOLDER PROPOSALS
If the Redomestication is not completed, the rules applicable to
shareholder nominations and proposals under Bermuda law and
Allied World Bermudas bye-laws will govern proposals and
nominations for the annual general meeting to be held in 2011.
If the Redomestication is completed, the rules applicable to
shareholder nominations and proposals under Swiss law and Allied
World Switzerlands articles of association will govern
proposals and nominations for the ordinary general meeting to be
held in 2011.
Allied
World Bermuda
If you wish to submit a proposal to be considered for inclusion
in the proxy materials for the 2011 annual general meeting or
propose a nominee for the board of directors, please send such
proposal to the Corporate Secretary, Allied World Assurance
Company Holdings, Ltd, 27 Richmond Road, Pembroke HM 08, Bermuda.
Under the rules of the SEC, proposals must be received by no
later than November 17, 2010 to be eligible for inclusion
in the 2011 annual general meeting proxy statement. If a
shareholder wishes to submit a proposal to the 2011 annual
general meeting without including such proposal in the proxy
statement for that meeting, that proposal will be considered
untimely if Allied World Bermuda is not notified in writing of
such proposal between January 5, 2011 and February 4,
2011. In that case, the proxies solicited by the 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.
84
Allied
World Switzerland
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 of a general meeting of
shareholders. Allied World Switzerlands articles of
association provide generally that the registered shareholder
must give us written notice at least 60 calendar days prior
to the general meeting.
You may obtain a copy of the bye-laws of Allied World Bermuda or
the articles of association of Allied World Switzerland, in
which these procedures are set forth, upon written request to
the Corporate Secretary, Allied World Assurance Company
Holdings, Ltd, 27 Richmond Road, Pembroke HM 08, Bermuda.
WHERE YOU
CAN FIND MORE INFORMATION
Allied World Bermuda files annual, quarterly and current
reports, proxy statements and other information with the SEC.
You may read and copy any document Allied World Bermuda files at
the SECs public reference rooms located 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 rooms. These SEC
filings are also available to the public on the SECs web
site at:
http://www.sec.gov.
Allied World Bermudas web site is located at
http://www.awac.com.
Allied World Bermudas Annual Reports on
Form 10-K,
Quarterly Reports on
Form 10-Q,
Current Reports on
Form 8-K
and other filings with the SEC are available, free of charge,
through its web site, as soon as reasonably practicable after
those reports or filings are electronically filed with or
furnished to the SEC. Information on Allied World Bermudas
web site or any other web site is not incorporated by reference
in this proxy statement and does not constitute a part of this
proxy statement.
SEC rules and regulations permit Allied World Bermuda to
incorporate by reference the information Allied
World Bermuda files with the SEC. This means that Allied World
Bermuda can disclose important information to you by referring
you to those documents. Some documents or information, such as
that called for by Item 7.01 of
Form 8-K,
are deemed furnished and not filed in accordance with SEC rules.
None of those documents and none of that information is
incorporated by reference into this proxy statement. The
information incorporated by reference is considered to be part
of this proxy statement. Information that Allied World Bermuda
files later with the SEC will automatically update and supersede
this information.
Allied World Bermuda incorporates by reference the documents and
sections listed below and any filings Allied World Bermuda will
make with the SEC under Sections 13(a), 13(c), 14 or 15(d)
of the Exchange Act (excluding any information
furnished but not filed) following the
date of this document, but prior to the date of the special
court-ordered meeting. The documents and sections incorporated
by reference are:
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Allied World Bermudas Annual Report on
Form 10-K
for the fiscal year ended December 31, 2009;
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Allied World Bermudas definitive proxy statement for its
2010 annual general meeting of shareholders, filed with the SEC
on March 17, 2010;
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Allied World Bermudas Quarterly Reports on
Form 10-Q
for the quarters ended March 31, 2010 and June 30,
2010;
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Allied World Bermudas Current Reports on
Form 8-K
filed with the SEC on March 3, May 11, August 9,
August 13 and October 1, 2010; and
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The discussion of U.S. Taxation of Our
Non-U.S. Companies
and U.S. Taxation of Our U.S. Subsidiaries
on Allied World Bermudas
Form S-3
filed with the SEC on December 31, 2007.
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85
You can request a free copy of the above filings or any filings
subsequently incorporated by reference into this proxy statement
(other than any exhibits to such filings not specifically
incorporated by reference) by writing or calling:
Allied World Assurance Company Holdings, Ltd
27 Richmond Road
Pembroke HM 08, Bermuda
Attn.: Wesley D. Dupont, Corporate Secretary
Telephone requests may be directed to
(441) 278-5400.
In order to ensure timely delivery of these documents, you
should make such request by November 11, 2010.
We have not authorized anyone to give any information or make
any representation about the Redomestication or the Scheme of
Arrangement or about us that differs from or adds to the
information in this proxy statement or in the documents
incorporated by reference. Therefore, you should not rely upon
any information that differs from or is in addition to the
information contained in this proxy statement or in the
documents incorporated by reference.
The information contained in this proxy statement speaks only as
of the date on the cover, unless the information specifically
indicates that another date applies.
NOTICE OF
INTERNET AVAILABILITY OF PROXY MATERIALS
Important Notice Regarding the Availability of Proxy
Materials for the Special Meetings to be held on
November 18, 2010. The Proxy Statement is available at
http://www.awac.com/proxy.aspx.
For the date, time and location of the Special Meetings, please
see General Information. For information on how to
attend and vote in person at the Special Meetings, an
identification of the matters to be voted upon at the Special
Meetings and the Boards recommendations regarding those
matters, please also refer to General Information.
86
PART I
PRELIMINARY
DEFINITIONS
A In this Scheme, unless the context otherwise requires or
unless otherwise expressly provided for, the following
expressions shall bear the following meanings:
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Allied World Bermuda |
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Allied World Assurance Company Holdings, Ltd, an exempted
company incorporated with limited liability under the laws of
Bermuda with registration number 31279. |
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Allied World Bermuda Non-Voting Common Shares |
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Non-Voting Common Shares of US$0.03 par value each of
Allied World Bermuda. |
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Allied World Bermuda Voting Common Shares |
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Voting Common Shares of US$0.03 par value each of Allied
World Bermuda. |
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Allied World Switzerland |
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Allied World Assurance Company Holdings, AG, a corporation
incorporated under the laws of Switzerland, with its registered
office in the Canton of Zug, Switzerland, and with registration
number CH-170.3.034.503-3. |
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Allied World Switzerland Registered Participation
Certificates |
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Registered Non-Voting Participation Certificates of Allied World
Switzerland with a Swiss Francs par value amount to be
determined before the Effective Time, having the rights,
entitlements and terms described in the Allied World Switzerland
Articles of Association attached to the Proxy Statement. |
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Allied World Switzerland Registered Shares |
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Registered Voting Shares of Allied World Switzerland with a
Swiss Francs par value amount to be determined before the
Effective Time. |
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Allowed Proceeding |
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Any Proceeding by a Scheme Shareholder to enforce its rights
under the Scheme where any party fails to perform its
obligations under the Scheme. |
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Business Day |
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Any day on which banks are open for business in Bermuda, New
York and Zurich. |
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Companies Act |
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The Companies Act 1981 of Bermuda. |
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Court Directed Non-Voting Common Shareholder Meeting |
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The meeting of the holders of Allied World Bermuda Non-Voting
Common Shares convened at the direction of the Supreme Court at
which the Scheme will be voted upon or any postponement or
adjournment thereof. |
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Court Directed Voting Common Shareholder Meeting |
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The meeting of the holders of Allied World Bermuda Voting Common
Shares convened at the direction of the Supreme Court at which
the Scheme will be voted upon or any postponement or adjournment
thereof. |
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Effective Time |
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The date and time on which a copy of the Order of the Supreme
Court sanctioning the Scheme and making such facilitating orders
as are appropriate pursuant to Section 99 of the Companies
Act shall have been delivered to the Registrar of Companies in
Bermuda for registration, at which time this Scheme shall become
effective. |
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Proceeding |
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Any process, suit, action, legal or other proceeding including
without limitation any arbitration, mediation, alternative
dispute resolution, |
A-2
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judicial review, adjudication, demand, execution, restraint,
forfeiture, reentry, seizure, lien, enforcement of judgment,
enforcement of any security or enforcement of any letters of
credit. |
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Prohibited Proceeding |
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Any Proceeding against Allied World Bermuda or Allied World
Switzerland or their property in any jurisdiction whatsoever
other than an Allowed Proceeding. |
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Proxy Statement |
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The Proxy Statement of Allied World Bermuda on Schedule 14A
filed on October 1, 2010 with the U.S. Securities and
Exchange Commission pursuant to Section 14(a) of the U.S.
Securities Exchange Act of 1934 in connection with the Scheme
representing the Explanatory Statement issued pursuant to
Section 100 of the Companies Act and including a notice of
the Court Directed Voting Common Shareholder Meeting and a
notice of the Court Directed Non-Voting Common Shareholder
Meeting. |
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Record Date |
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The close of business (New York time) on October 12, 2010. |
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Register of Members |
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Allied World Bermudas register of members kept in
accordance with Section 65 of the Companies Act. |
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Scheme |
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This scheme of arrangement in respect of Allied World Bermuda
under Section 99 of the Companies Act in its present form
or with or subject to any modifications, additions or conditions
that are consented to by Allied World Bermuda and that the
Supreme Court may approve or impose. |
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Scheme Consideration |
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One Allied World Switzerland Registered Share to be issued and
allotted by Allied World Switzerland in exchange for each Scheme
Voting Common Share and one Allied World Switzerland Registered
Participation Certificate to be issued and allotted by Allied
World Switzerland in exchange for each Scheme Non-Voting Common
Share. |
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Scheme Non-Voting Common Shareholders |
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The holders of Allied World Bermuda Non-Voting Common Shares
appearing on the Register of Members immediately prior to the
Effective Time. |
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Scheme Non-Voting Common Shares |
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Allied World Bermuda Non-Voting Common Shares in issue
immediately prior to the Effective Time. |
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Scheme Shareholders |
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Scheme Voting Common Shareholders and Scheme Non-Voting Common
Shareholders. |
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Scheme Shares |
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Scheme Voting Common Shares and Scheme Non-Voting Common Shares. |
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Scheme Voting Common Shareholders |
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The holders of Allied World Bermuda Voting Common Shares
appearing on the Register of Members immediately prior to the
Effective Time. |
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Scheme Voting Common Shares |
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Allied World Bermuda Voting Common Shares in issue immediately
prior to the Effective Time. |
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Supreme Court |
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The Supreme Court of Bermuda. |
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US$ |
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United States dollars, the lawful currency of the United States
of America. |
A-3
INTERPRETATION
B In this Scheme, unless the context otherwise requires or
otherwise expressly provides:
(1) references to Recitals, Parts, clauses and
sub-clauses
are references to the Recitals, Parts, clauses and
sub-clauses
respectively of this Scheme;
(2) references to a person include references
to an individual, firm, partnership, company, corporation, other
legal entity, unincorporated body of persons or any state or
state agency;
(3) references to a statute or a statutory provision
include the same as subsequently modified, amended or re-enacted
from time to time;
(4) references to an agreement, deed or document shall be
deemed also to refer to such agreement, deed or document as
amended, supplemented, restated, verified, replaced
and/or
novated (in whole or in part) from time to time and to any
agreement, deed or document executed pursuant thereto;
(5) the singular includes the plural and vice versa and
words importing one gender shall include the other gender;
(6) headings to Recitals, Parts, clauses and
sub-clauses
are for ease of reference only and shall not affect the
interpretation of this Scheme; and
(7) to the extent that there shall be any conflict or
inconsistency between the terms of this Scheme and the Proxy
Statement, then the terms of this Scheme shall prevail.
ALLIED
WORLD BERMUDA
C Allied World Bermuda was incorporated with limited
liability in Bermuda on 13th November 2001 as an exempted
limited liability company with registration number 31279.
D On the Record Date, Allied World Bermuda had an
authorised share capital of US$10,000,000 divided into
333,333,333 common shares of US$0.03 par value each, of
which 38,896,801 Allied World Bermuda Voting Common Shares
and 3,449,853 Allied World Bermuda Non-Voting Common Shares
have been issued and outstanding and are fully paid up. In
addition, as of such date, there were 8,465,456 of Allied World
Bermuda Voting Common Shares held in treasury.
E On the Record Date, 2,999,658 Allied World Bermuda
Voting Common Shares are issuable upon the vesting and exercise
of outstanding stock options, restricted stock units and
performance-based equity awards. In addition, certain of Allied
World Bermudas founding shareholders hold warrants
exercisable for up to 2,000,000 Allied World Bermuda Voting
Common Shares and up to 1,500,000 Allied World Bermuda
Non-Voting Common Shares, all of which are currently exercisable.
THE
PURPOSE OF THE SCHEME
F The purpose of the Scheme is to effect the exchange of
each issued Allied World Bermuda Voting Common Share for one
issued and fully paid Allied World Switzerland Registered Share
and the exchange of each issued Allied World Bermuda Non-Voting
Common Share for one issued and fully paid Allied World
Switzerland Registered Participation Certificate. The Scheme
will be effected in consecutive stages as provided in
Part II, Clause 3 below.
G Allied World Switzerland has agreed to appear at the
hearing of the petition to sanction the Scheme and undertakes to
be bound by its terms and to issue and allot fully paid Allied
World Switzerland Registered Shares and Allied World Switzerland
Registered Participation Certificates as provided herein.
A-4
PART II
THE
SCHEME
Application
and effectiveness of the Scheme
1. The compromise and arrangement effected by the Scheme
shall apply to the Scheme Shares and shall be binding on the
Scheme Shareholders.
Effect of
the Scheme
2. At the Effective Time all of the right, title and
interest of the Scheme Voting Common Shareholders in the Scheme
Voting Common Shares and all of the right, title and interest of
the Scheme Non-Voting Common Shareholders in the Scheme
Non-Voting Common Shares shall be subject to the arrangement
implemented by the mechanism set out in Clause 3 below.
Exchange
of shares and consideration
3.
a. At the later of (i) the Effective Time and
(ii) the satisfaction or waiver of the conditions set
out in Clause 25 below, all Scheme Shares shall be
cancelled.
b. In exchange for and in consideration of the cancellation
of the Scheme Shares, Allied World Bermuda will, immediately
following such cancellation, issue and allot a number of new,
fully paid Allied World Bermuda Voting Common Shares and Allied
World Bermuda Non-Voting Common Shares, as equals the number of
Scheme Shares cancelled, to Allied World Switzerland.
c. Against the contribution in kind of each Allied World
Bermuda Voting Common Share newly issued to it, Allied World
Switzerland shall allot for the Scheme Voting Common
Shareholders for issuance pursuant to Clause 6 below one
fully paid Allied World Switzerland Registered Share for each
Scheme Voting Common Share previously held by Scheme Voting
Common Shareholders.
d. Against the contribution in kind of each Allied World
Bermuda Non-Voting Common Share newly issued to it, Allied World
Switzerland shall allot for the Scheme Non-Voting Common
Shareholders for issuance pursuant to Clause 6 below one
fully paid Allied World Switzerland Registered Participation
Certificate for each Scheme Non-Voting Common Share previously
held by Scheme Non-Voting Common Shareholders.
PART III
RECORD
DATE AND DETERMINATION OF SCHEME SHAREHOLDERS
Record
Date
4. The holders of Allied World Bermuda Voting Common Shares
and the number of Allied World Bermuda Voting Common Shares that
they hold for the purposes of voting at the Court Directed
Voting Common Shareholder Meeting shall be determined from the
Register of Members of Allied World Bermuda Voting Common Shares
as of the Record Date.
5. The holders of Allied World Bermuda Non-Voting Common
Shares and the number of Allied World Bermuda Non-Voting Common
Shares that they hold for the purposes of voting at the Court
Directed Non-Voting Common Shareholder Meeting shall be
determined from the Register of Members of Allied World Bermuda
Non-Voting Common Shares as of the Record Date.
A-5
PART IV
DISTRIBUTIONS
Distribution
to Scheme Shareholders
6. As soon as reasonably practical following the completion
of the actions pursuant to Clause 3 above, Allied World
Switzerland shall issue the Allied World Switzerland Registered
Shares and the Allied World Switzerland Registered Participation
Certificates comprising the Scheme Consideration to an exchange
agent to be selected by Allied World Bermuda to transfer such
Scheme Consideration to the Scheme Shareholders as provided
herein. Allied World Bermuda will procure the issue of the
Allied World Switzerland Registered Shares and the Allied World
Switzerland Registered Participation Certificates and their
transfer to the Scheme Shareholders.
Rights of
Scheme Shareholders
7. With effect from and including the Effective Time, each
Scheme Shareholder shall in accordance with the Scheme cease to
have any rights with respect to Scheme Shares, except the right
to receive the Scheme Consideration. Upon cancellation of the
Scheme Shares, the Register of Members of Allied World Bermuda
shall be updated to reflect such cancellation.
PART V
GENERAL
SCHEME PROVISIONS
Effective
Time and Notification to Scheme Shareholders
8. The Scheme shall become binding and effective at the
Effective Time.
9. Allied World Switzerland shall give notification of the
Scheme having become effective by filing a Current Report on
Form 8-K
with the U.S. Securities and Exchange Commission, which
such notice shall be deemed served upon acceptance by the EDGAR
system thereof.
Stay of
Prohibited Proceedings
10. After the Effective Time, none of the Scheme
Shareholders shall commence a Prohibited Proceeding in respect
of or arising from the Scheme.
11. A Scheme Shareholder may commence an Allowed Proceeding
against Allied World Bermuda or Allied World Switzerland after
the Effective Time provided that it has first given Allied World
Bermuda five Business Days prior notice in writing of its
intention to do so.
Mandates
12. All mandates and other instructions in force at the
Effective Time in relation to the Scheme Shares (including
elections for payment of dividends (if any)) shall cease to be
valid as effective mandates or instructions.
Costs
13. Allied World Bermuda shall pay in full all costs,
charges, expenses and disbursements reasonably incurred by
Allied World Bermuda in connection with the negotiation,
preparation and implementation of the Scheme, including the
costs of holding the Court Directed Voting Common Shareholder
Meeting and the Court Directed Non-Voting Common Shareholder
Meeting and the costs of obtaining the sanction of the Supreme
Court.
Existing
instruments of transfer and certificates
14. As from the Effective Time, all instruments of transfer
and certificates validly existing at the Effective Time in
respect of a transfer or holding of any Scheme Shares shall as
from the Effective Time, cease to have effect as documents or
evidence of transfer or title.
A-6
Modifications
of the Scheme
15. Allied World Bermuda may, at any hearing before the
Supreme Court to sanction the Scheme, consent on behalf of all
Scheme Shareholders to any non-material modification of the
Scheme or any terms or conditions that the Supreme Court
determines to approve or impose.
Notice
16. Any notice or other written communication to be given
under or in relation to the Scheme other than pursuant to
Clauses 9 and 21 shall be given in writing and shall be
deemed to have been duly given if it is delivered by hand or
sent by post, to:
a. in the case of the Allied World Bermuda, 27 Richmond
Road, Pembroke HM 08, Bermuda, marked for the attention of
Wesley D. Dupont, Corporate Secretary;
b. in the case of a Scheme Shareholder, its last known
address according to Allied World Bermuda; and
c. in the case of any other person, any address set forth
for that person in any agreement entered into in connection with
the Scheme or the last known address according to Allied World
Bermuda, or by fax its last known fax number according to Allied
World Bermuda.
17. Any notice or other written communication to be given
under the Scheme shall be deemed to have been served in
accordance with the provisions of Bye-law 85 of Allied World
Bermudas Bye-laws.
18. In proving service, it shall be sufficient proof, in
the case of a notice sent by post, that the envelope was
properly stamped, addressed and placed in the post.
19. Save in the case of the notice, written communication
or document required to be filed pursuant to Clause 9
above, the accidental omission to send any notice, written
communication or other document in accordance with
Clauses 16 and 17 above or the non-receipt of any such
notice by a Scheme Shareholder, shall not affect the provisions
of the Scheme.
20. Allied World Bermuda shall not be responsible for any
loss or delay in the transmission of any notices, other
documents or payments posted by or to the Scheme Shareholders
which shall be posted at the risk of the Scheme Shareholders.
21. Any notice or other written communication that is
required to be given to all or substantially all Scheme
Shareholders shall be effective by filing a Current Report on
Form 8-K
or other applicable filing with the U.S. Securities and
Exchange Commission and shall be deemed to be served on the date
such filing is accepted by the EDGAR system thereof.
Exercise
of Discretion
22. When under any provision of the Scheme a matter is to
be determined by Allied World Bermuda, then it will have
discretion to interpret such matter under the Scheme in a manner
that it considers fair and reasonable, and its decisions will be
binding on all concerned.
Governing
Law and Jurisdiction
23. At and with effect from the Effective Time, the
operative terms of the Scheme shall be governed by, and
construed in accordance with, the laws of Bermuda and the Scheme
Shareholders hereby agree that the Courts of Bermuda shall have
exclusive jurisdiction to hear and determine any suit, action or
Proceeding and to settle any dispute which arises out of or is
connected with the terms of the Scheme or its implementation or
out of any action taken or omitted to be taken under the Scheme
or in connection with the administration of the Scheme; and for
such purposes, the Scheme Shareholders irrevocably submit to the
jurisdiction of the Courts of Bermuda; provided, however, that
nothing in this clause shall affect the validity of other
provisions determining governing law and jurisdiction as between
Allied World Bermuda and the Scheme Shareholders, whether
contained in any contract or otherwise.
A-7
24. Subject to the provisions of Clause 25(b) below,
the terms of the Scheme and the obligations imposed on Allied
World Bermuda hereunder shall take effect subject to any
prohibition or condition imposed by any applicable law.
Pre-Conditions
to the Scheme
25. The Scheme will not be completed unless the following
conditions are satisfied or waived:
a. The Allied World Switzerland Registered Shares to be
issued in connection with the Scheme, including the Allied World
Switzerland Registered Shares that are issuable following the
Effective Time upon exchange of the Allied World Switzerland
Registered Participation Certificates, are authorized for
listing on the New York Stock Exchange, subject to official
notice of issuance;
b. Neither Allied World Bermuda nor Allied World
Switzerland is subject to any governmental decree, order or
injunction that prohibits the consummation of the Scheme;
c. Allied World Bermuda has received an opinion from
Willkie Farr & Gallagher LLP, in form and substance
reasonably satisfactory to it, confirming, as of the Effective
Time, the matters of U.S. federal income tax law discussed
under the heading Material Tax Considerations
U.S. Federal Income Tax Considerations of the Proxy
Statement; and
d. Allied World Bermuda has received an opinion from
PricewaterhouseCoopers AG, in form and substance reasonably
satisfactory to it, confirming, as of the Effective Time, the
matters of Swiss tax law discussed under the heading
Material Tax Considerations Swiss Tax
Considerations of the Proxy Statement.
Authorisation
26. The Scheme Shareholders authorise Allied World Bermuda
to take all necessary actions and to execute all necessary
documents on their behalf as shall be required to procure the
issue of the Allied World Switzerland Registered Shares and the
Allied World Switzerland Registered Participation Certificates
and their transfer to the Scheme Shareholders, as provided
herein.
Expiry of
the Scheme
27. If the transactions contemplated by the Scheme shall
not have occurred on or before 5pm Bermuda time on the date
9 months after the Effective Time, the Scheme will
terminate and all actions taken under the Scheme will be
reversed or voided, as if they had never occurred, and the
position will revert to that existing immediately prior to the
Effective Time.
A-8
Annex B
IN THE SUPREME COURT OF BERMUDA
CIVIL JURISDICTION
COMMERCIAL COURT
2010: No.
IN THE MATTER OF
SECTION 99 OF THE COMPANIES ACT 1981
AND IN THE MATTER OF ALLIED
WORLD ASSURANCE
COMPANY HOLDINGS, LTD
ORDER FOR DIRECTIONS
UPON THE APPLICATION by Originating Summons of Allied
World Assurance Company Holdings, Ltd (Allied World)
AND UPON HEARING Counsel for Allied World
AND UPON READING the First Affidavit of Wesley D. Dupont
sworn on 1 October 2010 and the exhibit thereto
IT IS HEREBY ORDERED as follows:
1. Allied World do convene a meeting (the Voting
Shareholder Scheme Meeting) of the holders (the
Voting Shareholders) of Allied World voting common
shares of US$0.03 par value each (the Voting
Shares) as at the Record Date (as defined below), such
Voting Shareholder Scheme Meeting to be held at 27 Richmond
Road, Pembroke, HM 08, Bermuda, at 10.00 a.m., local time,
on a date to be determined but in any event within three months
from the date of this Order as may be determined by the board of
directors of Allied World for the purpose of considering and if
thought fit approving (with or without modification) the Scheme
and that, subject to this Order, the Voting Shareholder Scheme
Meeting shall be convened and held (and if so resolved,
adjourned) in accordance with the Bye-laws of Allied World.
2. Allied World do convene a meeting (the Non-Voting
Shareholder Scheme Meeting) of the holders (the
Non-Voting Shareholders) of Allied World non-voting
common shares of US$0.03 par value each (the
Non-Voting Shares) as at the Record Date, such
Non-Voting Shareholder Scheme Meeting to be held at 27 Richmond
Road, Pembroke, HM 08, Bermuda, at 10.30 a.m., local time,
or as soon as the Voting Shareholder Scheme Meeting has
concluded, if later, on date to be determined and in any event
within three months from the date of this Order as may be
determined by the board of directors of Allied World for the
purpose of considering and if thought fit approving (with or
without modification) the Scheme and that, subject to this
Order, the Non-Voting Shareholder Scheme Meeting shall be
convened and held (and if so resolved, adjourned) in accordance
with the Bye-laws of Allied World.
3. Scott A. Carmilani being President, Chief Executive
Officer and Chairman of the board of directors of Allied World,
or failing him Wesley D. Dupont being Executive Vice President,
General Counsel and Corporate Secretary of Allied World, or
failing him, any director or executive officer of Allied World
shall act as Chairman of the Voting Shareholder Scheme Meeting
and Non-Voting Shareholder Scheme Meeting (together the
Scheme Meetings).
4. Each Scheme Meeting may be adjourned by the Chairman or
by a simple majority vote of the Voting Shareholders or
Non-Voting Shareholders, as appropriate, present and voting at
the relevant meeting, whether in person or by proxy, to a later
date to solicit additional votes if there are insufficient
proxies to approve the Scheme, provided that notice of the date
and time of the holding of any adjourned meeting be given to the
Voting Shareholders or Non-Voting Shareholders, as appropriate,
as set out below.
B-1
5. At least 30 clear days before the day appointed for each
Scheme Meeting a Notice convening the same and enclosing:
a. a copy of the Scheme and a copy of the Proxy Statement/
Explanatory Statement as is required to be furnished pursuant to
section 100 of the Companies Act 1981, in the form or
substantially in the form of the document produced to the
Court; and
b. a form of proxy for use at each Scheme Meeting, as
appropriate, in the form or substantially in the form produced
to the Court,
(1) be sent by hand, courier or pre-paid post (or by air
mail, as appropriate) addressed to each Voting Shareholders and
Non-Voting Shareholder, as appropriate, as at the Record Date,
at the address shown on the Register of Members of Allied World
on such date, and (2) be available on the Companys
website at www.awac.com, provided that (i) the
accidental omission to serve any Voting Shareholder or
Non-Voting Shareholder (together the Shareholders)
with notice of the relevant Scheme Meeting, or the non-receipt
by any Shareholder of notice of the relevant Scheme Meeting,
shall not invalidate the proceedings at the relevant Scheme
Meeting and (ii) notwithstanding any of the foregoing it
shall be sufficient to prove that, in the case of delivery by
courier, such documents were delivered to a courier and in
envelopes addressed to the person or persons concerned at their
said addresses respectively.
6. The quorum for the Scheme Meetings will in each case be
the presence of two or more persons at the meeting representing
in person or by proxy more than 50% of the total issued and
outstanding Voting Shares or Non-Voting Shares (together the
Shares), as appropriate, of Allied World throughout
the meeting.
7. Any Shareholder may vote any number of his, her or its
Shares for the Scheme and vote the balance of his,
her or its Shares against the Scheme, or to abstain
from voting. Subject to any reasonable objections as they might
raise, Shareholders voting in this manner will, for the purpose
of the majority in number count, be counted as one
shareholder for the Scheme (as to the number of his,
her or its Shares being voted for the Scheme), and
one shareholder against the Scheme (as to the number
of his, her or its Shares being voted against the
Scheme).
8. The forms of proxy in the forms or substantially in the
forms produced to the Court and the provisions to be made
permitting Shareholders to appoint a proxy, including by mail,
telephone, electronically or otherwise, be and are hereby
approved for use at the Scheme Meetings.
9. The Chairman of the Scheme Meetings shall be entitled to
accept the warranty on the said forms of proxy as to the
authority of the signatory to cast the votes thereby cast
without further investigation.
10. The Chairman of the Scheme Meetings shall be at liberty
to accept a faxed or electronic copy of a form of proxy but may
require production of the original if he considers this to be
necessary or desirable for the purpose of verification.
11. Allied World be at liberty to set a record date (the
Record Date) for determining the holders of Shares
entitled to receive notice of, and to vote at, the Scheme
Meetings.
12. In the case of joint registered holders of Shares, the
vote of either holder whether in person or by proxy will be
accepted with or without a corresponding vote of the other
holder.
13. In the case of a Shareholder which is a corporation,
the Shareholder may by written instrument authorize such person
as it thinks fit to act as its representative at the relevant
Scheme Meeting and the person so authorized shall be entitled to
exercise the same powers on behalf of the corporation as that
corporation could exercise if it was an individual. The Chairman
of the Scheme Meetings may accept such assurances as he thinks
fit as to the right of any person to attend and vote at the
relevant Scheme Meetings on behalf of a Shareholder who is a
corporation.
14. The Chairman of the Scheme Meetings shall be at liberty
to accept a form of proxy and the figure for which any
Shareholder seeks to vote, notwithstanding that the form of
proxy has not been completed in accordance with the instructions
contained therein, provided that the Chairman of the relevant
Scheme Meeting considers that the information contained therein
is sufficient to establish the entitlement of the Shareholder to
vote. Should the form of proxy be returned duly signed but
without a specific direction as to how the Shareholder wishes to
vote, the
B-2
persons appointed as proxies shall vote for the Scheme and are
authorized in respect of any other matter to vote or abstain at
the proxies discretion.
15. The Chairman of the Scheme Meetings shall be at liberty
to appoint inspectors or scrutineers to count and tally the
votes cast at the Scheme Meetings.
AND IT IS FURTHER ORDERED that the Proxy Statement in
substantially the form of the draft exhibited to the First
Affidavit of Wesley Dupont be and is hereby deemed to meet the
requirements of section 100 of the Companies Act 1981 as
the explanatory statement referred to therein,
DATED this
7th day
of October 2010.
Kawaley J
B-3
IN THE SUPREME COURT OF BERMUDA
CIVIL JURISDICTION
COMMERCIAL COURT
2010: No. 328
IN THE MATTER OF ALLIED WORLD
ASSURANCE COMPANY HOLDINGS, LTD
AND IN THE MATTER OF THE COMPANIES ACT 1981
ORDER FOR DIRECTIONS
Conyers Dill & Pearman Limited
Clarenden House, 2 Church Street
Hamilton, Bermuda HM11
RJM/cm/384579/106053
ANNEX C
EXPECTED
TIMETABLE
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Description
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Proposed Date
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Record date for determining the Allied World Bermuda voting and
non-voting common shareholders eligible to vote at the
respective Shareholder Meetings
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October 12, 2010
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Proxy statement and proxy first mailed to Allied World Bermuda
shareholders
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October 14, 2010
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Latest time for submitting forms of proxy:
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via Internet or telephone
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7:00 p.m. Eastern time on November 17, 2010
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via proxy card
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Must be received at any time prior to commencement of the
respective Shareholder Meetings
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Shareholder Meeting for holders of voting common shares
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10:00 a.m. local time on November 18, 2010
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Shareholder Meeting for holders of non-voting common shares
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10:30 a.m. local time on November 18, 2010
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Court hearing to sanction the Scheme of Arrangement
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November 26, 2010
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Anticipated effective time of the Scheme of Arrangement
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As soon as practicable after the court hearing
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Issuance of the Allied World Switzerland voting shares and
non-voting participation certificates
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Promptly after the registration with the commercial register in
the Canton of Zug, Switzerland of the capital increase covering
the Allied World Switzerland registered shares to be issued and
the effective time of the Scheme of Arrangement
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C-1
Annex D
ARTICLES OF
ASSOCIATION
of
Allied
World Assurance Company Holdings, Ltd
Allied World Assurance Company Holdings, AG
I. Name,
Domicile and Purpose of the Company
Article 1
Corporate Name, Registered Office and Duration
Under the corporate name
Allied
World Assurance Company Holdings, Ltd
Allied World Assurance Company Holdings, AG
a Company exists pursuant to Article 620 et seq. of the
Swiss Code of Obligations (hereinafter CO) having
its registered office in Zug. The duration of the Company is
unlimited.
STATUTEN
der
Allied
World Assurance Company Holdings, Ltd
Allied World Assurance Company Holdings, AG
I. Firma,
Sitz und Zweck der Gesellschaft
Artikel 1
Firma, Sitz und Dauer der Gesellschaft
Unter der Firma
Allied
World Assurance Company Holdings, Ltd
Allied World Assurance Company Holdings, AG
besteht eine Aktiengesellschaft gemäss Artikel 620 ff. OR
mit Sitz in Zug. Die Dauer der Gesellschaft ist
unbeschränkt.
Article 2
Purpose
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|
a) |
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.
|
The Company may carry out finance and management transactions
and set up branches and subsidiaries in Switzerland and abroad.
The Company may acquire, hold and sell real estate in
Switzerland and abroad.
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b) |
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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Artikel 2
Zweck
|
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a) |
Hauptzweck der Gesellschaft ist der Erwerb, das Halten und der
Verkauf von Beteiligungen an Unternehmen, insbesondere, jedoch
nicht ausschliesslich, solcher der Direkt- und
Rückversicherungsbranche.
|
D-1
Die Gesellschaft kann Finanz- und Management-Transaktionen
ausführen. Sie kann Zweigniederlassungen und
Tochtergesellschaften im In- und Ausland errichten.
Die Gesellschaft kann im In- und Ausland Grundstücke
erwerben, halten und veräussern.
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|
b) |
Die Gesellschaft kann alle Geschäfte tätigen, die
geeignet sind, den Zweck der Gesellschaft zu fördern und
mit dem Zweck im Zusammenhang stehen.
|
II. Share
Capital and Shares, Participation Capital
Article 3a
Share Capital
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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 [ ]
per share. The share capital is fully paid-in.
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b)
|
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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II.
Aktienkapital und Aktien Partizipationskapital
Artikel
3a Aktienkapital
|
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a)
|
Das Aktienkapital der Gesellschaft beträgt CHF
[ ] und ist eingeteilt in [ ]
auf den Namen lautende Aktien im Nennwert von CHF
[ ] je Aktie. Das Aktienkapital ist
vollständig liberiert.
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b)
|
Auf Beschluss der Generalversammlung können jederzeit
Namenaktien in Inhaberaktien und Inhaberaktien in Namenaktien
umgewandelt werden.
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Article 3b
Participation Capital
|
|
a)
|
The participation capital of the Company amounts to CHF
[ ] and is divided into [ ]
registered participation certificates with a par value of CHF
[ ] per participation certificate. The
participation capital is fully paid-in.
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b)
|
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.
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)
|
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)
|
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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e)
|
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
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D-2
|
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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
3b Partizipationskapital
|
|
a)
|
Das Partizipationskapital der Gesellschaft beträgt CHF
[ ] und ist eingeteilt in [ ]
Partizipationsscheine lautend auf den Namen im Nennwert von CHF
[ ] je Partizipationsschein. Das
Partizipationskapital ist vollständig liberiert.
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|
b)
|
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.
Änderungen dieses Artikels 3b lit. b) bedürfen
der Zustimmung der absoluten Mehrheit der an der
Partizipantenversammlung vertretenen Partizipationsscheine.
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|
c) |
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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|
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d)
|
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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e)
|
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.
|
Article 4
Conditional Share Capital for Bonds and Similar Debt
Instruments
|
|
a)
|
The share capital of the Company shall be increased by an amount
not exceeding CHF [ ] through the issue of a
maximum of [ ] registered shares, payable in
full, each with a par value of CHF [ ] 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.
|
|
b)
|
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
|
D-3
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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.
|
|
|
c) |
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.
|
Artikel 4
Bedingtes Aktienkapital für Anleihensobligationen und
ähnliche Instrumente der Fremdfinanzierung
|
|
a)
|
Das Aktienkapital der Gesellschaft wird im Maximalbetrag von CHF
[ ] durch Ausgabe von höchstens
[ ] vollständig zu liberierenden
Namenaktien mit einem Nennwert von CHF [ ] 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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b)
|
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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|
c)
|
Der Erwerb von Namenaktien durch Ausübung von Wandel- und
Optionsrechten sowie sämtliche weiteren Übertragungen
von Namenaktien unterliegen den
Übertragungsbeschränkungen gemäss Artikel 8 der
Statuten.
|
Article 5
Conditional Share Capital for Employee Benefit Plans
|
|
a)
|
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
[ ], 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.
|
|
b)
|
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.
|
|
c)
|
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.
|
Artikel 5
Bedingtes Aktienkapital für
Mitarbeiterbeteiligungen
|
|
a) |
Das Aktienkapital der Gesellschaft wird im Maximalbetrag von CHF
[ ] durch Ausgabe von höchstens
[ ] vollständig zu liberierenden
Namenaktien mit einem Nennwert von CHF [ ] je
Aktie erhöht bei und im Umfang der Ausübung von
Optionen, welche Mitarbeitern der Gesellschaft oder ihrer
Tochtergesellschaften sowie Beratern, Direktoren oder anderen
Personen, welche Dienstleistungen für die Gesellschaft oder
ihre Tochtergesellschaften erbringen, eingeräumt
wurden/werden.
|
D-4
|
|
b)
|
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.
|
|
c)
|
Der Erwerb von Namenaktien im Zusammenhang mit
Mitarbeiterbeteiligungen sowie sämtliche weiteren
Übertragungen von Namenaktien unterliegen den
Übertragungsbeschränkungen gemäss Artikel 8 der
Statuten.
|
Article 5a
Conditional Capital for Existing Shareholder and Participant
Warrants
|
|
a) |
The share capital and the participation capital, respectively,
of the Company shall be increased by an amount not exceeding CHF
[ ] and CHF [ ], respectively,
through the issue from time to time of a maximum of 2,000,000
registered shares and 1,500,000 registered participation
certificates, respectively, payable in full, each with a par
value of CHF [ ], in connection with the
exercise of shareholder and participant warrants, respectively,
granted to (i) American International Group, Inc. and
(ii) GS Capital Partners 2000, L.P., GS Capital Partners
2000 Offshore, L.P., GS Capital Partners 2000 GmbH &
Co. Beteiligungs KG, GS Capital Partners 2000 Employee Fund,
L.P., Stone Street Fund 2000, L.P. and Bridge Street
Special Opportunities Fund 2000, L.P.
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|
|
b)
|
Shareholders and participants pre-emptive rights
shall be excluded with regard to the issuance of these shares
and registered participation certificates. These new registered
shares and registered participation certificates, respectively,
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 and
registered participation certificates, respectively.
|
|
c)
|
The acquisition of registered shares and registered
participation certificates, respectively, in connection with the
shareholder and participant warrants and any further transfers
of registered shares and registered participation certificates,
respectively, shall be subject to the restrictions specified in
Article 8 of the Articles of Association.
|
Artikel
5a Bedingtes Kapital für bestehende Aktionärs- und
Partizipantenoptionen
|
|
a) |
Das Aktien- bzw. Partizipationskapital der Gesellschaft wird im
Maximalbetrag von CHF [ ] bzw. CHF
[ ] durch Ausgabe von höchstens 2,000,000
vollständig zu liberierenden Namenaktien bzw. 1,500,000
vollständig zu liberierenden Partizipationsscheinen mit
einem Nennwert von CHF [ ] je Aktie bzw.
Partizipationsschein erhöht bei und im Umfang der
Ausübung von Optionen, welche (i) American
International Group, Inc. und (ii) GS Capital Partners
2000, L.P., GS Capital Partners 2000 Offshore, L.P., GS Capital
Partners 2000 GmbH & Co. Beteiligungs KG, GS Capital
Partners 2000 Employee Fund, L.P., Stone Street Fund 2000,
L.P. und Bridge Street Special Opportunities Fund 2000,
L.P., eingeräumt wurden.
|
|
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b)
|
Bezüglich dieser Aktien bzw. Partizipationsscheine ist das
Bezugsrecht der Aktionäre bzw. Partizipanten
ausgeschlossen. Neue Aktien bzw. Partizipationsscheine 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 bzw. Partizipationsscheine.
|
|
c)
|
Der Erwerb von Namenaktien im Zusammenhang mit Aktionärs-
bzw. Partizipantenoptionen sowie sämtliche weiteren
Übertragungen von Namenaktien bzw. Partizipationsscheinen
unterliegen den Übertragungsbeschränkungen gemäss
Artikel 8 der Statuten.
|
Article 6
Authorized Share Capital for General Purposes
|
|
a)
|
The Board of Directors is authorized to increase the share
capital from time to time and at any time until
[ ] by an amount not exceeding CHF
[ ] through the issue of up to
[ ] fully paid up registered shares with a par
value of CHF [ ] each.
|
|
b)
|
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
|
|
c) |
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.
|
|
|
d) |
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.
|
Artikel 6
Genehmigtes Kapital zu allgemeinen Zwecken
|
|
a)
|
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 [ ] je
Aktie zu erhöhen.
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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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c) |
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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d) |
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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Article 7
Form of Shares, Intermediated Securities
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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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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.
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c) |
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-6
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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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The foregoing provisions of this Article 7 of the Articles
of Association apply mutatis mutandis to participation
certificates.
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Artikel 7
Form der Aktien, Bucheffekten
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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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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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c) |
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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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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e)
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Die vorstehenden Bestimmungen dieses Artikels 7 der Statuten
gelten mutatis mutandis auch für Partizipationsscheine.
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Article 8
Share Register, Participation Certificate Register and Transfer
Restrictions
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a) |
Registered shares and the participation certificates are
registered in a share 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) |
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), d),
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 en tered in the share register
as shareholders without voting rights. The corresponding shares
shall be considered as not represented in the General Meeting of
Shareholders.
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c) |
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-7
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d) |
Registered shares attributed to GS Capital Partners 2000, L.P.,
GS Capital Partners 2000 Offshore, L.P., GS Capital Partners
2000 GmbH & Co. Beteiligungs KG, GS Capital Partners
2000 Employee Fund, L.P., Stone Street Fund 2000, L.P. and
Bridge Street Special Opportunities Fund 2000, L.P as Controlled
Shares pursuant to the attribution rules set forth below in
Article 14 paragraph c) of the Articles of Association,
shall be entered into the share register as shares without
voting rights to the extent they represent voting rights in
excess of one (1) vote.
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e)
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The limit of 10% of the registered share capital and the
limitation to one vote pursuant to Article 8 paragraph
d) 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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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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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.
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h) |
The Board of Directors may in special cases approve exceptions
to the above regulations (Article 8 paragraph c), d), 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) |
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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