UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
SCHEDULE
14A INFORMATION
Proxy
Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
(Amendment
No.______)
Filed
by the Registrant:
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¨
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Filed by a Party other than the Registrant:
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¨
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Check
the appropriate box:
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¨
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Preliminary
Proxy Statement
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¨
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Confidential,
for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
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ý
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Definitive
Proxy Statement
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¨
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Definitive
Additional Materials
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¨
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Soliciting
Material Pursuant to §240.14a-12
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AMTRUST
FINANCIAL SERVICES, INC.
(Name
of
Registrant as Specified in Its Charter)
__________________________________________________________
(Name
of
Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment
of Filing Fee (Check the appropriate box):
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ý
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No
fee required.
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¨
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Fee
computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
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(1)
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Title
of each class of securities to which transaction
applies:
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(2)
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Aggregate
number of securities to which transaction applies:
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(3)
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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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(4)
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Proposed
maximum aggregate value of transaction:
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(5)
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Total
fee paid:
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¨
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Fee
paid previously with preliminary materials.
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¨
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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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(1)
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Amount
Previously Paid:
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(2)
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Form,
Schedule or Registration Statement No.:
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(3)
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Filing
Party:
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(4)
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Date
Filed:
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NOTICE
OF ANNUAL MEETING
OF
SHAREHOLDERS
AND
PROXY
STATEMENT
MAY
23, 2008
59
Maiden
Lane, 6th Floor
New
York,
NY 10038
Phone:
212.220.7120
Fax:
212.220.7130
www.amtrustgroup.com
AmTrust
Financial Services, Inc.
59
Maiden Lane, 6th Floor
New
York, New York 10038
NOTICE
OF ANNUAL MEETING OF SHAREHOLDERS
TO
BE HELD ON MAY 23, 2008
April 14,
2008
Dear
Shareholder:
You
are
cordially invited to attend the 2008 Annual Meeting of Shareholders of AmTrust
Financial Services, Inc. (“AmTrust,” “AmTrust Financial,” “Company,” “our,”
“us,” or “we”), which will be held on May 23, 2008, commencing at 10:00 a.m.
(local time), at the Millennium Hilton Hotel, 55 Church Street, New York, New
York 10007.
At
the
Annual Meeting, you will be asked to consider and vote upon the election of
seven directors and the ratification of the appointment of BDO Seidman, LLP
as
our independent auditors, and to consider and act upon such other business
as
may properly come before the meeting or any adjournment or postponement thereof.
Each of these proposals is more fully described in the attached Proxy
Statement.
Holders
of record of Common Stock of record at the close of business on April 2,
2008, the date fixed by our Board of Directors as the record date for the
meeting, are entitled to notice of and to vote on any matters that properly
come
before the Annual Meeting and at any adjournment or postponement
thereof.
A
copy of
our Annual Report to Shareholders, which includes a copy of our Annual Report
on
Form 10-K for the fiscal year ended December 31, 2007, is being mailed
together with this Notice of Annual Meeting of Shareholders and Proxy Statement.
Additional copies may be obtained by writing to AmTrust Financial Services,
Inc., 59 Maiden Lane, 6th Floor, New York, New York 10038, and Attention:
Corporate Secretary.
On
behalf
of the officers, directors and employees of AmTrust Financial, I would like
to
express our appreciation for your continued support.
Sincerely,
STEPHEN
UNGAR
General
Counsel and Secretary
ALL
SHAREHOLDERS ARE CORDIALLY INVITED TO ATTEND THE ANNUAL MEETING. WHETHER OR
NOT
YOU PLAN TO ATTEND, PLEASE PROMPTLY VOTE BY DATING, SIGNING AND MAILING THE
ENCLOSED PROXY IN THE RETURN ENVELOPE PROVIDED TO ENSURE THAT YOUR SHARES WILL
BE REPRESENTED. IF YOU ATTEND THE ANNUAL MEETING, YOU MAY WITHDRAW YOUR PROXY,
IF YOU WISH, AND VOTE IN PERSON. YOUR PROXY IS REVOCABLE IN ACCORDANCE WITH
THE
PROCEDURES SET FORTH IN THIS PROXY STATEMENT.
TABLE
OF CONTENTS
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Page
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PROXY
STATEMENT
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1
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General
Information
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1
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SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
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2
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SECURITY
OWNERSHIP OF MANAGEMENT
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3
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CORPORATE
GOVERNANCE
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4
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Board
of Directors
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4
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Independence
of Directors
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4
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Executive
Sessions
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4
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Board
Committees
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4
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Audit
Committee
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4
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Executive
Committee
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5
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Nominating
and Corporate Governance Committee
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5
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Compensation
Committee
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5
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Compensation
of Directors
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6
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Shareholder
Communications
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7
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Code
of Business Conduct and Ethics
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7
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Section
16(a) Beneficial Ownership Reporting Compliance
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7
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PROPOSAL
1: ELECTION OF DIRECTORS
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8
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Information
about the Nominees
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8
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EXECUTIVE
OFFICERS
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9
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DISCUSSION
OF EXECUTIVE COMPENSATION
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10
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Employment
Agreements
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10
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Barry
D. Zyskind
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10
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Ronald
E. Pipoly, Jr.
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10
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Max
G. Caviet
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11
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Michael
J. Saxon
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12
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Christopher
M. Longo
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12
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2005
Equity Incentive Plan
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13
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Summary
Compensation Table for Fiscal Year 2007
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13
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Grant
of Plan-Based Awards for Fiscal Year 2007
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14
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Outstanding
Equity Awards at Fiscal Year-End
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14
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Options
Exercises and Stock Vested
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15
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Potential
Payments upon Termination or Change-In-Control
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15
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COMPENSATION
COMMITTEE REPORT
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16
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COMPENSATION
DISCUSSION AND ANALYSIS
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16
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Overview
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16
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Executive
Compensation
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16
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Tax
Deductibility of Executive Compensation
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18
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CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS
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19
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REPORT
OF OUR AUDIT COMMITTEE
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20
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PROPOSAL
2: RATIFICATION OF INDEPENDENT AUDITORS
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21
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Audit
and Non-Audit Fees
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21
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Pre-Approval
Policies and Procedures of the Audit Committee
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21
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ADDITIONAL
MATTERS
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22
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Shareholders’
Proposals for the 2008 Annual Meeting
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22
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Annual
Report and Financial Statements
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22
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Other
Business
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22
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____________________________________
PROXY
STATEMENT
_____________________________________
General
Information
This
Proxy Statement is furnished to you and other shareholders of AmTrust Financial
Services, Inc. (“AmTrust Financial,” “Company,” “our,” “us,” or “we”) in
connection with the solicitation of proxies by our Board of Directors (the
“Board”) to be used at the 2008 Annual Meeting of Shareholders (the “Annual
Meeting”) to be held at the Millennium Hilton Hotel, 55 Church Street, New York,
New York 10007, on May 23, 2008, at 10:00 a.m. (local time) and any adjournment
or postponement thereof. All shareholders are entitled and encouraged to attend
the Annual Meeting in person. This Proxy Statement together with the
accompanying proxy card was first mailed to shareholders on or about
April 21, 2008.
All
Common Stock represented by properly executed proxies received pursuant to
this
solicitation will be voted in accordance with the shareholder’s directions
specified on the proxy. If no directions have been specified by marking the
appropriate squares on the accompanying proxy card, the shares will be voted
“FOR” the slate of directors described herein, and “FOR” the ratification of BDO
Seidman, LLP as our independent auditors. In connection with any other business
that may properly come before the Annual Meeting, all properly executed proxies
delivered pursuant to this solicitation and not revoked will be voted in the
discretion of the Proxy Committee named in the proxy. A shareholder signing
and
returning the accompanying proxy has the power to revoke it at any time prior
to
its exercise by giving written notice of revocation to our Corporate Secretary,
by submitting a proxy bearing a later date, or by attending the Annual Meeting
and voting in person. Attendance at the Annual Meeting will not constitute,
in
itself, revocation of a proxy.
All
expenses in connection with this solicitation of proxies will be paid by us.
Proxies will be solicited principally by mail, but directors, officers and
certain other individuals authorized by us may personally solicit proxies.
AmTrust Financial will reimburse custodians, nominees or other persons for
their
out-of-pocket expenses in sending proxy material to beneficial
owners.
The
Board
has fixed the close of business on April 2, 2008, as the record date for
determining the holders of Common Stock entitled to notice of and to vote at
the
Annual Meeting. Each such shareholder is entitled to one vote per share. As
of
the record date, there were 59,989,839 shares of Common Stock
outstanding.
In
voting
by proxy with regard to the election of directors, shareholders may vote in
favor of each nominee or withhold their votes as to each nominee. Should any
nominee become unable to accept nomination or election, the Proxy Committee
will
vote for the election of such other person as a director as the present
directors may recommend in the place of such nominee. The information set forth
below regarding the nominees and the other directors continuing in office is
based on information furnished by them. In voting by proxy with regard to the
ratification of our independent auditors, shareholders may vote in favor of
or
against the proposal or may abstain from voting.
A
majority of the outstanding Common Stock, represented in person or by proxy,
constitutes a quorum for the transaction of business at the Annual Meeting.
The
seven candidates receiving the greatest number of votes will be elected as
our
directors. The affirmative vote of the holders of shares entitling them to
exercise a majority of the voting power of AmTrust Financial, represented in
person or by proxy at the Annual Meeting, is necessary to ratify the selection
of BDO Seidman, LLP as our independent auditor.
Shareholder
abstentions and broker non-votes will be included in the number of shareholders
present at the Annual Meeting for the purpose of determining the presence of
a
quorum. Brokers who do not receive shareholder instructions are entitled to
vote
on the election of directors and the ratification of our independent auditors.
Broker non-votes and shareholder abstentions will have no effect on the outcome
of the proposals.
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The
following table sets forth certain information with respect to the beneficial
ownership of our Common Stock by each person or group known by us to own more
than 5% of our Common Stock. Ownership percentages are based on 59,989,839
shares of Common Stock outstanding as of April 2, 2008.
Name and Address
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Amount and Nature
of Beneficial
Ownership
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Percent
of Class
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Barry
D. Zyskind
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59
Maiden Lane, 6th Floor
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New
York, New York 10038
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6,022,000
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10.0
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%
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George
Karfunkel
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59
Maiden Lane, 6th Floor
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New
York, New York 10038
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18,570,500
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31.0
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%
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Michael
Karfunkel
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59
Maiden Lane, 6th Floor
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New
York, New York 10038
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18,838,357
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31.4
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%
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New
Gulf Holdings, Inc.
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59
Maiden Lane, 6th Floor
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New
York, New York 10038
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7,985,714
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13.3
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%
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——————
(1)
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Messrs. M.
Karfunkel and G. Karfunkel each own 50.0% of Gulf USA Corporation,
which
owns 100% of New Gulf Holdings, Inc. (“NGH”). NGH owns 7,985,714 shares of
Common Stock. Messrs. M. Karfunkel and G. Karfunkel share voting and
investment power with respect to the shares owned by
NGH.
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(2)
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The
Chesed Foundation of America, a charitable foundation controlled
by
Mr. G. Karfunkel, owns 1,551,786 shares of Common Stock. Mr. G.
Karfunkel does not have a beneficial interest in the shares owned
by
Chesed Foundation of America and, therefore, Mr. G. Karfunkel
disclaims beneficial ownership of these shares of Common
Stock.
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(3)
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The
Hod Foundation, a charitable foundation controlled by Mr. M.
Karfunkel, owns 1,819,643 shares of Common Stock. Mr. M. Karfunkel
disclaims beneficial ownership of these shares of Common
Stock.
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SECURITY
OWNERSHIP OF MANAGEMENT
Set
forth
below is information concerning the beneficial ownership of our Common Stock
by
each director, each person named in the Summary Compensation Table under
“Executive Compensation” below, and of all our directors and executive officers
as a group as of April 2, 2008. For purposes of the table below, Common
Stock subject to options which are currently exercisable or exercisable within
60 days of May 23, 2008 are considered outstanding and beneficially owned by
the
person holding the options for the purposes of computing beneficial ownership
of
that person, but are not treated as outstanding for the purpose of computing
the
percentage ownership of any other person.
Title
of Class
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Name of Beneficial Owner
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Amount & Nature
of Beneficial
Ownership
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Percent
of Class
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Common
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Barry
D. Zyskind
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6,022,000
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10.0
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%
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Common
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George
Karfunkel
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18,570,500
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(1)(2)
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31.0
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%
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Common
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Michael
Karfunkel
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18,838,357
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(1)(3)
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31.4
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%
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Common
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Donald
T. DeCarlo
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28,281
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(4)
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*
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Common
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Abraham
Gulkowitz
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13,281
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(5)
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*
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Common
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Isaac
M. Neuberger
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13,281
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(5)
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*
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Common
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Jay
J. Miller
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13,281
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(5)
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*
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Common
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Max
G. Caviet
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57,031
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(5)
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*
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Common
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Michael
J. Saxon
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193,459
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(6)
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*
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Common
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Ronald
E. Pipoly, Jr.
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193,459
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(6)
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*
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Common
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Christopher
M. Longo
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193,459
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(6)
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*
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Common
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Harry
Schlachter
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22,475
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(7)
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*
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All
executive officers and
directors
as a group (12 persons)
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44,158,864
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72.7
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%
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——————
(1)
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Messrs. M.
Karfunkel and G. Karfunkel each own 50.0% of Gulf USA Corporation,
which
owns 100% of New Gulf Holdings, Inc. (“NGH”). NGH owns 7,985,714 shares of
Common Stock. Messrs. M. Karfunkel and G. Karfunkel share voting and
investment power with respect to the shares owned by
NGH.
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(2)
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The
Chesed Foundation of America, a charitable foundation controlled
by
Mr. G. Karfunkel, owns 1,551,786 shares of Common Stock. Mr. G.
Karfunkel does not have a beneficial interest in the shares owned
by
Chesed Foundation of America and, therefore, Mr. G. Karfunkel
disclaims beneficial ownership of these shares of Common
Stock.
|
(3)
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The
Hod Foundation, a charitable foundation controlled by Mr. M.
Karfunkel, owns 1,819,643 shares of Common Stock. Mr. M. Karfunkel
disclaims beneficial ownership of these shares of Common
Stock.
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(4)
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Includes
13,281 options that are exercisable within 60 days of our annual
meeting
to be held on May 23, 2008.
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(5)
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Options
that are exercisable within 60 days of our annual meeting to be held
on
May 23, 2008.
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(6)
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Includes
193,359 options that are exercisable within 60 days of our annual
meeting
to be held on May 23, 2008.
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(7)
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Includes
21,875 options that are exercisable within 60 days of our annual
meeting
to be held on May 23, 2008.
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CORPORATE
GOVERNANCE
Board
of Directors
Our
Certificate of Incorporation provides that our Board shall consist of not less
than five directors and not more than thirteen directors, with the exact number
to be set by the Board from time to time. Currently, our Board of Directors
consists of seven members, with each director elected to serve a one-year term.
Directors elected at the Annual Meeting will each serve for a one-year term
until the 2009 Annual Meeting of Shareholders and until the election or
appointment and qualification of his successor, or until his earlier death,
resignation or removal.
Our
Board
of Directors met on eight occasions during 2007. Each of our directors attended
75% or more of the regular and special Board and Board committee meetings on
which such director served. We have adopted a policy requiring that each member
of our Board of Directors attend our Annual Meeting.
Independence
of Directors
Five
of
our seven directors, George Karfunkel, Donald T. DeCarlo, Abraham Gulkowitz,
Isaac M. Neuberger and Jay J. Miller, are Independent Directors under the NASDAQ
Marketplace Rules. The remaining two directors, Barry D. Zyskind and Michael
Karfunkel, do not qualify as Independent Directors.
We
are a
“controlled company” as defined in Rule 4350(c)(3) of NASDAQ’s listing
qualification standards because George Karfunkel, Michael Karfunkel and Barry
D.
Zyskind, directly or indirectly, collectively beneficially own or control
approximately 59.1% of our voting power. See “Security Ownership Of Certain
Beneficial Owners”. Therefore, we are exempt from the requirements of Rule
4350(c) with respect to having:
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·
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a
majority of the members of our Board of Directors be
independent;
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·
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our
Compensation and Nominating and Corporate Governance Committees comprised
solely of Independent Directors;
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·
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the
compensation of our executive officers determined by a majority of
our
Independent Directors or a Compensation Committee comprised solely
of
Independent Directors; and
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·
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director
nominees being selected or recommended for selection by our Board
of
Directors, either by a majority of our Independent Directors or by
a
Nominating Committee comprised solely of Independent
Directors.
|
Michael
Karfunkel is a member of our Compensation and Nominating and Corporate
Governance Committees.
Executive
Sessions
As
required under NASDAQ’s Marketplace Rule 4350(c)(2), our Independent Directors
have regularly scheduled meetings at which only Independent Directors are
present. Our Independent Directors met in Executive Session four times during
2007.
Board
Committees
Our
Board
has established the following committees: Audit Committee, Compensation
Committee, Nominating and Corporate Governance Committee and Executive
Committee. Each committee has its own charter. Our Audit Committee is comprised
entirely of Independent Directors. Our Board may, from time to time, establish
or maintain additional committees as it deems necessary or
appropriate.
The
membership of the existing committees as of April 2, 2008 and the function
of each committee are described in the following table.
Director
|
|
Audit
Committee
|
|
Compensation
Committee
|
|
Executive
Committee
|
|
Nominating
and Corporate Governance Committee
|
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|
|
|
|
|
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|
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|
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Barry
D. Zyskind
|
|
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|
x
*
|
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|
|
|
Michael
Karfunkel
|
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|
|
|
|
x
|
|
|
x
|
|
|
x
|
|
George
Karfunkel
|
|
|
|
|
|
|
|
|
x
|
|
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|
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Donald
T. DeCarlo
|
|
|
x
|
|
|
x
*
|
|
|
|
|
|
|
|
Abraham
Gulkowitz
|
|
|
x
**
|
|
|
|
|
|
|
|
|
|
|
Isaac
M. Neuberger
|
|
|
x
|
|
|
|
|
|
|
|
|
x
*
|
|
Jay
J. Miller
|
|
|
|
|
|
x
|
|
|
|
|
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x
|
|
——————
**
|
Audit
Committee Financial Expert and
Chair
|
Audit
Committee
The
Audit
Committee oversees our auditing, accounting, financial reporting and internal
control functions, appoints our independent public accounting firm and approves
its services. One of its functions is to assure that the independent public
accountants have the freedom, cooperation and opportunity necessary to
accomplish their functions. The Audit Committee also assures that appropriate
action is taken on the recommendations of the independent public accountants.
Our Audit Committee Charter, which describes all of the Audit Committee’s
responsibilities, is posted on our website and is available in print to any
shareholder who requests a copy.
The
Audit
Committee was established in accordance with Section 3(a)(58)(A) of the
Securities Exchange Act of 1934, as amended, and currently consists of the
following Independent Directors: Mr. Gulkowitz, who is also the Chairman of
the Committee, Mr. DeCarlo and Mr. Neuberger. The Board has determined
that each member of the Audit Committee meets the independence requirements
contained in the NASDAQ listing standards and Rule 10A-3(b)(1) of the Exchange
Act. In addition, the Board has determined that Mr. Gulkowitz qualifies as
an “audit committee financial expert” within the meaning of Securities and
Exchange Commission (“SEC”) regulations and applicable NASDAQ listing
standards.
During
2007, the Audit Committee met six times on March 14, 2007, March 20, 2007,
May
11, 2007, June 28, 2007, August 10, 2007 and November 7, 2007. The Report of
the
Audit Committee appears on page 20.
Executive
Committee
The
Executive Committee has responsibilities that include exercising the authority
of the Board of Directors with respect to matters requiring action between
meetings of the Board of Directors; and deciding issues from time to time
delegated by the Board of Directors.
The
members of our Executive Committee are Mr. Zyskind, who is also the
chairman of the committee, George Karfunkel and Michael Karfunkel.
The
Executive Committee met on a monthly basis in 2007.
Nominating
and Corporate Governance Committee
The
Nominating and Corporate Governance Committee identifies and nominates members
of the Board of Directors; develops and recommends to the Board of Directors
a
set of corporate governance principles applicable to us; and oversees the
evaluation of the Board of Directors and management.
The
members of our Nominating and Corporate Governance committee are
Mr. Neuberger, who is also the chairman of the committee, Mr. Miller
and Michael Karfunkel. The Nominating and Corporate Governance Committee does
not have a charter.
In
carrying out its function to nominate candidates for election to our Board,
the
Nominating and Corporate Governance Committee considers the mix of skills,
experience, character, commitment, and diversity of background, all in the
context of the requirements of our Board at that point in time. The Nominating
and Corporate Governance Committee believes that each candidate should be an
individual who has demonstrated integrity and ethics in such candidate’s
personal and professional life, has an understanding of elements relevant to
the
success of a publicly-traded company and has established a record of
professional accomplishment in such candidate’s chosen field. Each candidate
should be prepared to participate fully in Board activities, including
attendance at, and active participation in, meetings of the Board, and not
have
other personal or professional commitments that would, in the Nominating and
Corporate Governance Committee’s judgment, interfere with or limit such
candidate’s ability to do so. Each candidate should also be prepared to
represent the best interests of all of our shareholders and not just one
particular constituency. Additionally, in determining whether to recommend
a
director for re-election, the Nominating and Corporate Governance Committee
also
considers the director’s past attendance at Board and committee meetings and
participation in and contributions to the activities of our Board.
The
Nominating and Corporate Governance Committee considers recommendations for
director candidates submitted by shareholders. A shareholder recommending an
individual for consideration by the Committee must provide (i) evidence in
accordance with the provisions of Regulation14a-8 under the Securities Exchange
Act of 1934, as amended, of compliance with the shareholder eligibility
requirements and (ii) all information regarding the candidate(s) and the
security holder that would be required to be disclosed in a proxy statement
filed with the SEC if the candidate(s) were nominated for election to the
Board including, without limitation, name, age, address, principal occupation
or
employment, and stock ownership. Shareholders should send the required
information to AmTrust Financial Services, Inc., c/o Corporate Secretary, 59
Maiden Lane, 6th Floor, New York, New York 10038.
In
order
for a recommendation to be considered by the Committee for the 2009 Annual
Meeting of Shareholders, the Corporate Secretary must receive the recommendation
no later than the close of business local time on January 1, 2009. Such
recommendations must be sent via registered, certified or express mail (or
other
means that allows the shareholder to determine when the recommendation was
received by us). The Corporate Secretary will send any shareholder
recommendations to the Committee for consideration at a future Committee
meeting. Individuals recommended by shareholders in accordance with these
procedures will receive the same consideration as other individuals evaluated
by
the Committee.
The
Nominating and Corporate Governance committee met one time in 2007 to nominate
the incumbent directors for election to the Board of Directors at the 2007
annual meeting.
Compensation
Committee
The
Compensation Committee reviews and determines, together with the other directors
if directed by the Board of Directors, the compensation of our executive
officers and reviews and approves employment and severance agreements with
our
executive officers. The Compensation Committee also administers the grant of
stock options and other awards under our 2005 Equity Incentive Plan and
establishes and reviews policies relating to the compensation and benefits
of
our employees and consultants.
The
members of the Compensation Committee are Mr. DeCarlo, who is also the
chairman of the committee, Mr. Miller and Michael Karfunkel. Michael
Karfunkel does not participate in any matters relating to Mr. Zyskind’s
compensation. The Compensation Committee does not have a charter.
To
date,
the Compensation Committee has not retained a compensation consultant. The
Compensation Committee’s sets compensation levels for our executive officers by
reviewing the compensation levels of comparable executives at companies of
similar size and development operating in our industry. Final compensation
decisions are made by our Chief Executive Officer in consultation with the
Compensation Committee and the Board of Directors, other than with respect
to
the Chief Executive Officer’s compensation, which has been determined by the
Compensation Committee and the Board of Directors.
The
Compensation Committee met twice in 2007.
Compensation
of Directors
We
pay an
annual retainer of $55,000 to each non-employee director of the Company other
than George Karfunkel and Michael Karfunkel. In addition, each such director
received a fee of $2,000 for each meeting of the Board of Directors attended
in
person and $1,000 for each meeting of the Board of Directors attended via
teleconference. Each such non-employee director who chaired a committee also
received an annual retainer of $5,000, as well as $1,000 for each meeting of
such committee of the Board chaired. Each such non-employee director received
a
fee of $1,000 for each meeting of a committee of the Board of Directors
attended. We also reimbursed our directors for reasonable expenses they incurred
in attending Board of Directors or committee meetings.
In
2007,
we also paid Mr. Miller an additional $73,000 in consideration of his
serving a director on the boards of our subsidiaries and made a grant of options
to purchase 100,000 shares of common stock. These options will fully vest in
two
years after the date of grant. Additionally, we paid Mr. DeCarlo an
additional $33,750 in consideration of his serving as a director on the boards
of certain of our subsidiaries.
Pursuant
to our 2005 Equity Incentive Plan, in 2007 we made a grant of options to
purchase 6,250 shares of our Common Stock, which will vest over a period of
one
year to each of our non-employee directors other than George Karfunkel and
Michael Karfunkel. We intend to make additional annual grants of options to
purchase 6,250 shares of our Common Stock to each of our non-employee directors
other than George Karfunkel and Michael Karfunkel. Each such option will fully
vest one year after the date of grant. Such options will have an exercise price
equal to the fair market value as of the date of the grant, will expire ten
years from the date of the grant and, unless otherwise provided, vest over
four
years, commencing one year after the date of grant. George Karfunkel and Michael
Karfunkel will not receive any compensation for serving on our Board
of Directors.
The
following table sets forth compensation earned by the non-employee members
of
our Board of Directors during the fiscal year ending December 31,
200
7:
Name
|
|
Fees
Earned
or Paid
in Cash
($)(1)
|
|
Option
Awards
($)(2)
|
|
Total
($)
|
|
|
|
|
|
|
|
|
|
Michael
Karfunkel
|
|
|
—
|
|
|
—
|
|
|
—
|
|
George
Karfunkel
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Donald
T. DeCarlo
|
|
|
107,750
|
|
|
29,318
|
|
|
137,068
|
|
Abraham
Gulkowitz
|
|
|
78,000
|
|
|
29,318
|
|
|
107,318
|
|
Isaac
M. Neuberger
|
|
|
73,000
|
|
|
29,318
|
|
|
102,318
|
|
Jay
J. Miller
|
|
|
140,000
|
|
|
82,507
|
|
|
222,507
|
|
——————
(1)
|
The
amounts in this column reflect retainer fees, Board meeting fees
and
committee fees earned in 2007 for service on our Board of Directors
and
its committees and, with respect to Mr. DeCarlo and Mr. Miller,
for service on the boards of directors of various of our
subsidiaries.
|
(2)
|
The
amounts in this column reflect the compensation costs for financial
reporting purposes for the year under FAS 123R without regard to
forfeiture assumptions. See Note 11 “Share Based Compensation,” in the
Notes to our Consolidated Financial Statements included in Item 8
of our
Annual Report on Form 10-K for the year ended December 31, 2007 for
our assumptions used to determine the compensation costs associated
with
stock option awards that we expensed in 2007. At December 31, 2007,
the aggregate number of option awards outstanding was: Mr. DeCarlo -
18,750 shares; Mr. Gulkowitz - 18,750 shares; Mr. Neuberger -
18,750 shares; and Mr. Miller - 118,750 shares. Unvested options are
forfeited upon termination of the director’s service; however, if the
director’s termination of service is due to (i) retirement on or after his
sixty-fifth birthday or, with consent of the Company, on or after
his
fifty-fifth birthday; (ii) disability; or (iii) death, the options
become
fully vested. Following the named executive officer’s termination date,
except if terminated for cause, he may exercise vested options for
up to
three months following the termination, or six months if termination
was
due to death, or, if sooner, the expiration dates of the
options.
|
Shareholder
Communications
Shareholders
and other interested persons may contact the non-management directors
individually or as a group by writing to such director(s) at AmTrust Financial
Services, Inc., c/o Corporate Secretary, 59 Maiden Lane, 6th Floor, New York,
New York 10038. Shareholders may also send communications to one or more
members
of the Board by writing to such director(s) or to the whole Board at AmTrust
Financial Services, Inc., c/o Corporate Secretary, 59 Maiden Lane, 6th Floor,
New York, New York 10038. The Corporate Secretary delivers all such
communications to the addressee or addressees set forth in the
communication.
Code
of Business Conduct and Ethics
All
directors, officers, and employees must act ethically at all times and in
accordance with our Code of Business Conduct and Ethics. This Code satisfies
the
definition of “code of ethics” pursuant to the rules and regulations of the SEC
and complies with the requirements of NASDAQ. Our Code of Business Conduct
and
Ethics is posted on our website at www.amtrustgroup.com and is available
in
print to any shareholder who requests a copy.
Section
16(a) Beneficial Ownership Reporting Compliance
Section
16(a) of the Securities Exchange Act of 1934, as amended, requires our directors
and executive officers to file reports of ownership and changes of ownership
of
our Common Stock and common share units with the SEC. We believe that during
fiscal year 2007, all filing requirements applicable to our directors and
executive officers were timely met.
PROPOSAL
1:
ELECTION
OF DIRECTORS
Our
Board
of Directors consists of seven members, with each director elected to serve
a
one-year term. All directors will be elected at the Annual Meeting, each
to
serve for a one-year term until the 2009 Annual Meeting of Shareholders and
until the election or appointment and qualification of his successor, or
until
his earlier death, resignation or removal. Upon recommendation of the Nominating
and Corporate Governance Committee, the Board of Directors has unanimously
nominated Messrs. Donald T. DeCarlo, Abraham Gulkowitz, Michael Karfunkel,
George Karfunkel, Jay J. Miller, Isaac M. Neuberger and Barry D. Zyskind
for
election as directors at the Annual Meeting. Proxies cannot be voted for
more
than seven director nominees.
Each
of
the director nominees is standing for re-election to the Board of Directors
and
has consented to serve for a new term. The Board of Directors does not
contemplate that any of the nominees will be unable to stand for election,
but
should any nominee become unable to serve or for good cause will not serve,
all
proxies (except proxies marked to the contrary) will be voted for the election
of a substitute nominee as our Board of Directors may recommend.
Information
about the Nominees
Barry
D. Zyskind
,
36,
Director since 1998, has held senior management positions with the Company
since
1998 and currently serves as the Company’s Chief Executive Officer and
President. Mr. Zyskind also serves as a Director of our wholly owned
subsidiaries Technology Insurance Company, Inc. (“TIC”), Rochdale Insurance
Company (“RIC”), Wesco Insurance Company (“WIC”), AmTrust International
Insurance Ltd. (“AII”), AmTrust International Underwriters Limited (“AIU”),
Associated Industries Insurance Company, Inc. (“AIIC”), Associated Industries
Insurance Services, Inc. (“AIIS”), IGI Group, Ltd., AmTrust North America, Inc.
(“ANA”), AMT Warranty Corp. (“AMTW”), Princeton Agency, Inc. (“PAI”) and North
American Risk Management, Inc. Mr. Zyskind currently serves as chairman of
the board of Maiden Holdings, Inc. and a director of American Stock Transfer
& Trust Co. Prior to joining AmTrust Financial, Mr. Zyskind was an
investment banker at Janney Montgomery Scott, LLC in New York. Mr. Zyskind
received an M.B.A. from New York University’s Stern School of Business in 1997.
Mr. Zyskind is the son-in-law of Michael Karfunkel.
Michael
Karfunkel
,
65,
Chairman of the Board of Directors since 1998, has been associated with American
Stock Transfer & Trust Company since 1971, where he is Chairman of the Board
and President. He also serves on the boards of directors of TIC, RIC, WIC,
AII,
AIU and PAI. Mr. Karfunkel is the brother of George Karfunkel and
father-in-law of Mr. Zyskind.
George
Karfunkel
,
60,
Director since 1998, has been associated with American Stock Transfer &
Trust Company since 1971, where he is Senior Vice President and a Director.
Mr. Karfunkel serves as vice chairman of The Upstate Bank. He serves on the
boards of directors of TIC, RIC, WIC, AII, AIU and PAI. Mr. Karfunkel is
the brother of Michael Karfunkel.
Donald
T. DeCarlo
,
69,
Director since 2006, is an attorney in private practice. From 1996 to 2004,
Mr. DeCarlo practiced in the New York offices of Lord, Bissell & Brook,
LLP, where he was managing partner prior to his departure. Mr. DeCarlo has
been a Commissioner of the New York State Insurance Fund since 1997. He is
also
a director of TIC, RIC, WIC, AIIC, AIIS, Jackson National Life Insurance
Co. of
New York, Greater New York Mutual Insurance Company (an insurer that primarily
underwrites large property coverages) and its subsidiaries, Greater New York
Custom Insurance Company, Insurance Company of Greater New, and Strathmore
Insurance Company. From 1987 to 1997, Mr. DeCarlo held a number of
positions with the Travelers Group’s insurance companies including serving as
Senior Vice President and General Counsel of all of the companies from 1994
to
1997. From 1973 to 1986, Mr. DeCarlo was vice president and general counsel
of the National Council on Compensation Insurance, a national association
that
collects, tabulates and provides data used in formulating rates for workers
compensation insurance. Mr. DeCarlo received a B.A. from Iona College in
1960 and a J.D. from St. John’s University School of Law in 1969.
Abraham
Gulkowitz
,
59,
Director since 2006, is the senior managing principal of Brookville Capital,
a
hedge fund specializing in credit analysis, which is a wholly owned indirect
subsidiary of Morgan Stanley. Mr. Gulkowitz has worked at Brookville
Capital since 2002. From 1978 to 2002, Mr. Gulkowitz served as a Senior
Managing Director and a member of the partners’ management group at Bankers
Trust/Deutsche Bank. His responsibilities included the analysis of economic
and
business issues related to leveraged financing transactions as well as mergers
and acquisitions, private equity and real estate investments. Mr. Gulkowitz
joined Bankers Trust in 1978 from Chase Manhattan Bank where he was responsible
for financial market analysis. Previously, he was an economics research
assistant to Alan Greenspan. Mr. Gulkowitz received his M.B.A. from New
York University, where he also did post-graduate work in economics.
Jay
J. Miller
,
75,
Director since 1998, has practiced law specializing in securities matters
and
corporate transactions for more than 40 years. Mr. Miller joined the
Company in 1998 and served as its secretary (without compensation) from 1998
to
2005. Mr. Miller also serves as a Director of our wholly owned subsidiaries
TIC, RIC, WIC, AII, AIU, AIIC, AIIS, AMTW, ANA, PAI and United Underwriting
Agency, Inc., and is Chairman of the Board of Gulf USA Corporation. He is
also a
director of American Stock Transfer & Trust Company and Integrated Business
Systems, Inc. Mr. Miller received an A.B. from Syracuse University in 1952
and a J.D. from Columbia University School of Law in 1955.
Isaac
M. Neuberger
,
61,
Director since 2006, is the senior principal of the law firm of Neuberger,
Quinn, Gielen, Rubin & Gibber P.A., where he specializes in complex
corporate and commercial matters, with emphasis in mergers and acquisitions
and
finance. Prior to starting the firm in 1989, Mr. Neuberger practiced in the
firm of Melnicove, Kaufman, Weiner, Smouse & Garbis P.A. As an
undergraduate, Mr. Neuberger studied at Johns Hopkins University, Loyola
College and Ner Israel Rabbinical College, and he received his J.D. from
the
University of Maryland School of Law in 1969.
THE
BOARD UNANIMOUSLY RECOMMENDS A VOTE “FOR” THE ELECTION OF ALL NOMINEES NAMED
ABOVE.
EXECUTIVE
OFFICERS
The
table
below sets forth the names, ages and positions of our executive
officers:
|
|
|
|
|
Name
|
|
Age
|
|
Position(s)
|
|
|
|
|
|
Barry
D. Zyskind
|
|
36
|
|
Chief
Executive Officer, President and Director
|
Max
G. Caviet
|
|
53
|
|
President
of AII and AIU
|
Michael
J. Saxon
|
|
49
|
|
Chief
Operating Officer
|
Ronald
E. Pipoly, Jr.
|
|
41
|
|
Chief
Financial Officer
|
Christopher
M. Longo
|
|
34
|
|
Chief
Information Officer
|
Harry
Schlachter
|
|
51
|
|
Senior
Vice President – Finance and
Treasurer
|
Set
forth
below are descriptions of the backgrounds of each or our executive officers,
other than Barry D. Zyskind, whose background is described above under “Election
of Directors”.
Max
G. Caviet
,
President of AII and AIU, joined the Company in January 2003.
Mr. Caviet serves on the boards of directors of both companies. Mr. Caviet
is President, Chief Executive Officer and Director of Maiden Holdings, Ltd.
and
will continue to serve as an executive officer of both companies during a
transitional period which will not extend beyond June 30, 2008 (Following
the
transitional period, Mr. Caviet is expected to resign his positions at AmTrust.)
Between 1972 and 1982, Mr. Caviet was an underwriter and team leader,
specializing in engineering risks, at British Engine Insurance Company. In
1982,
Mr. Caviet joined CIGNA Insurance Company of North America (UK) Ltd. as a
Senior Underwriter for Special Risks and was promoted to Engineering and
Underwriting Manager. In 1990, Mr. Caviet joined Crowe Underwriting Agency
Ltd. as its Engineering and Extended Warranty Underwriter. From 1994 to 2003,
Mr. Caviet was Engineering and Underwriting Manager with Trenwick
International Limited.
Michael
J. Saxon
,
Chief
Operating Officer, joined the Company in 2001. Prior to coming to AmTrust
Financial, he was Chief Claims Officer for Credit General Insurance Company
(a
property and casualty insurer). In 1984, Mr. Saxon began his career at
Liberty Mutual. Thereafter, Mr. Saxon joined Progressive Insurance Company,
where he held successively more responsible management positions in the Claims
Department over an eight-year period. Mr. Saxon received a B.S. in Finance
from the University of Akron in 1983.
Ronald
E. Pipoly, Jr.
,
Chief
Financial Officer, joined the Company in 2001. From 1993 to 2001,
Mr. Pipoly served as Financial Analyst, Assistant Controller, and finally
Controller at PRS Group, Inc. (a property and casualty insurance holding
company) in Beachwood, Ohio. Mr. Pipoly began his career at Coopers and
Lybrand, where he worked from 1988 through 1993. He received a B.S. in
Accounting from the University of Akron in 1988.
Christopher
M. Longo
,
Chief
Information Officer, joined the Company in 2001. Previous to his employment
with
the Company, Mr. Longo was a commercial lines underwriter and actuarial
analyst with Credit General Insurance Company. Mr. Longo received a B.S. in
Biological Sciences from Kent State University in 2000.
Harry
Schlachter
,
Senior
Vice President – Finance and Treasurer, joined the Company in 2001. He
received a B.B.A. in Accounting and an M.B.A. in Taxation from Baruch College
in
1978 and 2005, respectively.
DISCUSSION
OF EXECUTIVE COMPENSATION
Employment
Agreements
Barry
D. Zyskind
Under
Mr. Zyskind’s employment agreement, dated as of January 1, 2005,
Mr. Zyskind serves as our President and Chief Executive Officer.
Mr. Zyskind’s term of employment under his agreement continues until
December 31, 2009, at which time the employment agreement automatically
renews for successive three year terms, unless Mr. Zyskind or the Company
provides 180 days’ written notice of an intention not to renew. His salary is
subject to review by the Board of Directors or the Compensation Committee
annually. Effective January 1, 2007, Mr. Zyskind receives an annual
base salary in the amount of $625,000. Mr. Zyskind is also entitled to an
annual profit bonus equal to two percent (2%) of the Company’s pre-tax profit,
subject to a cap equal to two and one-half times his salary if certain financial
goals are met. See “Compensation Discussion and Analysis - Bonus” for further
details regarding the calculation of Mr. Zyskind’s bonus. Mr. Zyskind
is also eligible to receive special bonuses at the discretion of the Board
of
Directors or the Compensation Committee and to participate in any long-term
incentive compensation plan established for his benefit or in any such plan
established for the benefit of the senior management of the
Company.
If
Mr. Zyskind’s employment terminates due to death, his heirs are entitled to
his salary payable for the remainder of his term of employment or one year,
whichever is greater, at the rate in effect immediately before such termination,
any annual or special bonus earned or awarded through the date of termination,
any deferred compensation under any incentive or other deferred compensation
plan, any other compensation or benefits that have vested through the date
of
termination or to which he may then be entitled according to the terms and
conditions of each grant, plan or award and any reimbursements of expenses
due
him through the date of termination. If Mr. Zyskind’s employment terminates
due to disability, he will be entitled to the compensation and benefits
enumerated above, except that his salary shall be offset by the amount of
any
long-term disability insurance benefit the Company may have elected to provide
for him.
We
may
terminate Mr. Zyskind’s employment for cause upon written notice to
Mr. Zyskind at least 30 days prior to the intended termination. If
Mr. Zyskind’s employment were terminated for cause, he would be entitled to
his salary through the date of termination, any annual or special bonus earned
or awarded through the date of termination, any deferred compensation under
any
incentive or other deferred compensation plan, any other compensation or
benefits which may have vested through the date of termination or to which
he
then may be entitled according to the terms and conditions of each grant,
plan
or award and any reimbursements of expenses due him through the date of
termination. Cause is defined in Mr. Zyskind’s employment agreement as (i)
the conviction of a felony involving an act or acts of dishonesty on his
part
and resulting in gain or personal enrichment at the expense of the Company;
(ii)
willful and continued failure of Mr. Zyskind to perform his obligations
under the employment agreement, resulting in demonstrable material economic
harm
to the Company; or (iii) Mr. Zyskind’s willful and material breach of the
noncompetition and nonsolicitation provisions of the employment agreement
to the
demonstrable and material detriment of the Company.
If
we
terminate Mr. Zyskind’s employment without cause or if Mr. Zyskind
terminates his employment with good reason, then Mr. Zyskind is entitled,
in addition to the compensation and benefits specified in the paragraph above,
to (i) a lump-sum payment equal to the salary payable to him for the
remainder of his employment term at the rate in effect immediately before
the
termination, (ii) a lump-sum payment equal to the annual profit bonuses for
the remainder of his term of employment (to be prorated for any partial fiscal
year) equal to the greater of the average of the bonuses awarded to him during
the three fiscal years preceding the fiscal year of termination or the bonus
awarded to him for the fiscal year immediately preceding termination,
(iii) continued participation, for the remainder of his term of employment,
in all employee benefit plans or programs in which he was participating on
the
date of his termination; or, if such participation is prohibited, he shall
be
entitled to the after-tax economic equivalent of any such benefit which shall
be
determined by the lowest cost Mr. Zyskind would incur in obtaining such
benefit individually, (iv) continued payment, for the remainder of his term
of employment, of 100% of the cost of health insurance through the Company’s
group health plan for himself, his spouse and dependent children and
(v) other benefits in accordance with applicable plans and programs of the
Company. Good reason is defined in Mr. Zyskind’s employment agreement as
one of the following actions taken without Mr. Zyskind’s prior written
consent or his acquiescence: (i) a reduction in his then current salary;
(ii) a diminution, reduction or other adverse change in the level of bonus
or incentive compensation opportunities, the applicable performance criteria
and
otherwise the manner in which the bonuses and incentive compensation are
determined for Mr. Zyskind; (iii) the Company’s failure to pay
Mr. Zyskind any amounts otherwise vested and due him hereunder or under any
plan or policy of Company; (iv) a diminution of Mr. Zyskind’s titles,
position, authorities or responsibilities, including not serving on the Board
of
Directors; (v) the assignment of duties incompatible with Mr. Zyskind’s
position of President; (vi) imposition of a requirement that Mr. Zyskind
report other than to the full Board of Directors; or (vii) a material
breach of the Agreement by Company that is not cured within 10 business days
after written notification by Executive of such breach.
Mr. Zyskind
has agreed to keep confidential all information regarding the Company that
he
receives during the term of his employment and thereafter. He also agreed
that,
upon termination of employment, other than a termination without cause or
due to
good reason, he will not solicit any customer or employee of the Company
for one
year after termination.
Ronald
E. Pipoly, Jr.
Under
Mr. Pipoly’s employment agreement, dated as of December 1, 2005,
Mr. Pipoly has agreed to serve as an officer of our wholly-owned
subsidiary, AmTrust North America, Inc., which we refer to as ANA.
Mr. Pipoly also serves as our Chief Financial Officer. Mr. Pipoly’s
term of employment under his agreement continues until May 31, 2008, at
which time the employment agreement will automatically renew for successive
one
year terms, unless Mr. Pipoly or the Company provides 90 days’ written
notice of an intention not to renew. Mr. Pipoly’s salary is subject to
review by the Board of Directors annually commencing on December 1, 2007.
Effective January 1, 2008, Mr. Pipoly receives an annual base salary
in the amount of $400,000. Mr. Pipoly is entitled to an annual bonus
comparable to the other senior executives of the Company, provided that the
Company meets certain targets set forth in its business plan for the given
time
period, which shall be no less than 30% of his then current salary.
Mr. Pipoly is also entitled to other bonus payments in the discretion of
the Board of Directors. Pursuant to his employment agreement, on
February 9, 2006, Mr. Pipoly was granted 343,750 options, which will
fully vest over a period of 4 years. On October 27, 2007, Mr. Pipoly was
granted an additional 50,000 options, which will fully vest over a period
of
4 years.
In
the
event of disability, the Company may terminate Mr. Pipoly’s employment upon
five days’ written notice; however, Mr. Pipoly will be entitled to receive
his salary and any unreimbursed expenses through the disability termination
date. In the event Mr. Pipoly dies during his term of employment, his heirs
will be entitled to receive his salary earned and any unreimbursed expenses
accrued through the date of his death.
The
Company may terminate Mr. Pipoly’s employment at any time for cause and,
upon such an event, the Company will have no further compensation or benefit
obligation to Mr. Pipoly after the date of termination. Cause is defined in
Mr. Pipoly’s employment agreement as (i) a material breach of the
employment agreement by Mr. Pipoly, but only if such breach is not cured
within 30 days following written notice by the Company to Mr. Pipoly of
such breach, assuming such breach may be cured; (ii) conviction of any act
or course of conduct involving moral turpitude; or (iii) engagement in any
willful act or willful course of conduct constituting an abuse of office
or
authority which significantly adversely affects the business or reputation
of
the Company. No act, failure to act or course of conduct on Mr. Pipoly’s
part shall be considered willful unless done, or omitted to be done, by him
not
in good faith and without reasonable belief that his action, omission or
course
of conduct was in the best interest of the Company.
Mr. Pipoly
has agreed to keep confidential all information regarding the Company that
he
receives during the term of his employment and thereafter. Mr. Pipoly has
also agreed that upon termination of employment he will not compete with
the
Company, solicit any customer or employee of the Company or solicit any entity
that has been contacted by the Company regarding a possible acquisition by
the
Company for purposes of acquiring that entity, for three years after
termination.
Max
G. Caviet
Under
Mr. Caviet’s employment agreement, dated as of January 1, 2005,
Mr. Caviet has agreed to serve as a senior executive of the Company, as
President of our wholly-owned subsidiary, AmTrust International Insurance,
Ltd.
and as an officer of other affiliates of the Company. Mr. Caviet’s term of
employment under this agreement continues until December 31, 2008, at which
time the employment agreement will automatically renew for successive three
year
terms, unless Mr. Caviet or the Company provides 180 days’ written notice
of an intention not to renew. Mr. Caviet also serves as President and Chief
Executive Officer of Maiden Holdings, Inc. (“Maiden”) and will continue to serve
as an executive officer of both companies during a transitional period which
is
not expected to extend beyond June 30, 2008.
Mr. Caviet’s
salary is subject to annual review by the Board of Directors. Effective
January 1, 2007, Mr. Caviet receives an annual base salary in the
amount of £250,000. Mr. Caviet is entitled to an annual profit bonus equal
to ten percent (10%) of the net pre-tax profit of the special risk and extended
warranty business written by the Company and its affiliates under the direct
or
indirect supervision of Mr. Caviet exclusive of extraordinary items and
investment income or loss. Mr. Caviet’s annual profit bonus is subject to a
cap equal to one and one-half times his salary. See “Compensation Discussion and
Analysis - Bonus” for further details regarding Mr. Caviet’s bonus
payments. Mr. Caviet is also eligible for other bonus payments determined
at the sole discretion of the Board of Directors. Pursuant to his employment
agreement, on February 9, 2006, Mr. Caviet was granted 62,500 options,
which will fully vest over a period of 4 years. On September 1, 2006, Mr.
Caviet was granted an additional 50,000 options, which will fully vest over
a
period of 4 years. On October 27, 2007, Mr. Caviet was granted an
additional 50,000 options, which will fully vest over a period of
4 years.
In
the
event of disability, the Company may terminate Mr. Caviet’s employment upon
five days’ written notice; however, the Company must provide Mr. Caviet
permanent health insurance which is intended to provide benefits to him in
the
event of termination for disability. In the event Mr. Caviet dies during
his term of employment, his heirs will be entitled to receive his salary
and
profit bonus earned through his date of death as well as any unreimbursed
expenses.
If
we
terminate or do not renew Mr. Caviet’s employment for gross misconduct we
will not be obligated to pay any other compensation or benefits to
Mr. Caviet after the date of termination. Gross misconduct is defined in
Mr. Caviet’s employment agreement as (i) a material or serious breach
of the employment agreement by Mr. Caviet, but only if such breach is not
cured within 30 days following written notice by the Company to Mr. Caviet
of such breach, assuming such breach may be cured; (ii) conviction of any
act or course of conduct involving moral turpitude; or (iii) engagement in
any willful act or willful course of conduct constituting an abuse of office
or
authority which significantly adversely affects the business or reputation
of
the Company or Mr. Caviet.
If
we
terminate or non-renew Mr. Caviet’s employment for any reason including
disability, other than gross misconduct, he will be entitled to receive
(i) his salary for a period of one year from the original expiration date
of the term of employment, or one year from the effective date of termination
or
non-renewal, whichever is greater and (ii) his profit bonus on all special
risk and extended warranty business written by the Company and its affiliates
under the direct or indirect supervision of Mr. Caviet written through the
date of termination, through the expiration of such business, for a maximum
period of five years from the date of termination.
If
Mr. Caviet does not renew his employment agreement for the purpose of
retirement (as defined under U.K. law), he will be entitled to his profit
bonus
on all special risk and extended warranty business written by the Company
and
its affiliates under the direct or indirect supervision of Mr. Caviet
written through the end of the employment period, through the expiration
of such
business, for a maximum period of five years from the end of the employment
period.
Mr. Caviet
has agreed to keep confidential all information regarding the Company that
he
receives during the term of his employment and thereafter. Mr. Caviet has
also agreed that, subject to the severance payments provided above, upon
termination of employment he will not solicit any customer or employee of
the
Company or solicit any entity that has been contacted by the Company regarding
a
possible acquisition by the Company for purposes of acquiring that entity,
for
two years after termination.
Michael
J. Saxon
Under
Mr. Saxon’s employment agreement, dated as of June 1, 2005,
Mr. Saxon agreed to serve as President of ANA. Additionally, Mr. Saxon
serves as the Chief Operating Officer of the Company. Mr. Saxon’s term of
employment under this agreement continues until May 31, 2008, at which time
the employment agreement will automatically renew for successive one year
terms,
unless Mr. Saxon or the Company provides 90 days’ written notice of an
intention not to renew. Mr. Saxon is entitled to an annual salary review
beginning on June 1, 2007. Effective January 1, 2008, Mr. Saxon
receives an annual base salary in the amount of $500,000. Mr. Saxon is
entitled to an annual profit bonus, equal to one percent (1%) of the Company’s
profit for the fiscal year, subject to a cap in the amount of his then current
salary. See “Compensation Discussion and Analysis - Bonus” for further details
regarding Mr. Saxon’s bonus payments. Mr. Saxon may also receive other
bonus payments determined at the sole discretion of the Board of Directors.
Pursuant to his employment agreement, on February 9, 2006, Mr. Saxon
was granted 343,750 options, which will fully vest over a period of
4 years. On October 27, 2007, Mr. Saxon was granted an additional 50,000
options, which will fully vest over a period of 4 years.
In
the
event of disability, the Company may terminate Mr. Saxon’s employment
agreement upon five days’ written notice; however, he will be entitled to
receive his salary and any unreimbursed expenses through the disability
termination date and for three months thereafter. In the event Mr. Saxon
dies during his term of employment, his heirs shall be entitled to receive
his
salary and any unreimbursed expenses through the date of his death and for
three
months thereafter. The Company may terminate Mr. Saxon’s employment at any
time for cause and, upon such an event, the Company will have no further
compensation or benefit obligation to Mr. Saxon after the date of
termination. Cause is defined in Mr. Saxon’s employment agreement as
(i) a material breach of the employment agreement by Mr. Saxon, but
only if such breach is not cured within 30 days following written notice
by the
Company to Mr. Saxon of such breach, assuming such breach may be cured;
(ii) conviction of any act or course of conduct involving moral turpitude;
or (iii) engagement in any willful act or willful course of conduct
constituting an abuse of office or authority which significantly adversely
affects the business or reputation of the Company. No act, failure to act
or
course of conduct on Mr. Saxon’s part shall be considered willful unless
done, or omitted to be done, by him not in good faith and without reasonable
belief that his action, omission or course of conduct was in the best interest
of the Company.
Mr. Saxon
has agreed to keep confidential all information regarding the Company that
he
receives during the term of his employment and thereafter. Mr. Saxon has
also agreed that upon termination of employment he will not compete with
the
Company, solicit any customer or employee of the Company or solicit any entity
that has been contacted by the Company regarding a possible acquisition by
the
Company for purposes of acquiring that entity, for three years after
termination.
Christopher
M. Longo
Under
Mr. Longo’s employment agreement, dated as of June 1, 2005,
Mr. Longo has agreed to serve as an officer of ANA. Additionally,
Mr. Longo services as the Chief Information Officer of the Company.
Mr. Longo’s term of employment under this agreement continues until
May 31, 2008, at which time the employment agreement will automatically
renew for successive one year terms, unless Mr. Longo or the Company
provides 90 days’ written notice of an intention not to renew. Mr. Longo is
entitled to an annual review of his salary by the Board of Directors beginning
on June 1, 2009. Effective January 1, 2008, Mr. Longo receives an
annual base salary in the amount of $300,000. Mr. Longo is entitled to an
annual profit bonus equal to one percent (1%) of the Company’s profit for the
fiscal year, subject to a cap equal to one and one-half times Mr. Longo’s
then current salary. See “Compensation Discussion and Analysis - Bonus” for
further details regarding Mr. Longo’s bonus payments. Pursuant to his
employment agreement, on February 9, 2006, Mr. Longo was granted
343,750 options, which will fully vest over a period of 4 years. On October
27, 2007, Mr. Longo was granted an additional 50,000 options, which will
fully
vest over a period of 4 years.
In
the
event of disability, the Company may terminate his employment upon five days’
written notice; however, Mr. Longo will be entitled to receive his salary
and any unreimbursed expenses through the disability termination date. In
the
event Mr. Longo dies during his term of employment, his heirs will be
entitled to receive his salary and any unreimbursed expenses earned through
the
date of his death.
We
may
terminate Mr. Longo’s employment at any time for cause and, upon such an
event, the Company will have no further compensation or benefit obligation
to
Mr. Longo after the date of termination. Cause is defined in
Mr. Longo’s employment agreement as (i) a material breach of the
employment agreement by Mr. Longo, but only if such breach is not cured
within 30 days following written notice by the Company to Mr. Longo of such
breach, assuming such breach may be cured; (ii) conviction of any act or
course of conduct involving moral turpitude; or (iii) engagement in any
willful act or willful course of conduct constituting an abuse of office
or
authority which significantly adversely affects the business or reputation
of
the Company. No act, failure to act or course of conduct on Mr. Longo’s
part shall be considered willful unless done, or omitted to be done, by him
not
in good faith and without reasonable belief that his action, omission or
course
of conduct was in the best interest of the Company.
Mr. Longo
has agreed to keep confidential all information regarding the Company that
he
receives during the term of his employment and thereafter. Mr. Longo has
also agreed that upon termination of employment he will not compete with
the
Company, solicit any customer or employee of the Company or solicit any entity
that has been contacted by the Company regarding a possible acquisition by
the
Company for purposes of acquiring that entity, for three years after
termination.
2005
Equity Incentive Plan
Our
Board
of Directors and Shareholders approved the 2005 Equity Incentive Plan in
December 2005, which allows for grants of incentive stock options,
non-qualified stock options and restricted shares of Common Stock to present
and
future officers, directors, employees and consultants of the Company or any
subsidiary. The aggregate number of shares of Common Stock for which awards
may
be issued may not exceed 5,994,300 shares, and the aggregate number of shares
of
Common Stock for which restricted stock awards may be issued may not exceed
1,998,100 shares, subject to the authority of our Board of Directors to adjust
this amount in the event of a consolidation, reorganization, stock dividend,
stock split, recapitalization or similar transaction affecting our Common
Stock.
Summary
Compensation Table for Fiscal Year 2007
The
following table sets forth the compensation paid or accrued by us in fiscal
year
2007 for our named executive officers. Our named executive officers include
our
chief executive officer, our chief financial officer and our three other most
highly compensated executive officers.
Name
and Principal Position
|
|
Year
|
|
Salary
($)
|
|
Stock
Awards
($)(1)
|
|
Option
Awards
($)(1)
|
|
Non-Equity
Incentive
Plan
Compensation
($)
|
|
All Other
Compensation
($)(2)
|
|
Total
($)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Barry
D. Zyskind
Chief
Executive Officer
|
|
|
2007
2006
|
|
|
625,000
600,000
|
|
|
—
—
|
|
|
—
—
|
|
|
1,562,500
1,050,000
|
|
|
34,130
34,800
|
|
|
2,221,630
1,684,800
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ronald
Pipoly
Chief
Financial Officer
|
|
|
2007
2006
|
|
|
300,000
224,250
|
|
|
—
750
|
|
|
241,332
202,698
|
|
|
375,000
275,000
|
|
|
6,750
3,375
|
|
|
923,082
706,073
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Max
Caviet
President
of AIU
|
|
|
2007
2006
|
(3)
(4)
|
|
496,075
489,650
|
|
|
—
—
|
|
|
80,804
48,687
|
|
|
667,291
337,000
|
|
|
19,108
18,740
|
|
|
1,263,278
894,077
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Michael
J. Saxon
Chief
Operating Officer
|
|
|
2007
2006
|
|
|
400,000
325,000
|
|
|
—
750
|
|
|
241,332
202,698
|
|
|
400,000
325,000
|
|
|
6,750
6,600
|
|
|
1,048,082
860,048
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Christopher
Longo
Chief
Information Officer
|
|
|
2007
2006
|
|
|
250,000
174,250
|
|
|
—
750
|
|
|
241,332
202,698
|
|
|
375,000
262,000
|
|
|
6,750
4,375
|
|
|
873,082
644,073
|
|
(1)
|
Represents
the compensation cost of stock awards for financial reporting purposes
for
the year under FAS 123R without regard to forfeiture assumptions.
See Note
11 “Share Based Compensation,” in the Notes to our Consolidated Financial
Statements included in Item 8 of our Annual Report on Form 10-K for
the
year ended December 31, 2006 for our assumptions used to determine
the compensation costs associated with stock awards which we expensed
in
2006; and See Note 12 “Share Based Compensation,” in the Notes to our
Consolidated Financial Statements included in Item 8 of our Annual
Report
on Form 10-K for the year ended December 31, 2007 for our assumptions
used to determine the compensation costs associated with stock awards
which we expensed in 2007.
|
(2)
|
The
amounts in this column reflect for each named executive officer matching
contributions made by the Company under the 401(k) plan. The amount
shown
in this column for Mr. Zyskind also includes payments made by the
Company on an automobile leased by Mr. Zyskind, the cost of health
and dental coverage paid by the Company for Mr. Zyskind and his
covered dependents, and the annual premium paid by the Company for
individual permanent life insurance coverage for the benefit of
Mr. Zyskind’s beneficiaries. The amount shown in this column for
Mr. Caviet only includes $14,378 for reimbursement of payments on an
automobile leased by Mr. Caviet and $4,730, the cost of health and
dental coverage, paid by the Company for Mr. Caviet and his covered
dependents.
|
(3)
|
Salary
and all other compensation were paid in British pounds, but converted
to
U.S. dollars using the spot market currency exchange rate in effect
in New
York City on December 31, 2007, which was $1.9843 to £1.00. Bonus is
paid in U.S. dollars.
|
(4)
|
Salary
and all other compensation were paid in British pounds, but converted
to
U.S. dollars using the spot market currency exchange rate in effect
in New
York City on December 31, 2006, which was $1.9586 to £1.00. Bonus is
paid in U.S. dollars.
|
Grant
of Plan-Based Awards for Fiscal Year 2007
|
|
Grant
|
|
Estimated Future Payouts
Under Non-Equity Incentive
Plan Target
(1)
|
|
All Other
Stock
Awards:
Number
of Shares
of Stock
or Units
|
|
All Other
Option
Awards:
Number of
Securities
Underlying
Options
|
|
Exercise
or Base
Price of
Option
Awards
|
|
Grant Date
Fair Value
of Stock
and
Option
Awards
|
|
Name
|
|
Date
|
|
Threshold
|
|
Target
|
|
Maximum
|
|
(#)
|
|
(#)(2)
|
|
($/Sh)
|
|
($)(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Barry
D. Zyskind
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Annual
Bonus
|
|
|
|
|
|
|
|
|
|
|
$
|
1,562,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ronald
Pipoly
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
Incentive Plan
|
|
|
10/24/2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
50,000
|
|
|
14.55
|
|
|
285,500
|
|
Annual
Bonus
|
|
|
|
|
$
|
90,000
|
|
|
|
|
|
375,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Max
Caviet
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
Incentive Plan
|
|
|
10/24/2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
50,000
|
|
|
14.55
|
|
|
285,500
|
|
Annual
Bonus
|
|
|
|
|
|
|
|
|
|
|
|
744,112
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Michael
J. Saxon
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
Incentive Plan
|
|
|
10/24/2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
50,000
|
|
|
14.55
|
|
|
285,500
|
|
Annual
Bonus
|
|
|
|
|
|
|
|
|
|
|
|
400,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Christopher
Longo
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
Incentive Plan
|
|
|
10/24/2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
50,000
|
|
|
14.55
|
|
|
285,500
|
|
Annual
Bonus
|
|
|
|
|
|
|
|
|
|
|
|
375,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Each
named executive officer’s employment agreement, other than
Mr. Pipoly’s, provides for an annual bonus equal to a pre-determined
percentage of the Company’s profits, which is subject to a maximum amount.
There is no threshold or target amount, other than with respect to
Mr. Pipoly, whose bonus will be no less than 30% of his base salary.
See “Compensation Discussion and Analysis - Bonus” for further explanation
of the calculation of these
bonuses.
|
(2)
|
Stock
options were granted to our named executive officers under our 2005
Equity
Incentive Plan. Twenty-five percent of the stock options vest and
become
exercisable on the first anniversary of the grant date, with an additional
6.25% of the stock options vesting each quarter thereafter based
on
continued employment. Each stock option award expires on the tenth
anniversary of the grant date. Unvested options are forfeited upon
termination of employment; however, if the executive’s termination is due
to (i) retirement on or after his sixty-fifth birthday or, with
consent of the Company, on or after his fifty-fifth birthday;
(ii) disability; or (iii) death, the option becomes fully
vested. Following the named executive officer’s termination date, except
if terminated for cause, he may exercise vested options for up to
three
months following the termination, or six months if termination was
due to
death, or, if sooner, the expiration dates of the options. To the
extent
permissible, the stock options are incentive stock options within
the
meaning of Section 422 of the Internal Revenue
Code.
|
(3)
|
This
amount reflects the grant date fair value in accordance with FAS
123R.
|
Outstanding
Equity Awards at Fiscal Year-End
The
following table sets forth the outstanding equity awards for each of our named
executive officers as of December 31, 2007:
Name
|
|
Number of
Securities
Underlying
Unexercised
Options (#)
Exercisable
|
|
Number of
Securities
Underlying
Unexercised
Options (#)
Unexercisable
|
|
Equity
Incentive
Plan Awards:
Number of
Securities
Underlying
Unexercised
Unearned
Options (#)
|
|
Option
Exercise
Price
($/Sh)
|
|
Option
Expiration
Date
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Barry
D. Zyskind
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ronald
Pipoly
|
|
|
150,390
|
|
|
193,360
50,000
|
|
|
|
|
|
7.00
14.55
|
|
|
2/9/2016
10/23/2017
|
(1)
(2)
|
Max
Caviet
|
|
|
27,343
15,625
|
|
|
35,157
34,375
50,000
|
|
|
|
|
|
7.00
7.50
14.55
|
|
|
2/9/2016
9/1/2016
10/23/2017
|
(1)
(3)
(2)
|
Michael
J. Saxon
|
|
|
150,390
|
|
|
193,360
50,000
|
|
|
|
|
|
7.00
14.55
|
|
|
2/9/2016
10/23/2017
|
(1)
(2)
|
Christopher
Longo
|
|
|
150,390
|
|
|
193,360
50,000
|
|
|
|
|
|
7.00
14.55
|
|
|
2/9/2016
10/23/2017
|
(1)
(2)
|
(1)
|
Granted
on February 9, 2006 under the 2005 Equity Incentive Plan. Twenty
five
percent (25%) of the option vested on February 9, 2007. Thereafter,
an
additional 6.25% of the option vests each quarter, until the option
is
100% vested on February 9, 2010.
|
(2)
|
Granted
on October 24, 2007 under the 2005 Equity Incentive Plan. Twenty
five
percent (25%) of the option vested on October 24, 2008. Thereafter,
an
additional 6.25% of the option vests each quarter, until the option
is
100% vested on October 24, 2011.
|
(3)
|
Granted
on September 1, 2006 under the 2005 Equity Incentive Plan. Twenty
five
percent (25%) of the option vested on September 1, 2007. Thereafter,
an
additional 6.25% of the option vests each quarter, until the option
is
100% vested on September 1, 2010.
|
Options
Exercises and Stock Vested
In
2007,
none of our named executive officers exercised any stock option awards that
were
granted to them.
The
following table sets forth the aggregate number of stock options that became
vested for our named executive officers during fiscal year 2007. The table
also
sets forth the value realized on vesting of the stock options (the market price
on the date of vesting multiplied by the number of shares). These stock options
awards were granted under our 2005 Equity Incentive Plan.
|
|
Stock
Awards
|
|
|
|
Number
of Shares
Acquired
on Vesting
(#)
|
|
Value
Realized
on Vesting
($)(1)
|
|
|
|
|
|
|
|
Barry
D. Zyskind
|
|
|
|
|
|
|
|
Ronald
Pipoly
|
|
|
150,390
|
|
|
1,746,672
|
|
Max
Caviet
|
|
|
42,968
|
|
|
569,068
|
|
Michael
J. Saxon
|
|
|
150,390
|
|
|
1,746,672
|
|
Christopher
Longo
|
|
|
150,390
|
|
|
1,746,672
|
|
|
(1)
|
The
market value of the shares on the vesting date was determined based
on the
trading price on the NASDAQ on that
date.
|
Potential
Payments upon Termination or Change-In-Control
The
table
below sets forth the potential payments to our named executive officers under
various termination scenarios including termination without cause, termination
for good reason, termination as a result of death or disability and termination
as a result of retirement, as per their respective employment agreements. See
“Compensation Discussion and Analysis - Employment Agreements” for further
discussion of termination events. The potential payments to our named executive
officers assume that the termination event occurs as of the last day of our
fiscal year (December 28, 2007). Since the Board of Directors has
discretion as to whether or not to accelerate the vesting of unvested stock
options and restricted share awards granted under the 2005 Equity Incentive
Plan
upon a change in control of the Company, the financial effect of such an event
has not been included in this table. We do not include the financial effect
of a
termination for cause or gross misconduct (as defined in the named executive
officer’s employment agreement) because the named executive officers are not
entitled to any further compensation or benefits following such a
termination.
Name and Principal Position
|
|
Without
Cause or
For Good
Reason
|
|
Death
|
|
Disability
|
|
Retirement
|
|
Cause
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Barry
D. Zyskind
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Salary
Continuation/Bonus
|
|
$
|
4,375,000
|
(1)
|
$
|
1,250,000
|
(3)
|
$
|
1,250,000
|
(4)
|
|
|
|
|
|
|
Benefits
|
|
|
33,560
|
(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
Ronald
Pipoly
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vesting
of Stock Awards(5)
|
|
|
|
|
|
753,263
|
|
|
753,263
|
|
|
|
|
|
|
|
Max
Caviet
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Salary
Continuation/Bonus
|
|
|
1,930,733
|
(6)
|
|
|
|
|
1,434,658
|
(6)
|
$
|
1,434,658
|
(7)
|
|
|
|
Benefits
|
|
|
|
|
|
|
|
|
35,860
|
(8)
|
|
|
|
|
|
|
Vesting
of Stock Awards(5)
|
|
|
|
|
|
431,943
|
|
|
491,943
|
|
|
|
|
|
|
|
Michael
J. Saxon
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Salary
Continuation
|
|
|
|
|
|
100,000
|
(9)
|
|
100,000
|
(9)
|
|
|
|
|
|
|
Vesting
of Stock Awards(5)
|
|
|
|
|
|
753,263
|
|
|
753,263
|
|
|
|
|
|
|
|
Christopher
Longo
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vesting
of Stock Awards(5)
|
|
|
|
|
|
753,263
|
|
|
753,263
|
|
|
|
|
|
|
|
(1)
|
This
lump-sum benefit includes (i) Mr. Zyskind’s 2007 annual base
salary provided through December 31, 2009, and (ii) the annual
profit bonuses through December 31, 2009, equal to the greater of the
average of the bonuses awarded to him during the three fiscal years
preceding the fiscal year of termination or the bonus awarded to
him for
the fiscal year immediately preceding
termination.
|
(2)
|
This
includes the costs for providing Mr. Zyskind with (i) continued
participation through December 31, 2009, in all employee benefit
plans or programs in which he was participating on December 31, 2007
or, if such participation is prohibited, the after-tax economic equivalent
of any such benefit which shall be determined by the lowest cost
Mr. Zyskind would incur in obtaining such benefit individually,
(ii) continued payment of 100% of the cost of health insurance
through the Company’s group health plan for Mr. Zyskind, his spouse
and dependent children through December 31, 2009, and
(iii) other benefits in accordance with applicable plans and programs
of the Company.
|
(3)
|
This
amount reflects Mr. Zyskind’s 2007 annual base salary provided
through December 31, 2009.
|
(4)
|
This
amount reflects Mr. Zyskind’s 2007 annual base salary provided
through December 31, 2009 (which will be reduced by any long-term
disability insurance benefit provided by the
Company).
|
(5)
|
This
amount includes the full vesting of unvested stock options in accordance
with the named executive officers’ Stock Option Award Agreements under the
2005 Equity Incentive Plan.
|
(6)
|
This
amount includes (i) Mr. Caviet’s salary through
December 31, 2007, and (ii) Mr. Caviet’s profit bonus, for
a period of five years, on all special risk and extended warranty
business
written by the Company and its affiliates through December 31, 2007
under the direct or indirect supervision of Mr. Caviet, assuming that
such
business
does not terminate earlier. Mr. Caviet is entitled to this amount if
the Company elects to non-renew or terminate Mr. Caviet’s employment
for any reason other than gross misconduct. For the definition of
gross
misconduct, see the summary of Mr. Caviet’s employment agreement in
“Discussion of Summary Compensation and Grant of Plan Based Awards
Tables.” Mr. Caviet’s employment agreement does not provide him with
the opportunity to terminate employment with good
reason.
|
(7)
|
This
amount includes Mr. Caviet’s profit bonus, for a period of five
years, on all special risk and extended warranty business written
by the
Company and its affiliates through December 31, 2007 under the direct
or indirect supervision of Mr. Caviet, assuming that such business
does not terminate earlier.
|
(8)
|
This
amount reflects the cost of providing Mr. Caviet with permanent
health insurance in accordance with his employment
agreement.
|
(9)
|
This
amount reflects Mr. Saxon’s 2007 annual base salary pro-rated for
three months.
|
COMPENSATION
COMMITTEE REPORT
AmTrust
Financial Services, Inc.’s Compensation Committee has reviewed and discussed the
Compensation Discussion and Analysis required by item 402(b) of Regulation
S-K
with management and, based on such review and discussion, has recommended to
the
Board that the following Compensation Discussion and Analysis be included in
the
Proxy Statement and, as incorporated by reference, in our Annual Report on
Form
10-K.
Donald
T.
DeCarlo (Chairman)
Michael
Karfunkel
Jay
J.
Miller
April 1,
2008
COMPENSATION
DISCUSSION AND ANALYSIS
This
compensation discussion and analysis explains the material elements of the
compensation awarded to, earned by, or paid to each of our named executive
officers during the last completed fiscal year.
Overview
The
objectives of our executive compensation policy have been to retain the
executives who have been integral to our growth, to attract other talented
and
dedicated executives and to motivate each of our executives to increase our
overall profitability. To achieve these goals, we have strived to offer each
executive an overall compensation package, which is simple, but competitive
and
a meaningful portion of which is tied to the achievement of specific
objectives.
Our
overall strategy is to compensate our named executive officers with a mix of
cash compensation, in the form of base salary and bonus, and equity
compensation, in the form of stock options.
To
date,
we have not retained a compensation consultant. Our policy for setting
compensation levels has focused on compensating our named executive officers
at
levels competitive for executives at companies of similar size and development
operating in the industry. Compensation decisions have been made by our Chief
Executive Officer in consultation with the Compensation Committee and the Board
of Directors, other than with respect to the Chief Executive Officer’s
compensation, which has been determined by the Compensation Committee and the
Board of Directors. In addition to frequent discussions between the Chief
Executive Officer and the Board of Directors, we also gather market compensation
data through negotiations related to newly hired executives. We believe that
the
compensation levels for our named executive officers are competitive. We expect
that as we continue to progress our compensation policies will evolve to reflect
our achievements and to remain competitive.
Executive
Compensation
Our
executive compensation policy includes the following elements:
Base
Salary
.
The
base salaries we provide to our named executive officers are designed to provide
an annual salary at a level consistent with individual experience, skill and
contribution to our business. When setting base salary, we take into account
the
compensation paid to similarly situated executives employed at our competitors
and cost of living considerations. The salaries of the named executive officers
are reviewed on an annual basis.
Bonus
.
We
believe that bonuses should be dependent on and tied to the Company’s
performance, and should only be paid in the event of superior performance.
Our
bonus policy is designed to reward each named executive officer for his
contributions to our profitability for the fiscal year. Except for
Mr. Pipoly, the employment agreements for our named executive officers
specify the annual bonus targets for each executive. In March 2008, the
Compensation Committee proposed the bonus payments for our named executive
officers for the 2007 fiscal year and such recommendations were adopted by
the
Board of Directors.
Annual
profit bonuses paid to each named executive officer, other than Mr. Pipoly,
are equal to a pre-determined percentage of profits, as set forth in their
respective employment agreements. Each such named executive officer’s bonus is
subject to an annual cap, based on a percentage of the officer’s base salary for
the respective fiscal year, as set forth in their respective employment
agreements. The maximum annual profit bonuses for these named executive officers
are as follows: 250% of base salary for Mr. Zyskind; 150% of base salary
for
Mr. Caviet; 100% of base salary for Mr. Saxon; and 150% of base salary
for Mr. Longo. Mr. Pipoly’s bonus, which is not subject to an annual
cap, is determined in a different manner (as described below). We believe it
would not be appropriate for the Chief Financial Officer’s bonus to be directly
based on the Company’s results.
In
addition to the annual profit bonus, under the terms of their respective
employment agreements, each named executive officer is also eligible for a
discretionary bonus, as determined each fiscal year by the Board of Directors.
The actual amount of any discretionary bonus will be determined following a
review of each named executive officer’s individual performance and contribution
to our strategic goals during the fiscal year. The named executive officers
did
not receive discretionary bonuses in 2007.
Mr. Zyskind’s
employment agreement provides an annual profit bonus equal to two percent (2%)
of our pre-tax profits for the fiscal year, provided that our pretax profit
equals or exceeds a given threshold, subject to the annual cap discussed above.
Profit is defined in Mr. Zyskind’s employment agreement as our revenues
less expenses, determined in accordance with generally accepted accounting
principles on a consistent basis. The threshold profit for fiscal year 2007
was
$24.2 million.
The
employment agreements for Mr. Saxon and Mr. Longo provide that the
annual profit bonus will equal one percent (1%) of our profits for the fiscal
year, subject to the annual caps discussed above. Profit is defined in
Mr. Saxon’s and Mr. Longo’s employment agreement as our after tax net
income, excluding extraordinary income.
Mr. Pipoly’s
employment agreement provides that the annual bonus will equal an amount
comparable to our other senior executives, provided that we have met the targets
set forth in our business plan for the subject annual period, and
Mr. Pipoly’s annual bonus will be no less than thirty percent (30%) of his
base salary.
Mr. Caviet’s
annual bonus is equal to ten percent (10%) of our pre-tax net operating income,
exclusive of extraordinary items and investment income or loss, arising from
special risk and extended warranty business written by us and our affiliates
under the direct or indirect supervision of Mr. Caviet, subject to the
annual cap discussed above. The bonuses awarded to each named executive officer
for 2007 are shown below in the “Summary Compensation Table for Fiscal Year
2007”.
Stock
and Stock-Based Grants
Stock
Options
.
Stock-based awards are a critical component of our executive compensation policy
as equity ownership helps closely align our named executive officers’ interests
to those of our shareholders. Our 2005 Equity Incentive Plan (the “2005 Plan”)
has provided the principal method for our named executive officers to acquire
equity interests in the Company. The 2005 Plan was established to award our
employees and named executive officers with proprietary interests in the Company
and to provide an additional incentive to promote our success and to remain
in
our service. The 2005 Plan authorizes us to grant incentive stock options,
non-qualified stock options and restricted stock awards to our employees,
officers, directors and consultants. There are currently approximately 535
people who are eligible to participate in the plan at the discretion of our
Board of Directors, which oversees the administration of the Plan.
In
2007,
our named executive officers, other than Mr. Zyskind who holds a
significant equity interest in the Company, were awarded stock options in the
amounts indicated below in the “Grants of Plan-Based Awards for Fiscal Year
2007” table. The stock options are intended to be treated as incentive stock
options within the meaning of Section 422 of the Internal Revenue Code to the
extent possible. The stock options were granted at an exercise price equal
to
the fair market value of our Common Stock on the date of grant. Under the 2005
Equity Incentive Plan, unless otherwise determined by the Board of Directors
and
provided in the award agreement, 25% of the stock options become exercisable
on
the first anniversary of the grant date, with an additional 6.25% of the stock
options vesting each quarter thereafter based on continued employment, and
expire ten years after the date of grant. Incentive stock options also include
certain other terms necessary to assure compliance with the Internal Revenue
Code.
Restricted
Stock
.
The
Board of Directors has made, and may in the future elect to make, grants of
restricted stock to our named executive officers. Under the 2005 Equity
Incentive Plan, unless otherwise determined by the Board of Directors and
provided in the award agreement, 25% of the restricted stock vests on the first
anniversary of the grant date, with 6.25% of the restricted stock vesting each
quarter thereafter and based upon continued employment.
Retirement
Plan
.
We do
not provide a qualified or non-qualified pension plan for our named executive
officers. All of our employees, however, participate in a defined contribution
plan under Section 401(k) of the Internal Revenue Code. The plan allows eligible
employees to defer up to 75% of their compensation to the plan on a pre-tax
basis, subject to the applicable dollar limit set by the Internal Revenue
Service. We make a Company contribution of up to 50% of an employee’s
contribution to the plan, up to 6% of eligible compensation. We may also make
discretionary profit sharing contributions to the Plan. No profit sharing
contributions were made in 2007.
Change
of Control and Severance Arrangements
.
The
employment agreements for each of our named executive officers do not contain
change of control provisions, nor do we maintain change of control agreements
with any of our named executive officers. Mr. Zyskind’s and
Mr. Caviet’s employment agreements, which are as discussed in more detail
below, provide certain severance benefits should they be terminated without
cause and, with respect to Mr. Zyskind, should he terminate his employment
agreement for good reason. Mr. Caviet’s severance benefits are tied to
non-solicitation provisions. We do not provide any other severance
benefits.
Perquisites
and Other Benefits
.
As a
general matter, we limit the use of perquisites in compensating our senior
management. We do, however, cover the full cost of health insurance premiums
for
Mr. Zyskind and Mr. Caviet and their families and provide
Mr. Zyskind with an individual permanent life insurance policy. We also
make the lease payments on an automobile leased by Mr. Zyskind and
reimburse Mr. Caviet for the lease payments that he makes on an automobile.
The amount of Mr. Zyskind’s and Mr. Caviet’s health and automobile
benefits are shown below in the “Summary Compensation Table for Fiscal Year
2007.”
We
also
maintain a number of health and welfare programs to provide life, health and
disability benefits to our employees. Other than with respect to the benefits
we
provide to Mr. Zyskind discussed above, our named executive officers in the
U.S. participate in these plans on the same terms as other U.S. employees.
In
addition to the benefits discussed above, Mr. Caviet participates in the
employee benefits offered for employees of our U.K. affiliates.
Other
Compensation
.
The
employment agreements entered into with our named executive officers will remain
in their current form until such time as the Board of Directors determines,
in
its discretion, that revisions are appropriate. In addition, we intend to
continue to maintain our current benefits and perquisites for our named
executive officers; however, the Board of Directors, in its discretion, may
modify, amend or add to a named executive officer’s executive benefits or
perquisites if it deems it advisable.
Tax
Deductibility of Executive Compensation
Limitations
on deductibility of compensation may occur under Section 162(m) of the Internal
Revenue Code, which generally limits to $1 million the tax deductibility of
compensation paid by a public company to its chief executive officer and to
any
of the other four most highly compensated executive officers. Section 162(m)
provides an exception to this deduction limit for performance based compensation
that meets certain requirements. Two types of compensation can qualify as
performance based compensation under section 162(m): (i) annual bonuses and
other incentive awards, if they are payable or vest based on achievement of
objective performance goals under a plan that meets the 162(m) requirements,
and
(ii) stock options and stock appreciation rights, if they are granted under
a shareholder approved plan that meets certain criteria.
CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS
Other
than as stated below, no director, executive officer or security holder who
is
known to us to own of record or beneficially more than five percent of our
common securities, or any member of the immediate family of such director,
executive officer or security holder, had or will have a direct or indirect
material interest in a transaction or series of transactions in which we are,
or
one of our subsidiaries is, a party and the amount involved exceeds $120,000.
We
have adopted a policy that requires that all related party transactions be
approved by our Audit Committee.
Leap
Tide Transactions
AmTrust
Capital Management, Inc. (“ACM”), our wholly owned subsidiary, currently manages
approximately $69 million dollars of our assets. These assets are held in a
Bermuda managed account.
ACM
also
serves as the Investment Manager of Leap Tide Partners, L.P., a domestic
partnership, and Leap Tide Offshore, Ltd., a Cayman exempted company, both
of
which were formed for the purpose of providing qualified third-party investors
the opportunity to invest funds in a vehicle managed by ACM (the “Hedge Funds”).
As of December 31, 2007, approximately $27 million dollars have been
invested in the Hedge Funds. Approximately 88% of these funds were contributed
by Michael Karfunkel, George Karfunkel and Barry D. Zyskind. Our Audit Committee
has reviewed the Leap Tide transactions and determined that they were entered
into at arms’ length and did not violate our Code of Business Conduct and
Ethics.
Corporate
Office Lease Agreement
In
June 2002, we entered into a lease for approximately 9,000 square feet of
office space at 59 Maiden Lane in downtown Manhattan from 59 Maiden Lane
Associates, LLC, an entity which is wholly owned by Michael Karfunkel and George
Karfunkel. We paid annual rent of approximately $348,000 for this space in
fiscal 2007. At the time we entered into the lease we were privately held and
did not have an Audit Committee. Effective January 1, 2008, we entered into
an amended lease whereby we increased our leased space to 14,807 square feet
and
extended the lease through December 31, 2017; the annual rent increased to
$621,894 for the period from January 1, 2008 to December 31, 2012, and then
$666,315 for the period from January 1, 2013, to December 31, 2017. The Audit
Committee reviewed and approved this most recent extension of the
lease.
Barry
Karfunkel Employment Relationship
In
2007,
Barry Karfunkel, an analyst with ACM earned $250,000 in salary and received
$25,000 for relocation costs. Barry Karfunkel is the son of Michael Karfunkel
and the brother-in-law of Barry D. Zyskind. Our Audit Committee has reviewed
Barry Karfunkel’s employment relationship and has determined that it is an arms’
length relationship and that it does not violate our Code of Business Conduct
and Ethics.
Maiden
Agreements
During
the third quarter of 2007, AmTrust and Maiden Holdings, Inc. (“Maiden”) entered
into a master agreement, as amended, by which our Bermuda affiliate, AmTrust
International Insurance, Ltd. (“AII”) and Maiden entered into a quota share
reinsurance agreement (the “Reinsurance Agreement”) by which (a) AII retrocedes
to Maiden an amount equal to 40% of the premium written by AmTrust’s U.S., Irish
and U.K. insurance companies (the “AmTrust Ceding Insurers”), net of the cost of
unaffiliated inuring reinsurance (and in the case of AmTrust’s U.K. insurance
subsidiary, IGI Insurance Company Limited (“IGI”), net of commissions) and 40%
of losses and (b) AII transferred to Maiden 40% of the AmTrust Ceding Insurer’s
unearned premium reserves, effective as of July 1, 2007, with respect to current
lines of business, excluding risks for which the AmTrust Ceding Insurers’ net
retention exceeds $5 million (“Covered Business”). We also have agreed to cause
AII, subject to regulatory requirements, to reinsure any insurance company
which
writes Covered Business in which we acquire a majority interest to the extent
required to enable AII to cede to Maiden 40% of the premiums and losses related
to such Covered Business. The Agreement further provides that the AII receives
a
ceding commission of 31% of ceded written premiums. The Reinsurance Agreement
has an initial term of three years and will automatically renew for successive
three year terms thereafter, unless either AII or Maiden notifies the other
of
its election not to renew not less than nine months prior to the end of any
such
three year term. In addition, either party is entitled to terminate on thirty
days notice or less upon the occurrence of certain early termination events,
which include a default in payment, insolvency, change in control of AII or
Maiden, run-off, or a reduction of 50% or more of the shareholders’ equity of
Maiden or the combined shareholders’ equity of AII and the AmTrust Ceding
Insurers. We recorded approximately $59 million of ceding commission during
2007
as a result of this transaction.
Maiden
is
a Bermuda insurance holding company formed by Michael Karfunkel, George
Karfunkel and Barry Zyskind. Messrs. Karfunkel and Mr. Zyskind contributed
$50
million to Maiden and have an 18.6% ownership interest in Maiden, assuming
the
full exercise of all common stock purchase warrants.
Principal
Shareholders Consolidation
AmTrust
Financial Group, Inc. (“AFG”) was the principal shareholder of the Company,
owning approximately 24,089,286 shares of common stock of the Company (the
“Common Stock”). Messrs. Michael Karfunkel, George Karfunkel and Barry Zyskind
directly or indirectly held approximately 37.5%, 37.5% and 25.0%, respectively,
of AFG. To simplify the stock ownership of AmTrust, two mergers were
consummated, in 2007, whereby AFG and G/MK Acquisition Corp. were merged with
and into a wholly owned subsidiary of AmTrust. AFG and G/MK Acquisition Corp.
were primarily shell holding companies with no other assets, except for common
stock. As a result, we issued and delivered 24,088,000 shares of Common Stock
in
exchange for 24,089,286 shares of Common Stock held by AFG, which shares were
then issued in proportion to their respective AFG holdings: Michael Karfunkel
received 9,033,000 shares, George Karfunkel received 9,033,000 shares, Barry
Zyskind received 6,022,000, and the remaining 1,286 shares were returned to
the
treasury of the Company. The mergers had no impact on our financial position,
results of operations or cash flows for the year ended 2007.
REPORT
OF OUR AUDIT COMMITTEE
The
Audit
Committee’s role includes the oversight of our financial, accounting and
reporting processes; our system of internal accounting and financial controls;
and our compliance with related legal and regulatory requirements. The Audit
Committee oversees the appointment, engagement, termination and oversight of
our
independent auditors, including conducting a review of their independence;
reviewing and approving the planned scope of our annual audit; overseeing our
independent auditors’ audit work; reviewing and pre-approving any audit and
non-audit services that may be performed by our independent auditors; reviewing
with management and our independent auditors the adequacy of our internal
financial and disclosure controls; reviewing our critical accounting policies
and the application of accounting principles; and monitoring the rotation of
partners of our independent auditors on our audit engagement team as required
by
law. The Audit Committee establishes procedures, as required under applicable
law, for the receipt, retention and treatment of complaints received by us
regarding accounting, internal accounting controls or auditing matters and
the
confidential and anonymous submission by employees of concerns regarding
questionable accounting or auditing matters. The Audit Committee’s role also
includes meeting to review our annual audited financial statements and quarterly
financial statements with management and our independent auditors.
Each
member of the Audit Committee meets the independence criteria prescribed by
applicable law and the rules of the SEC and NASDAQ for audit committee
membership and is an “independent director” within the meaning of applicable
NASDAQ listing standards. Each Audit Committee member meets the NASDAQ’s
financial literacy requirements, and the Board has further determined that
Mr. Gulkowitz is an “Audit Committee financial expert,” as defined in
401(h) of Regulation S-K promulgated by the SEC and also meets the NASDAQ’s
professional experience requirements. The Audit Committee acts pursuant to
a
written charter, which complies with the applicable provisions of the
Sarbanes-Oxley Act of 2002 and related rules of the SEC and NASDAQ, which can
be
found on our website at www.amtrustgroup.com.
We
have
reviewed and discussed the audited financial statements with management and
with
our independent auditors. We met with our independent auditors, with and without
management present, to discuss results of their examinations, their evaluation
of our internal controls, and the overall quality of our financial
reporting.
We
have
discussed with the independent auditors the matters required to be discussed
by
Statement on Auditing Standards No. 61, as amended, Communication with Audit
Committees. In addition, we received the written disclosures from the
independent auditors required by Independence Standards Board Standard No.
1,
Independence Discussions with Audit Committees and discussed with the
independent auditors their independence, including a review of both audit and
non-audit fees.
Based
upon the review and discussions described in the preceding paragraph, we
recommended to our Board that the audited financial statements of the Company
be
included in the Annual Report on Form 10-K for the year ended December 31,
2007 filed with the SEC.
The
Audit
Committee
Abraham
Gulkowitz (Chairman)
Donald
T.
DeCarlo
Isaac
M.
Neuberger
April 1,
2008
PROPOSAL
2:
RATIFICATION
OF INDEPENDENT AUDITORS
The
Audit
Committee has appointed the firm of BDO Seidman, LLP, independent accountants,
to be our independent auditors for the fiscal year ending December 31,
2008. Although not required by our bylaws or otherwise, the Board believes
it is
appropriate to seek shareholder ratification of this appointment. If
ratification is not obtained, the Audit Committee intends to continue the
employment of BDO Seidman, LLP at least through the end of the fiscal year
ending December 31, 2008, but will consider shareholder input for future
appointments.
A
representative of BDO Seidman, LLP will be present at the Annual Meeting and
will have the opportunity to make a statement if he or she desires to do so
and
to respond to appropriate questions from shareholders.
Before
making its recommendation to the Board for appointment of BDO Seidman, LLP,
the
Audit Committee carefully considered that firm’s qualifications as independent
auditors for us, which included a review of BDO Seidman, LLP’s performance last
year, as well as its reputation for integrity and competence in the fields
of
accounting and auditing. The Audit Committee expressed satisfaction with BDO
Seidman, LLP in these respects.
Audit
and Non-Audit Fees
Our
Audit
Committee approves the fees and other significant compensation to be paid to
our
independent auditors for the purpose of preparing or issuing an audit report
or
related work. Our Audit Committee also preapproves all auditing services and
permitted non-audit services, including the fees and terms thereof, to be
performed for us by our independent auditors, subject to the de minimis
exceptions for non-audit services described in the Exchange Act. Our Audit
Committee delegates to our Audit Committee Chair preapproval authority for
non-audit services up to $25,000 subject to subsequent approval by the full
Audit Committee at its next scheduled meeting. Our Audit Committee reviewed
and
discussed with BDO Seidman, LLP the following fees for services rendered for
the
2007 fiscal year and considered the compatibility of non-audit services with
BDO
Seidman, LLP’s independence. The following table presents the aggregate fees
billed for professional services rendered to us by BDO Seidman, LLP, our
principal auditors, and BDO International affiliate firms, for 2007 and 2006.
Other than as set forth below, no professional services were rendered or fees
billed by BDO Seidman, LLP or its international affiliates during 2007 and
2006.
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Audit
Fees(1)
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$
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1,665,000
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$
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1,033,000
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Audit-Related
Fees(2)
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—
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—
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Tax
Fees(3)
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—
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—
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All
Other Fees(4)
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—
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4,400
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Total
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$
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1,665,000
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$
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1,037,400
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(1)
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Audit
fees relate to professional services rendered for: (i) the audit of
our annual financial statements and the review of our quarterly financial
statements
on
Form 10-Q
for the fiscal years ended December 31, 2006
and 2007, (ii)
the
audit of the Company’s internal control over financial reporting
and (iii) services performed in connection with filings of
registration statements and securities
offerings.
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(2)
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Audit-related
fees relate to services rendered to us primarily related to benefit
plan
audits.
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(3)
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Tax
fees relate to services rendered to us for tax compliance, tax planning
and advice.
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(4)
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Other
services performed include certain advisory services in connection
with
accounting research and do not include any fees for financial information
systems design and implementation.
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Pre-Approval
Policies and Procedures of the Audit Committee
Pursuant
to its charter, the Audit Committee pre-approves all audit and permitted
non-audit services, including engagement fees and terms thereof, to be performed
for us by the independent auditors, subject to the exceptions for certain
non-audit services approved by the Audit Committee prior to the completion
of
the audit in accordance with Section 10A of the Securities Exchange Act of
1934,
as amended. The Audit Committee must also pre-approve all internal
control-related services to be provided by the independent auditors. The Audit
Committee will generally pre-approve a list of specific services and categories
of services, including audit, audit-related and other services, for the upcoming
or current fiscal year, subject to a specified cost level. Any material service
not included in the approved list of services must be separately pre-approved
by
the Audit Committee. In addition, all audit and permissible non-audit services
in excess of the pre-approved cost level, whether or not such services are
included on the pre-approved list of services, must be separately pre-approved
by the Audit Committee.
The
Audit
Committee may form and delegate to a subcommittee consisting of one or more
members (provided that such person(s) are Independent Directors) its authority
to grant pre-approvals of audit, permitted non-audit services and internal
control-related services, provided that decisions of such subcommittee to grant
pre-approvals shall be presented to the full Audit Committee at its next
scheduled meeting.
THE
BOARD UNANIMOUSLY RECOMMENDS A VOTE “FOR” RATIFICATION OF BDO SEIDMAN, LLP AS
OUR AUDITORS FOR THE FISCAL YEAR ENDING DECEMBER 31, 2008.
Shareholders’
Proposals for the 2009 Annual Meeting
A
proposal by a shareholder intended for inclusion in our proxy materials for
the
2009 Annual Meeting of Shareholders pursuant to Rule 14a-8 of the Exchange
Act
must be received by us at 59 Maiden Lane, 6th Floor, New York, New York 10038,
Attn: Corporate Secretary, on or before January 1, 2009, in order to be
considered for such inclusion. Shareholder proposals intended to be submitted
at
the 2009 Annual Meeting of Shareholders outside the framework of Rule 14a-8
will
be considered untimely under Rule 14a-4(c)(1) if not received by us at the
above
address on or before March 16, 2009. If we do not receive notice of the
matter by the applicable date, the proxy holders will vote on the matter, if
properly presented at the meeting, in their discretion.
Annual
Report and Financial Statements
A
copy of
our Annual Report, which incorporates our Annual Report on Form 10-K for the
fiscal year ended December 31, 2007, including audited financial statements
set forth therein, is being sent to all our shareholders with this Notice of
Annual Meeting of Shareholders and Proxy Statement on or about April 21,
2008.
Other
Business
The
Board
does not intend to present, and has no knowledge that others will present,
any
other business at the Annual Meeting. However, if any other matters are properly
brought before the Annual Meeting, it is intended that the holders of proxies
will vote thereon in their discretion.
PROXY
AMTRUST
FINANCIAL SERVICES, INC.
Annual
Meeting of Shareholders to be held May 23, 2008
This
proxy is solicited on behalf of the Board of Directors
The
undersigned hereby appoints Stephen Ungar and Barry D. Zyskind as proxies of
the
undersigned, with full power of substitution, to vote all of the shares of
Common Stock of AmTrust Financial Services, Inc. (the “Company”) that the
undersigned may be entitled to vote at the Annual Meeting of Shareholders of
the
Company to be held at the Millennium Hilton Hotel, 55 Church Street, New York,
10007, on May 23, 2008 at 10 a.m., and at any adjournment, postponement or
continuation thereof, as set forth on the reverse side of this proxy
card.
You
are encouraged to specify your choices by marking the appropriate boxes. SEE
REVERSE SIDE, but you need not mark any boxes if you wish to vote in accordance
with the Board of Directors’ recommendations.
(Continued
and to be signed on the reverse side)
ANNUAL
MEETING OF SHAREHOLDERS OF
AMTRUST
FINANCIAL SERVICES, INC.
May
23, 2008
Please
date, sign and mail your proxy card in the envelope provided as soon as
possible.
Please
detach along perforated line and mail in the envelope provided.
THE
BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” THE NOMINEES LISTED FOR DIRECTORS
AND
“FOR”
THE FOLLOWING PROPOSAL.
PLEASE
SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE. PLEASE MARK YOUR VOTE
IN BLUE
OR
BLACK INK AS SHOWN HERE
x
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FOR
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AGAINST
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ABSTAIN
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1.
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Election
of Directors:
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NOMINEES:
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Ratification of the appointment
of BDO Seidman, LLP as Independent Auditor for the year ended December
31,
2008.
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¨
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¨
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¨
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¨
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FOR
ALL NOMINEES
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¡
Barry
D. Zyskind
¡
Michael
Karfunkel
¡
George
Karfunkel
¡
Donald
T. DeCarlo
¡
Abraham
Gulkowitz
¡
Isaac
Neuberger
¡
Jay
J. Miller
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¨
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WITHHOLD AUTHORITY
FOR
ALL NOMINEES
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¨
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FOR
ALL EXCEPT
(See
instructions below)
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In
their discretion, the proxies are authorized to vote upon such other
business as may properly come before the annual meeting and any
adjournment, postponement or continuation thereof.
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INSTRUCTION:
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To
withhold authority to vote for
any
individual nominee(s), mark
“FOR
ALL EXCEPT” and fill in
the
circle next to each nominee
you wish
to withhold, as shown here:
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To
change the address on your account, please check the box at right
and
indicate your new address in the address space above. Please note
that
changes to the registered name(s) on the account may not be submitted
via this method.
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¨
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Signature
of Shareholder:
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Date:
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Signature
of Shareholder:
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Date:
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Note:
Please
sign exactly as your name or names appear on this Proxy. When shares are held
jointly, each holder should sign. When signing as executor, administrator,
attorney, trustee or guardian, please give full title as such. If the signer
is
a corporation, please sign full corporate name by duly authorized officer,
giving full title as such. If signer is a partnership, please sign in
partnership name by authorized person.
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