Group that has the effect of injuring the reputation or business of any member of the CompanyGroup in a material manner; (iii) Employee’s conviction of, or plea of guilty or nolocontendere to, the commission of a criminal act that would constitute a felony in the UnitedStates; (iv) the commission by Employee of an act of fraud, embezzlement or material dishonestyagainst any member of the Company Group (other than a good faith expense account dispute); or (v)Employee’s breach of any material provision of this Agreement.          (g) “Change in Control” shall mean and be deemed to occur if (i) any “person” (assuch term is defined in Section 3(a)(9) and as used in Sections 13(d) and 14(d) of the ExchangeAct), excluding any member of the Company Group, a trustee or any fiduciary holding securitiesunder an employee benefit plan of any member of the Company Group, an underwriter temporarilyholding Holdings’ securities pursuant to an offering of such securities or a corporation owned,directly or indirectly, by shareholders of Holdings in substantially the same proportion as theirownership of Holdings, is or becomes the “beneficial owner” as defined in Rule 13d-3 under theExchange Act, directly or indirectly, of securities of Holdings representing 50% or more of thecombined voting power of Holdings’ then outstanding securities (“Voting Securities”); (ii)during any period of not more than two years, individuals who constitute the Board of Directors ofHoldings as of the beginning of the period and any new director (other than a director designatedby a person who has entered into an agreement with Holdings to effect a transaction described inclause (i) or (iii) of this sentence) whose election by the Board of Directors of Holdings ornomination for election by Holdings’ shareholders was approved by a vote of at least two-thirds(2/3) of the directors then still in office who either were directors at such time or whoseelection or nomination for election was previously so approved, cease for any reason to constitutea majority thereof; (iii) the shareholders of Holdings approve a merger, consolidation,amalgamation or reorganization or a court of competent jurisdiction approves a scheme ofarrangement of Holdings, other than a merger, consolidation, amalgamation, reorganization or schemeof arrangement which would result in the Voting Securities of Holdings outstanding immediatelyprior thereto continuing to represent (either by remaining outstanding or by being converted intoVoting Securities of the surviving entity) at least 50% of the combined voting power of the VotingSecurities of Holdings or such surviving entity outstanding immediately after such merger,consolidation, amalgamation, reorganization or scheme of arrangement; or (iv) the shareholders ofHoldings approve a plan of complete liquidation of Holdings or any agreement for the sale ordisposition by Holdings of all or substantially all of its assets.          (h) “Code” shall mean the United States Internal Revenue Code of 1986, as amended.          (i) “Commencement Date” shall mean January 16, 2008.          (j) “Company” shall have the meaning set forth in the preamble hereto.          (k) “Company Group” means Holdings together with any direct or indirect subsidiary.
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          (l) “Competitive Activities” shall mean any business activities in which any member ofthe Company Group is engaged, or has committed plans to engage, during the Term of Employment.          (m) “Confidential Information” shall have the meaning set forth in Section 9(a) below.          (n) “Delay Period” shall have the meaning set forth in Section 16 below.          (o) “Developments” shall have the meaning set forth in Section 9(e) below.          (p) “Disability” shall mean any physical or mental disability or infirmity that hasprevented the performance of Employee’s duties in all material respects for a period of one hundredeighty (180) consecutive calendar days.          (q) “Employee” shall have the meaning set forth in the preamble hereto.          (r) “Exchange Act” shall mean the Securities Exchange Act of 1934, as amended.          (s) “Good Reason” shall mean, without Employee’s written consent, (i) an adversechange in Employee’s employment title; (ii) a material diminution in Employee’s employment dutiesor responsibilities, or the assignment to Employee of duties that are materially inconsistent withhis position; (iii) any reduction in Base Salary or target Annual Bonus opportunity; or (iv) anybreach by the Company of any material provision of this Agreement.          (t) “Holdings” shall mean Allied World Assurance Company Holdings, Ltd, a Bermudacorporation and the Company’s ultimate parent.          (u) “Interfering Activities” shall mean (i) encouraging, soliciting or inducing, or inany manner attempting to encourage, solicit or induce, any Person employed by, as agent of, or aservice provider to, any member of the Company Group to terminate (or, in the case of an agent orservice provider, reduce) such Person’s employment, agency or service, as the case may be, with anymember of the Company Group; provided, that the foregoing shall not be violated by generaladvertising not targeted at employees of any member of the Company Group nor by serving as areference upon an employee’s request with regard to an entity with which Employee is notaffiliated; or (ii) encouraging, soliciting or inducing, or in any manner attempting to encourage,solicit or induce any customer, supplier (including insurance brokers), licensee or other businessrelation of any member of the Company Group to cease doing business with or reduce the amount ofbusiness conducted with any member of the Company Group, or in any way interfere with therelationship between any such customer, supplier (including insurance brokers), licensee orbusiness relation and any member of the Company Group.          (v) “Person” shall mean any individual, corporation, partnership, limited liabilitycompany, joint venture, association, joint-stock company, trust (charitable or non-charitable),unincorporated organization or other form of business entity.
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          (w) “Non-Interference Period” shall mean the period commencing on the CommencementDate and ending on the twenty-four (24) month anniversary of the date of termination.          (x) “Non-Compete Period” shall mean the period commencing on the Commencement Dateand:          (i) in the case of Employee’s termination of employment hereunder by the Company forCause, ending on the date of such termination;          (ii) in the case of Employee’s termination of employment hereunder by the Companywithout Cause or by Employee for Good Reason, ending on the twenty-four (24) monthanniversary of the date of such termination; or          (iii) in the case of Employee’s termination of employment hereunder by the Employeewithout Good Reason or as a result of his Disability, ending on the date of suchtermination; *provided*, *however*, that the Company may elect to extend the Non-Compete Periodup to an additional twelve (12) months following the date of such termination by providingEmployee written notice of such election within five (5) business days following suchtermination specifying the applicable period of extension, in which case, the Company shallbe required to continue, through the end of the Non-Compete Period, as so extended, (A) topay Employee his Base Salary, in accordance with the Company’s regular payroll practices,and (B) to provide participation under the Company’s health and other insurance plans, or ifsuch continued participation in is not permissible, provide Employee with coverage that iseconomically equivalent to Employee through alternative arrangements, or the cash value ofsuch coverage, in a manner that places the Employee in a net economic position that is atleast equivalent to the position in which the Employee would have been had such alternativearrangements not been used by the Company; *provided*, *however*, that if the cash value is paidto Employee, it shall be paid to Employee no later than the date that is one day prior totwo and one-half months following the end of the Company’s fiscal year in which suchtermination occurs.          (y) “Release Expiration Date” shall have the meaning set forth in Section 8(g) below.          (z) “Severance Multiplier” shall mean an amount equal to two (2); *provided*, *however*,if Employee’s termination occurs within the twelve (12) month period following a Change in Controlthe Severance Multiplier shall equal five (5) in the first twelve (12) month period following theCommencement Date; four (4) in the second twelve (12) month period following the Commencement Dateand three (3) thereafter.          (aa) “Severance Term” shall mean the period specified in Section 8(d)(iii) below.          (bb) “Term of Employment” shall mean the period specified in Section 2 below.
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          Section 2. **Acceptance and Term of Employment**.          The Company agrees to employ Employee and Employee agrees to serve the Company on the termsand conditions set forth herein. The Term of Employment shall commence on the Commencement Dateand shall continue until Employee is terminated as provided in Section 8 hereof.          Section 3. **Position, Duties and Responsibilities; Place of Performance**.          (a) During the Term of Employment, Employee shall be employed and serve as President of theCompany (together with such other position or positions consistent with Employee’s title as theBoard or the officer of the Company to which Employee reports shall specify from time to time) andshall have such duties typically associated with such title. Subject to the foregoing, Employeealso agrees to serve as an officer and/or director of any other member of the Company Group, ineach case without additional compensation. Notwithstanding anything contained herein to thecontrary, in connection with any restructuring of the Company Group, the Company shall be permittedto transfer Employee’s employment to any other member of the Company Group without such transfer inand of itself resulting in an event pursuant to which Employee may terminate employment with GoodReason.          (b) Subject to the terms and conditions set forth in this Agreement, Employee shall devote hisfull business time, attention and efforts to the performance of his duties under this Agreement andshall not engage in any other business or occupation during the Term of Employment, including,without limitation, any activity that (x) conflicts with the interests of any member of the CompanyGroup, (y) interferes with the proper and efficient performance of his duties for the Company or(z) interferes with the exercise of his judgment in the Company’s best interests. Notwithstandingthe foregoing, nothing herein shall preclude Employee from (i) serving, with the prior writtenconsent of the Company, as a member of the board of directors or advisory boards (or theirequivalents in the case of a non-corporate entity) of non-competing businesses and charitableorganizations, (ii) engaging in charitable activities and community affairs, and (iii) subject tothe terms and conditions set forth in Section 9 hereof, managing his personal investments andaffairs; *provided*, *however*, that the activities set out in clauses (i), (ii) and (iii) shall belimited by Employee so as not to materially interfere, individually or in the aggregate, with theperformance of his duties and responsibilities hereunder.          (c) Employee’s principal place of employment shall be at the Company’s New York office,although Employee understands and agrees that he may be required to travel from time to time forbusiness reasons.          Section 4. **Compensation**.          During the Term of Employment, Employee shall be entitled to the following compensation:          (a) Base Salary. Employee shall be paid an annualized Base Salary, payable inaccordance with the regular payroll practices of the Company, of not less than $525,000, subject toincrease, if any, as may be approved in writing by the Company, but not to decrease from the thencurrent Base Salary.
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          (b) Annual Bonus. Employee shall be eligible for an annual incentive bonus awarddetermined by the Company in respect of each fiscal year during the Term of Employment (the“Annual Bonus”). The Annual Bonus shall be earned and payable in accordance with the termsof Holdings’ annual bonus plan as in effect from time to time.          (c) Change in Control Acceleration. Notwithstanding any contrary terms of anyHoldings equity plan or other agreement pursuant to which equity-based awards have been granted toEmployee, upon the occurrence of a Change in Control, all such equity-based awards shall fully vestimmediately prior to such Change in Control.          Section 5. **Employee Benefits**.          During the Term of Employment, Employee shall be entitled to participate in health, insurance,retirement and other perquisites and benefits generally provided to other senior executives of theCompany that are made available and as are in effect from time to time. Employee shall also beentitled to the same number of holidays, vacation and sick days as are generally allowed to seniorexecutives of the Company in accordance with the Company policy in effect from time to time.During the Term of Employment, Employee shall also be entitled to reimbursement or payment of thecost of financial and tax planning, such reimbursement not to exceed $10,000 per year.          Section 6. **“Key-Man” Insurance**.          At any time during the Term of Employment, the Company shall have the right to insure the lifeof Employee for the sole benefit of the Company, in such amounts, and with such terms, as it maydetermine. All premiums payable thereon shall be the obligation of the Company. Employee shallhave no interest in any such policy, but agrees to reasonably cooperate with the Company in takingout such insurance by submitting to physical examinations, supplying all information reasonablyrequired by the insurance company, and executing all necessary documents, provided that nofinancial obligation or liability is imposed on Employee by any such documents.          Section 7. **Reimbursement of Business Expenses**.          Employee is authorized to incur reasonable business expenses in carrying out his duties andresponsibilities under this Agreement and the Company shall promptly reimburse him for all suchreasonable business expenses incurred in connection with carrying out the business of the Company,subject to documentation in accordance with the Company’s policy, as in effect from time to time.          Section 8. **Termination of Employment**.          (a) General. The Term of Employment shall terminate upon the earliest to occur of (i)Employee’s death, (ii) a termination by reason of a Disability, (iii) a termination by the Companywith or without Cause, and (iv) a termination by Employee with or without Good Reason. Upon anytermination of Employee’s employment for any reason, except as may otherwise be requested by theCompany in writing and agreed upon in writing by Employee,
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Employee shall resign from any and all directorships, committee memberships or any otherpositions Employee holds with any member of the Company Group.          (b) Termination due to Death or Disability. Employee’s employment shall terminateautomatically upon his death. The Company may terminate Employee’s employment immediately upon theoccurrence of a Disability, such termination to be effective upon Employee’s receipt of writtennotice of such termination. In the event Employee’s employment is terminated due to his death orDisability, Employee or his estate or his beneficiaries, as the case may be, shall be entitled to:          (i) The Accrued Obligations;          (ii) Any unpaid Annual Bonus in respect to any completed fiscal year which has endedprior to the date of such termination, such amount to be paid at the same time it wouldotherwise be paid to Employee had no such termination occurred, but in no event later thanthe date that is one day prior to two and one-half months following the end of the Company’sfiscal year in which such termination occurs;          (iii) A pro rata Annual Bonus (determined using the target Annual Bonus if suchtermination occurs during the fiscal year in which the Commencement Date falls, and usingthe highest Annual Bonus paid or payable for the two immediately prior fiscal years forterminations after the fiscal year in which the Commencement Date falls) based on the numberof days elapsed from the commencement of such fiscal year through and including the date ofsuch termination, such amount to be paid within five (5) business days of such termination;and          (iv) Vesting, as of the date of such termination, in the number of equity-based awards,if any, which would otherwise have vested during the one (1) year period immediatelyfollowing such termination (without regard to any subsequent vesting events).Except as set forth in this Section 8(b), following Employee’s termination by reason of his deathor Disability, Employee shall have no further rights to any compensation or any other benefitsunder this Agreement.          (c) Termination by the Company for Cause.          (i) A termination for Cause shall not take effect unless the provisions of thissubsection (i) are complied with. Employee shall be given not less than fifteen (15) daysprior written notice by the Company of the intention to terminate his employment for Cause,such notice to state in detail the particular act or acts or failure or failures to act thatconstitute the grounds on which the proposed termination for Cause is based. Employee shallhave fifteen (15) days after the date that such written notice has been given to Employee inwhich to cure such act or acts or failure or failures to act, to the extent such cure ispossible. If he fails to cure such act or acts or failure or failures to act, thetermination shall be effective on the date immediately following the expiration of thefifteen (15) day notice period. If cure is not possible, the termination shall be effectiveon the date of receipt of such notice by Employee. During any cure period
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provided hereunder, the Company may, in its sole and absolute discretion, prohibitEmployee from entering the premises of any member of the Company Group or otherwiseperforming his duties hereunder, and any such prohibition shall in no event constitute anevent pursuant to which Employee may terminate employment with Good Reason; *provided*,*however*, that if cure is possible, and Employee can reasonably demonstrate to the Companythat he desires to enter the premises of any member of the Company Group or to otherwiseperform his duties hereunder solely to attempt to cure the act or acts or failure orfailures to act that constitute the grounds on which the proposed termination for Cause isbased, Employee shall be permitted to enter the premises of any member of the Company Groupor otherwise to perform his duties hereunder solely for the purposes of curing such act oracts or failure or failures to act.          (ii) In the event the Company terminates Employee’s employment for Cause, he shall beentitled only to the Accrued Obligations. Following such termination of Employee’semployment for Cause, except as set forth in this Section 8(c)(ii), Employee shall have nofurther rights to any compensation or any other benefits under this Agreement.          (d) Termination by the Company without Cause. The Company may terminate Employee’semployment at any time without Cause, effective upon Employee’s receipt of written notice of suchtermination. In the event Employee’s employment is terminated by the Company without Cause (otherthan due to death or Disability), Employee shall be entitled to:          (i) The Accrued Obligations;          (ii) Any unpaid Annual Bonus in respect to any completed fiscal year which has endedprior to the date of such termination, such amount to be paid at the same time it wouldotherwise be paid to Employee had no such termination occurred, but in no event later thanthe date that is one day prior to two and one-half months following the end of the Company’sfiscal year in which such termination occurs;          (iii) An amount equal to the Severance Multiplier multiplied by the sum of his thencurrent Base Salary and Annual Bonus (determined using the target Annual Bonus if suchtermination occurs during the fiscal year in which the Commencement Date falls, and usingthe highest Annual Bonus paid or payable for the two immediately prior fiscal years forterminations after the fiscal year in which the Commencement Date falls), payable insubstantially equal monthly installments over the period commencing on the date oftermination and ending on the date that is one day prior to two and one-half monthsfollowing the end of the Company’s fiscal year in which such termination occurs (the“Severance Term”);          (iv) Continuation of participation under the Company’s health and other insurance plansfor a period of years equal to the Severance Multiplier, or if such continued participationin is not permissible, provide Employee with coverage that is economically equivalent toEmployee through alternative arrangements, or the cash value of such coverage, in a mannerthat places the Employee in a net economic position that is at least equivalent to theposition in which the Employee would have been had such
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alternative arrangements not been used by the Company; *provided*, *however*, that if thecash value is paid to Employee, it shall be paid to Employee no later than the date that isone day prior to two and one-half months following the end of the Company’s fiscal year inwhich such termination occurs; and          (v) Vesting, as of the date of such termination, in the number of equity-based awards,if any, which would otherwise have vested during the two (2) year period immediatelyfollowing such termination (without regard to any subsequent vesting events).Notwithstanding the foregoing, the payments and benefits described in subsections (ii) through (iv)above shall immediately cease, and the Company shall have no further obligations to Employee withrespect thereto, in the event that Employee breaches any provision of Section 9 hereof.          Following such termination of Employee’s employment by the Company without Cause, except asset forth in this Section 8(d), Employee shall have no further rights to any compensation or anyother benefits under this Agreement.          (e) Termination by Employee with Good Reason. Employee may terminate his employmentwith Good Reason by providing the Company fifteen (15) days prior written notice setting forth inreasonable specificity the event that constitutes Good Reason, which written notice, to beeffective, must be provided to the Company within ninety (90) days of the occurrence of such event.During such fifteen (15) day notice period, the Company shall have a cure right (if curable), andif not cured within such period, Employee’s termination will be effective upon the date immediatelyfollowing the expiration of the fifteen (15) day notice period, and Employee shall be entitled tothe same payments and benefits as provided in Section 8(d) above for a termination without Cause,it being agreed that Employee’s right to any such payments and benefits shall be subject to thesame terms and conditions as described in Section 8(d) above. Following such termination ofEmployee’s employment by Employee with Good Reason, except as set forth in this Section 8(e),Employee shall have no further rights to any compensation or any other benefits under thisAgreement.          (f) Termination by Employee without Good Reason. Employee may terminate hisemployment without Good Reason by providing the Company thirty (30) days prior written notice ofsuch termination. In the event of a termination of employment by Employee under this Section 8(f),Employee shall be entitled only to the Accrued Obligations. In the event of termination ofEmployee’s employment under this Section 8(f), the Company may, in its sole and absolutediscretion, by written notice accelerate such date of termination and still have it treated as atermination without Good Reason. Following such termination of Employee’s employment by Employeewithout Good Reason, except as set forth in this Section 8(f), and, if applicable, such additionalcompensation and benefits described in Section 1(x)(iii), Employee shall have no further rights toany compensation or any other benefits under this Agreement.          (g) Release. Notwithstanding any provision herein to the contrary, the Company mayrequire that, prior to payment of any amount or provision of any benefit pursuant
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to subsections (d) or (e) of this Section 8, Employee shall have executed a general release infavor of the Company and any other member of the Company Group and related parties in the form asis reasonably required by the Company, and any waiting periods contained in such release shall haveexpired. Such release, if required by the Company, shall be delivered to Employee within twenty(20) business days following the termination of Employee’s employment hereunder, and failure todeliver such release within such twenty (20) business day period shall be deemed to constitute awaiver of such requirement. Assuming delivery of the release by the Company, if Employee fails toexecute such release on or prior to the Release Expiration Date, Employee shall not be entitled toany payments or benefits pursuant to (d) or (e) of this Section 8 (other than the AccruedObligations). Notwithstanding anything contained in this subsection (g) to the contrary, in anycase where the date of termination and the last day of the applicable waiting period fall in twoseparate taxable years, any payments required to be made to Employee that are treated as deferredcompensation for purposes of Section 409A of the Code shall be made in the later taxable year attimes provided by this Section 8. For purposes of this Agreement, “Release ExpirationDate” means the date which is twenty-one (21) days following the date upon which the Companydelivers to Employee the release contemplated herein, or in the event that such termination ofemployment is “in connection with an exit incentive or other employment termination program” (assuch phrase is defined in the Age Discrimination in Employment Act of 1967), the date that isforty-five (45) days following such delivery date.          Section 9. **Restrictive Covenants**.          Employee acknowledges and agrees that (A) the agreements and covenants contained in thisSection 9 are (i) reasonable and valid in geographical and temporal scope and in all otherrespects, and (ii) essential to protect the value of the business and assets of the Company Group;and (B) by his employment with the Company, Employee will obtain knowledge, contacts, know-how,training and experience and there is a substantial probability that such knowledge, contacts,know-how, training and experience could be used to the substantial advantage of a competitor of theCompany Group and to the Company Group’s substantial detriment.          (a) Confidential Information. At any time during and after the end of the Term ofEmployment, without the prior written consent of the Company, except to the extent required by anorder of a court having jurisdiction or under subpoena from an appropriate government agency, inwhich event, Employee shall, to the extent legally permitted, consult with the Company prior toresponding to any such order or subpoena, and except as he in good faith believes necessary ordesirable in the performance of his duties hereunder, Employee shall not disclose to or use for thebenefit of any third party any confidential or proprietary trade secrets, customer lists, drawings,designs, information regarding product development (including types of insurance products),marketing plans, sales plans, management organization information, operating policies (includingunderwriting policies and risk assessment policies) or manuals, business plans, financial records,packaging design or other financial, commercial, business or technical information (i) relating toany member of the Company Group, or (ii) that any member of the Company Group may receive belongingto suppliers, customers or others who do business with any member of the Company Group (includinginsurance brokers) as a result of his position with any member of the Company Group (collectively,“Confidential Information”).
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Employee’s obligation under this Section 9(a) shall not apply to any information that ispublicly available or hereafter becomes publicly available, in each case without the breach byEmployee of this Section 9(a).          (b) Non-Competition. Employee covenants and agrees that during the Non-CompetePeriod, with respect to Bermuda (including any province thereof), any State of the United States ofAmerica or any other jurisdiction in which any member of the Company Group engages (or hascommitted plans to engage) in business during the Term of Employment, or, following termination ofEmployee’s employment, was engaged in business (or had committed plans to engage) at the time ofsuch termination of employment, Employee shall not, directly or indirectly, individually orjointly, own any interest in, operate, join, control or participate as a partner, director,principal, officer, or agent of, enter into the employment of, act as a consultant to, or performany services for any Person (other than any member of the Company Group), that engages in anyCompetitive Activities. Notwithstanding anything herein to the contrary, this Section 9(b) shallnot prevent Employee from acquiring as an investment securities representing not more than threepercent (3%) of the outstanding voting securities of any publicly-held corporation or from being apassive investor in any mutual fund, hedge fund, private equity fund or similar pooled account solong as Employee’s interest therein is less than three percent (3%) and he has no role in selectingor managing investments thereof.          (c) Non-Interference. During the Non-Interference Period, Employee shall not,directly or indirectly, for his own account or for the account of any other Person, engage inInterfering Activities.          (d) Return of Documents. In the event of the termination of Employee’s employment forany reason, Employee shall deliver to the Company all of (i) the property of any member of theCompany Group, and (ii) the documents and data of any nature and in whatever medium of any memberof the Company Group, and he shall not take with him any such property, documents or data or anyreproduction thereof, or any documents containing or pertaining to any Confidential Information.          (e) Works for Hire. Employee agrees that the Company shall own all right, title andinterest throughout the world in and to any and all inventions, original works of authorship,developments, concepts, know-how, improvements or trade secrets, whether or not patentable orregisterable under copyright or similar laws, which Employee may solely or jointly conceive ordevelop or reduce to practice, or cause to be conceived or developed or reduced to practice duringthe Term of Employment, whether or not during regular working hours, provided they either (i)relate at the time of conception or development to the actual or demonstrably proposed business orresearch and development activities of any member of the Company Group; (ii) result from or relateto any work performed for any member of the Company Group; or (iii) are developed through the useof Confidential Information and/or Company resources or in consultation with personnel of anymember of the Company Group (collectively referred to as “Developments”). Employee herebyassigns all right, title and interest in and to any and all of these Developments to the Company.Employee agrees to assist the Company, at the Company’s expense (but for no other consideration ofany kind), to further evidence, record and perfect such assignments, and to perfect, obtain,maintain, enforce and defend any rights specified to be so owned or assigned. Employee herebyirrevocably designates and appoints the Company and its
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agents as attorneys-in-fact to act for and on Employee’s behalf to execute and file anydocument and to do all other lawfully permitted acts to further the purposes of the foregoing withthe same legal force and effect as if executed by Employee. In addition, and not in contraventionof any of the foregoing, Employee acknowledges that all original works of authorship which are madeby him (solely or jointly with others) within the scope of employment and which are protectable bycopyright are “works made for hire,” as that term is defined in the United States Copyright Act (17USC Sec. 101) or any similar law or regulation. To the extent allowed by law, this includes allrights of paternity, integrity, disclosure and withdrawal and any other rights that may be known asor referred to as “moral rights.” To the extent Employee retains any such moral rights underapplicable law, Employee hereby waives such moral rights and consents to any action consistent withthe terms of this Agreement with respect to such moral rights, in each case, to the full extent ofsuch applicable law. Employee will confirm any such waivers and consents from time to time asrequested by the Company.          (f) Blue Pencil. If any court of competent jurisdiction shall at any time deem theduration or the geographic scope of any of the provisions of this Section 9 unenforceable, theother provisions of this Section 9 shall nevertheless stand and the duration and/or geographicscope set forth herein shall be deemed to be the longest period and/or greatest size permissible bylaw under the circumstances, and the parties hereto agree that such court shall reduce the timeperiod and/or geographic scope to a permissible duration or size.          Section 10. **Breach of Restrictive Covenants**.          Without limiting the remedies available to the Company, Employee acknowledges that a breach ofany of the covenants contained in Section 9 hereof may result in material irreparable injury to theCompany Group for which there is no adequate remedy at law, that it will not be possible to measuredamages for such injuries precisely and that, in the event of such a breach or threat thereof, theCompany shall be entitled to obtain a temporary restraining order and/or a preliminary or permanentinjunction, without the posting of a bond or the necessity of proving irreparable harm or injury asa result of such breach or threatened breach of Section 9 hereof, restraining Employee fromengaging in activities prohibited by Section 9 hereof or such other relief as may be requiredspecifically to enforce any of the covenants in Section 9 hereof. Notwithstanding any otherprovision to the contrary, the Non-Compete Period, in the case of the covenants contained inSection 9(b), and the Non-Interference Period, in the case of the covenants contained in Section9(c), shall be tolled during any period of violation of any of such covenants and during any otherperiod required for litigation during which the Company seeks to enforce such covenants againstEmployee or another Person with whom Employee is affiliated if it is ultimately determined thatEmployee was in breach of such covenants.          Section 11. **Representations and Warranties of Employee**.          Employee represents and warrants to the Company that:          (a) Employee’s employment will not conflict with or result in his breach of any agreement towhich he is a party or otherwise may be bound;
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          (b) Employee has not violated, and in connection with his employment with the Company will notviolate, any non-solicitation, non-competition or other similar covenant or agreement of a prioremployer by which he is or may be bound; and          (c) In connection with Employee’s employment with the Company, he will not use anyconfidential or proprietary information that he may have obtained in connection with employmentwith any prior employer.          Section 12. **Indemnification.**          Subject to the terms and conditions of the Articles or Certificate of Incorporation and Bylawsof the Company (in each case, as in effect from time to time), the Company agrees to indemnify andhold Employee harmless to the fullest extent permitted by the laws of the United States, as ineffect at the time of the subject act or omission. In connection therewith, Employee shall beentitled to the protection of any insurance policies which the Company elects to maintain generallyfor the benefit of the Company’s directors and officers, against all costs, charges and expenseswhatsoever incurred or sustained by Employee in connection with any action, suit or proceeding towhich he may be made a party by reason of his being or having been a director, officer or employeeof the Company. This provision shall survive any termination of Employee’s employment hereunder.          Section 13. **Taxes**.          The Company may withhold from any payments made under this Agreement all applicable taxes,including, but not limited to, income, employment and social insurance taxes, as shall be requiredby law.          Section 14. **No Mitigation or Set Off**.          Employee shall not be required to mitigate the amount of any payment provided for pursuant tothis Agreement by seeking other employment or otherwise and the amount of any payment provided forpursuant to this Agreement shall not be reduced by any compensation earned as a result ofEmployee’s other employment or otherwise.          Section 15. **Successors and Assigns; No Third-Party Beneficiaries**.          (a) The Company. This Agreement shall inure to the benefit of and be enforceable by,and may be assigned by the Company to, any purchaser of all or substantially all of Holdings’ orthe Company’s business or assets or any successor to Holdings or the Company (whether direct orindirect, by purchase, merger, consolidation or otherwise). Holdings or the Company will require,as applicable, in a writing delivered to Employee, any such purchaser, successor or assignee toexpressly assume and agree to perform this Agreement in the same manner and to the same extent thatHoldings and the Company would be required to perform it if no such purchase, succession orassignment had taken place. The Company may make no other assignment of this Agreement or itsobligations hereunder.          (b) Employee. Employee’s rights and obligations under this Agreement shall not betransferable by Employee by assignment or otherwise, without the prior written consent of
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the Company; *provided*, *however*, that if Employee shall die, all amounts then payable toEmployee hereunder shall be paid in accordance with the terms of this Agreement to Employee’sdevisee, legatee or other designee or, if there be no such designee, to Employee’s estate.          (c) No Third-Party Beneficiaries. Except as otherwise set forth in Section 8(b) orSection 15(b) hereof, nothing expressed or referred to in this Agreement will be construed to giveany Person other than the Company and Employee any legal or equitable right, remedy or claim underor with respect to this Agreement or any provision of this Agreement.          Section 16. **Delay in Payment**.          Notwithstanding any provision in this Agreement to the contrary, but taking into accountTreas. Reg. 1.409A-1(b)(9)(iii), any payment of nonqualified deferred compensation otherwiserequired to be made hereunder to Employee at any date as a result of the termination of Employee’semployment shall be delayed for such period of time as may be necessary to meet the requirements ofSection 409A(a)(2)(B)(i) of the Code (the “Delay Period”). On the earliest date on whichsuch payments can be made after the Delay Period, there shall be paid to the Employee, in a singlecash lump sum, an amount equal to the aggregate amount of all payments delayed pursuant to thepreceding sentence. Notwithstanding the foregoing, to the extent that the first sentence appliesto the provision of any ongoing health and other insurance plan benefits, Employee shall pay thefull cost for such health and other insurance plan benefits during the Delay Period and the Companyshall pay Employee an amount equal to the amount of such premiums paid by Employee during the DelayPeriod within ten (10) days after the end of the Delay Period.          Section 17. **Waiver and Amendments**.          Any waiver, alteration, amendment or modification of any of the terms of this Agreement shallbe valid only if made in writing and signed by each of the parties hereto. No waiver by either ofthe parties hereto of their rights hereunder shall be deemed to constitute a waiver with respect toany subsequent occurrences or transactions hereunder unless such waiver specifically states that itis to be construed as a continuing waiver.          Section 18. **Severability**.          If any covenants or such other provisions of this Agreement are found to be invalid orunenforceable by a final determination of a court of competent jurisdiction: (a) the remainingterms and provisions hereof shall be unimpaired, and (b) the invalid or unenforceable term orprovision hereof shall be deemed replaced by a term or provision that is valid and enforceable andthat comes closest to expressing the intention of the invalid or unenforceable term or provisionhereof.          Section 19. **Governing Law**.          THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OFNEW YORK (WITHOUT GIVING EFFECT TO THE CHOICE OF LAW PRINCIPLES THEREOF) APPLICABLE TO CONTRACTSMADE AND TO BE PERFORMED ENTIRELY WITHIN SUCH STATE.
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          Section 20. **Dispute Resolution**.          Any controversy arising out of or relating to this Agreement or the breach hereof (other thanclaims for injunctive relief pursuant to Section 10 hereof) shall be settled by binding arbitrationin accordance with the Employment Dispute Resolution Rules of the American Arbitration Association(before a single arbitrator) and judgment upon the award rendered may be entered in any courthaving jurisdiction thereof. The costs of any such arbitration proceedings shall be borne equallyby the Company and Employee; *provided*, *however*, that the arbitrator shall have the right to awardto either party reasonable attorneys’ fees and costs expended in the course of such arbitration orenforcement of the awarded rendered thereunder. Any award made by such arbitrator shall be final,binding and conclusive on the parties for all purposes, and judgment upon the award rendered by thearbitrators may be entered in any court having jurisdiction thereof.          Section 21. **Notices**.          (a) Every notice or other communication relating to this Agreement shall be in writing, andshall be mailed to or delivered to the party for whom it is intended at such address as may fromtime to time be designated by it in a notice mailed or delivered to the other party as hereinprovided, provided that, unless and until some other address be so designated, all notices orcommunications by Employee to the Company shall be mailed or delivered to the Company at itsprincipal executive office, with a copy sent to the General Counsel of Holdings, and all notices orcommunications by the Company to Employee may be given to Employee personally or may be mailed toEmployee at Employee’s last known address, as reflected in the Company’s records.          (b) Any notice so addressed shall be deemed to be given: (i) if delivered by hand, on thedate of such delivery; (ii) if mailed by courier or by overnight mail, on the first business dayfollowing the date of such mailing; and (iii) if mailed by registered or certified mail, on thethird business day after the date of such mailing.          Section 22. **Section Headings.**          The headings of the sections and subsections of this Agreement are inserted for convenienceonly and shall not be deemed to constitute a part thereof, affect the meaning or interpretation ofthis Agreement or of any term or provision hereof.          Section 23. **Entire Agreement**.          This Agreement constitutes the entire understanding and agreement of the parties heretoregarding the employment of Employee. This Agreement supersedes all prior negotiations,discussions, correspondence, communications, understandings and agreements between the partiesrelating to the subject matter of this Agreement.
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          Section 24. **Survival of Operative Sections**.          Upon any termination of Employee’s employment, the provisions of Section 8 through Section 26of this Agreement (together with any related definitions set forth in Section 1 hereof) shallsurvive to the extent necessary to give effect to the provisions thereof.          Section 25. **Currency**.          All sums of money expressed in this Agreement are in the lawful money of the United States ofAmerica.          Section 26. **Counterparts**.          This Agreement may be executed in two or more counterparts, each of which shall be deemed tobe an original but all of which together shall constitute one and the same instrument. Theexecution of this Agreement may be by actual or facsimile signature.[Signatures to appear on the following page.]
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          IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the date first abovewritten.         ALLIED WORLD NATIONAL ASSURANCE COMPANY           By: /s/ Scott A. Carmilani           Name: Scott A. Carmilani    Title: Director           EMPLOYEE           By: /s/ W. Gordon Knight W. Gordon Knight  
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