EX-10.3






Exhibit 10.3




ALLEGHANY CORPORATION




2007 LONG-TERM INCENTIVE PLAN




     1. PURPOSES OF THE PLAN. The purposes of the Alleghany Corporation 2007 Long-Term Incentive
Plan (the “Plan”) are to further the long-term growth of Alleghany Corporation (the “Corporation”),
to the benefit of its stockholders, by providing incentives to the officers and other employees of
the Corporation and its subsidiaries who will be largely responsible for such growth, and to assist
the Corporation in attracting and retaining executives of experience and ability on a basis
competitive with industry practices. The Plan permits the Corporation to provide equity-based
incentive compensation of the types commonly known as restricted stock, stock options, stock
appreciation rights, performance shares, performance units and phantom stock, as well as other
types of equity-based incentive compensation.



     2. ADMINISTRATION OF THE PLAN. The Plan shall be administered by the Compensation Committee
of the Board of Directors of the Corporation (the “Committee”). No member of the Committee, during
the one year period prior to such membership or during such membership, shall be granted or awarded
equity securities pursuant to the Plan or any other plan of the Corporation or any of its
affiliates, except as permitted by Rule 16b-3(c)(2)(i) promulgated under the Securities Exchange
Act of 1934, as amended, as such Rule may be amended from time to time. Subject to the provisions
of the Plan, the Committee shall have exclusive power to select the employees to participate in the
Plan, to determine the type, size and terms of awards to be made to each participant selected, and
to determine the time or times when awards will be granted or paid. The Committee’s interpretation
of the Plan or of any awards granted thereunder shall be final and binding on all parties
concerned, including the Corporation and any participant. The Committee shall have authority,
subject to the provisions of the Plan, to establish, adopt and revise such rules, regulations,
guidelines, forms of agreements and instruments relating to the Plan as it may deem necessary or
advisable for the administration of the Plan.



     3. PARTICIPATION. Participants in the Plan shall be selected by the Committee from among the
employees of the Corporation and its subsidiaries. The term “employee” shall mean any person
(including any officer) employed by the Corporation or a subsidiary on a salaried basis. The term
“subsidiary” shall mean any corporation, partnership or limited liability company, a majority of
the total combined voting power of whose stock or other equity interests is beneficially owned,
directly or indirectly, by the Corporation. Participants may receive multiple awards under the
Plan.



     4. AWARDS.




     (a) Types. Awards under the Plan may include, but need not be limited to, cash
and/or shares of the Corporation’s common stock, $1.00 par value (“Common Stock”), rights to
receive cash and/or shares of Common Stock, stock appreciation rights, options (“Options”)
to purchase shares of Common Stock, including options intended to qualify as incentive stock
options under Section 422 of the Internal Revenue Code of 1986, as amended (“Code”), and
options not intended so to qualify. The Committee may also make any other type of award
deemed by it to be consistent with the purposes of the Plan.



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     (b) Certain Qualifying Awards. The Committee, in its sole discretion, may
grant an award to any participant with the intent that such award qualifies as
“performance-based compensation” under Section 162(m) of the Code (a “Qualifying Award”).
The right to receive (or retain) any award granted as a Qualifying Award (other than an
Option or a stock appreciation right granted at Fair Market Value) shall be conditional upon
the achievement of performance goals established by the Committee in writing at the time
such award is granted. Such performance goals, which may vary from participant to
participant and award to award, shall be based upon the attainment of specific amounts of,
or increases in, one or more of the following: revenues, operating income, cash flow,
management of expenses, loss reserves and loss adjustment expense reserves, underwriting
expenses, income before income taxes, net income, earnings per share, net worth,
stockholders’ equity, return on equity or assets or total return to stockholders, whether
applicable to the Corporation or any relevant subsidiary or business unit or entity in which
the Corporation has a significant investment, or any combination thereof as the Committee
may deem appropriate. Prior to the payment of any award granted as a Qualifying Award, the
Committee shall certify in writing that the performance goals were satisfied. The maximum
number of shares of Common Stock with respect to which Qualifying Awards may be granted to
any participant in any calendar year shall be 50,000 shares of Common Stock, subject to
adjustment as provided in Section 7(a) hereof.




     (c) Time and Deferral of Payments. At the time the Committee grants each award
under the Plan, the Committee shall specify in writing the time (which time may be a
specific date or event, or the time of satisfaction of any performance goals or other
condition imposed by the Committee) of the payment of the award. In awarding any right to
receive cash and/or shares of Common Stock, the Committee may also specify that the payment
of all or any portion of such cash and/or shares of Common Stock may at the election of the
participant be deferred until a later date. Deferrals shall be for such periods and upon
such other terms as the Committee may determine, all of which terms (including the amount
(or method for determining the amount) of the deferrals payable, the time when such
deferrals shall be payable and the terms and conditions of, and any limitations on changes
to, such elections) shall be set forth in the award agreement, which terms and any changes
to such terms, shall comply with the requirements of Section 409A of the Code and, in the
case of any Qualifying Award, shall comply with the requirements of Section 162(m) of the
Code.




     (d) Vesting, Other Performance Requirements and Forfeiture. In awarding any
Options or any rights to receive cash and/or shares of Common Stock (including Qualifying
Awards), the Committee (i) may specify that the right to exercise such Options or the right
to receive payment of such cash and/or shares of Common Stock shall be conditional upon the
fulfillment of specified conditions, including, without limitation, completion of specified
periods of service in the employ of the Corporation or its subsidiaries, and the achievement
of specified business and/or personal performance goals, and (ii) may provide for the
forfeiture of all or any portion of any such Options or rights in specified circumstances.
The Committee may also specify by whom and/or in what manner the accomplishment of any such
performance goals shall be determined and may waive or modify any such performance goals or
conditions.



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     (e) Agreements. Any award under the Plan may, in the Committee’s discretion,
be evidenced by an agreement at the time of grant of the award or thereafter, which, subject
to the provisions of the Plan, may contain such terms and conditions as may be approved by
the Committee, and shall be executed by an officer on behalf of the Corporation; provided
that in the event that payment of any award may be deferred as provided in Section 4(c)
hereof, the award must be evidenced by an award agreement.



     5. SHARES OF STOCK SUBJECT TO THE PLAN. Subject to adjustment as provided in Section 7(a)
hereof, the number of shares of Common Stock which may be paid to participants under the Plan
and/or purchased pursuant to Options granted under the Plan shall not exceed an aggregate of
300,000 shares. For this purpose, awards based upon, or measured by, the value or changes in the
value of shares of Common Stock (whether paid in cash or shares of Common Stock), any shares of
Common Stock retained by the Corporation in satisfaction of the participant’s obligation for
withholding taxes, and shares of Common Stock not issued as a result of a net exercise of an Option
shall be treated as shares of Common Stock paid to participants. If any award shall be forfeited
or otherwise terminates (in whole or in part) or an Option shall expire or terminate unexercised,
the shares of Common Stock covered thereby shall remain available under the Plan for payment to
participants. Shares to be delivered or purchased under the Plan may be either authorized but
unissued shares of Common Stock or shares of Common Stock held by the Corporation as treasury
shares. Any shares of Common Stock issued by the Corporation through the assumption or
substitution of outstanding grants in connection with the acquisition of another entity shall not
reduce the maximum number of shares available for delivery under the Plan.



     6. OPTIONS.




     (a) Term of Options. The term of any Option shall be determined by the
Committee, but in no event shall any Option be exercisable more than ten years after the
date on which it was granted. The Committee may grant options intended to qualify as
incentive stock options under Section 422 of the Code, and Options not intended so to
qualify; provided, however, that Options intended to qualify as incentive stock options may
only be granted to employees of the Corporation and any subsidiary corporation (within the
meaning of Section 424(f) of the Code).




     (b) Option
Price; Fair Market Value. The price (“Option Price”) at which
shares of Common Stock may be purchased pursuant to any Option shall be determined by the
Committee at the time the Option is granted, but in no event shall the Option Price be less
than 100 percent of the Fair Market Value of such shares on the date the Option is granted.
For purposes of the Plan, Fair Market Value is the closing sales prices of the Common Stock
on the relevant date as reported on the stock exchange or market on which the Common Stock
is primarily traded, or, if no sale is made on such date, then Fair Market Value is the
weighted average of the closing sales prices of the Common Stock on the next preceding day
and the next succeeding day on which such sales were made as reported on the stock exchange
or market on which the Common Stock is primarily traded.



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     (c) Payment Upon Exercise. Upon exercise of an Option, the Option Price shall
be payable to the Corporation in cash, or, at the discretion of the Committee, in shares of
Common Stock valued at the Fair Market Value thereof on the date of payment, or in a
combination of cash and shares of Common Stock.




     (d) Surrender of Options. The Corporation may, if the Committee so determines,
accept the surrender by a participant, or the personal representative of a participant, of
an Option, in consideration of a payment by the Corporation equal to the difference obtained
by subtracting the aggregate Option Price from the aggregate Fair Market Value of the Common
Stock covered by the Option on the date of such surrender, such payment to be in cash, or,
if the Committee so provides, in shares of Common Stock valued at Fair Market Value on the
date of such surrender, or partly in shares of Common Stock and partly in cash.



     7. DILUTION AND OTHER ADJUSTMENTS.




     (a) Changes in Capital Structure. In the event of any corporate transaction
involving the Corporation (including, without limitation, any subdivision or combination or
exchange of the outstanding shares of Common Stock, stock dividend, stock split, spin-off,
split-off, recapitalization, capital reorganization, liquidation, reclassification of shares
of Common Stock, merger, consolidation, extraordinary cash or other distributions, stock
repurchases or redemption at prices in excess of book value per share, stock issuances or
sales at prices less than book value per share or sale, lease or transfer of substantially
all of the assets of the Corporation or other event similar in type or effect to an event
herein listed), the Board of Directors of the Corporation shall make such equitable
adjustments as it may deem appropriate in the Plan and the awards thereunder, including,
without limitation, an adjustment in the total number of shares of Common Stock which may
thereafter be delivered or purchased under the Plan, in the maximum number of shares of
Common Stock with respect to which awards may be granted to any participant in any year
under Section 4(b) hereof and in any performance goals. Agreements evidencing Options may
include such provisions as the Committee may deem appropriate with respect to the
adjustments to be made to the terms of such Options upon the occurrence of any of the
foregoing events.




     (b) Tender Offers and Exchange Offers. In the event of any tender offer or
exchange offer, by any person other than the Corporation, for shares of Common Stock, the
Committee may make such adjustments in outstanding awards and authorize such further action
as it may deem appropriate to enable the recipients of outstanding awards to avail
themselves of the benefits of such offer, including, without limitation, acceleration of the
exercise date of outstanding Options so that they become immediately exercisable in whole or
in part, or offering to acquire all or any portion of specified categories of Options for a
price determined pursuant to Section 6(d) hereof, or acceleration of the payment of
outstanding awards payable, in whole or in part, in shares of Common Stock.




     (c) Limits on Discretion to Make Adjustments. Notwithstanding any provision of
this Section 7 to the contrary, no adjustment shall be made in any



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outstanding Qualifying Awards to the extent that such adjustment would adversely affect
the status of that Qualifying Award as “performance-based compensation” under Section 162(m)
of the Code.



     8. MISCELLANEOUS PROVISIONS.




     (a) Right to Awards. No employee or other person shall have any claim or right
to be granted any award under the Plan.




     (b) Rights as Stockholders. A participant shall have no rights as a holder of
Common Stock by reason of awards under the Plan, unless and until certificates for shares of
Common Stock are issued to the participant.




     (c) No Assurance of Employment. Neither the Plan nor any action taken
thereunder shall be construed as giving any employee any right to be retained in the employ
of the Corporation or any subsidiary.




     (d) Costs and Expenses. All costs and expenses incurred in administering the
Plan shall be borne by the Corporation.




     (e) Unfunded Plan. The Plan shall be unfunded. The Corporation shall not be
required to establish any special or separate fund nor to make any other segregation of
assets to assure the payment of any award under the Plan.




     (f) Withholding Taxes. The Corporation shall have the right to deduct from all
awards hereunder paid in cash any federal, state, local or foreign taxes required by law to
be withheld with respect to such payments and, with respect to awards paid in stock, to
require the payment (through withholding from the participant’s salary or otherwise) of any
such taxes, but the Committee may make such arrangements for the payment of such taxes as
the Committee in its discretion shall determine, including payment with shares of Common
Stock (including net payments of awards paid in Common Stock).




     (g) Limits on Transferability. No awards under the Plan nor any rights or
interests therein shall be pledged, encumbered, or hypothecated to, or in favor of, or
subject to any lien, obligation, or liability of a participant to, any party, other than the
Corporation or any subsidiary, nor shall such awards or any rights or interests therein be
assignable or transferable by the recipient thereof except, in the event of the recipient’s
death, to his designated beneficiary as hereinafter provided, or by will or the laws of
descent and distribution. During the lifetime of the recipient, awards under the Plan
requiring exercise shall be exercisable only by such recipient or by the guardian or legal
representative of such recipient. Notwithstanding the foregoing, the Committee may, in its
discretion, provide that awards granted pursuant to the Plan (other than an option granted
as an incentive stock option) be transferable, without consideration, to a participant’s
immediate family members (i.e., children, grandchildren or spouse), to trusts for the
benefit of such immediate family members and to partnerships in which such family members
are the only partners. The Committee may impose such terms and conditions on such
transferability as it may deem appropriate.



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     (h) Beneficiary. Any payments on account of awards under the Plan to a
deceased participant shall be paid to such beneficiary as has been designated by the
participant in writing to the Secretary of the Corporation or, in the absence of such
designation, according to the participant’s will or the laws of descent and distribution.




     (i) Nature of Benefits. Awards under the Plan, and payments made pursuant
thereto, are not a part of salary or base compensation.




     (j) Compliance with Legal Requirements. The obligation of the Corporation to
issue or deliver shares of Common Stock upon exercise of Options or otherwise shall be
subject to satisfaction of all applicable legal and securities exchange requirements,
including, without limitation, the provisions of the Securities Act of 1933, as amended, and
the Securities Exchange Act of 1934, as amended. The Corporation shall endeavor to satisfy
all such requirements in such a manner as to permit at all times the exercise of all
outstanding Options in accordance with their terms, and to permit the issuance and delivery
of shares of Common Stock whenever provided for by the terms of any award made under the
Plan.



     9. AMENDMENT OR TERMINATION OF THE PLAN. The Board of Directors of the Corporation, without
the consent of any participant, may at any time terminate or from time to time amend the Plan in
whole or in part; provided, however, that no such action shall adversely affect any rights or
obligations with respect to any awards theretofore made under the Plan; and provided, further, that
no amendment, without approval of the holders of Common Stock by an affirmative vote of a majority
of the shares of Common Stock voted thereon in person or by proxy, shall (i) increase the aggregate
number of shares subject to the Plan (other than increases pursuant to Section 7 hereof), (ii)
extend the period during which awards may be granted under the Plan, (iii) increase the maximum
term for which Options may be issued under the Plan, (iv) decrease the minimum Option Price at
which Options may be issued under the Plan, or (v) materially modify the requirements for
eligibility to participate in the Plan. With the consent of the participants affected, the
Committee may amend outstanding agreements evidencing awards under the Plan, and may amend the
terms of awards not evidenced by such agreements, in any manner not inconsistent with the terms of
the Plan.



     10. EFFECTIVE DATE AND TERM OF PLAN. The Plan shall become effective when approved at the
annual meeting of stockholders (the “Annual Meeting”) by a majority of the voting power of the
Voting Stock (all as defined in the Corporation’s Restated Certificate of Incorporation) present in
person or represented by proxy and entitled to vote at such Annual Meeting. The Plan shall
terminate on the date of the Annual Meeting in 2012, unless sooner terminated by action of the
Board of Directors of the Corporation. No award may be granted hereunder after termination of the
Plan, but such termination shall not affect the validity of any award then outstanding.



     11. LAW GOVERNING. The validity and construction of the Plan and any agreements entered into
thereunder shall be governed by the laws of the State of New York, but without regard to the
conflict laws of the State of New York except to the extent that such conflict laws require
application of the laws of the State of Delaware.



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     12. SECTION 409A PROVISION. Notwithstanding any provision of the Plan to the contrary, if at
the time of a participant’s termination of employment (within the meaning of Section 409A of the
Internal Revenue Code of 1986, as amended (“Section 409A”)) the participant is a “specified
employee,” then any payments that are required to be made to such participant under the Plan as a
result of the participant’s termination of employment that constitute the deferral of compensation
(within the meaning of Treasury Regulation Section 1.409A-1(b)) and that would in the absence of
this provision have been paid to the participant within six months and one day of the participant’s
termination of employment (the “Deferred Compensation Payments”) shall not be paid to the
participant at the time herein provided but shall instead be accumulated and paid to the
participant in a lump sum with interest thereon at a rate equal to the yield per annum on 6-month
Treasury bills (secondary market) on the date the participant terminates employment (as reported by
the Federal Reserve Board) from the date payment would have been made to the participant under the
Plan until the date paid, such payment to be made on the day after the date that is six (6) months
from the date of the participant’s termination of employment; provided, however, if the participant
dies prior to the expiration of such six (6) month period, payment shall be made to the
participant’s estate as soon as practicable following the participant’s death. For these purposes,
a participant will be a “specified employee” if, on the date of the participant’s termination of
employment, the participant is an individual who is, under the method of determination adopted by
the Committee designated as, or within the category of employees deemed to be, a “specified
employee” within the meaning and in accordance with Treasury Regulation Section 1.409A-1(i). The
Committee shall determine in its sole discretion all matters relating to who is a “specified
employee” and the application of and effects of the change in such determination.




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