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Exhibit 4.1





ALLIED WORLD ASSURANCE COMPANY HOLDINGS, AG

THIRD AMENDED AND RESTATED 2001 EMPLOYEE STOCK OPTION PLAN




     1. Purpose. As of December 1, 2010 (the “Third Amendment and Restatement
Effective Date”), the Allied World Assurance Company Holdings, AG Second Amended and
Restated 2001 Employee Stock Option Plan was amended and restated and renamed the Allied
World Assurance Company Holdings, AG Third Amended and Restated 2001 Employee Stock Option
Plan (the “Plan”). The purpose of the Plan is to advance the interest of Allied World
Assurance Company Holdings, AG (“Allied World”) and its subsidiaries (collectively, the
“Company”) by providing certain Key Persons (as defined below) with the opportunity to
acquire a proprietary interest in the success of the Company, to enhance the long-term
performance of the Company, as well as to attract people with training, experience and
ability to the Company and its subsidiaries and affiliates.



     2. Definitions of Certain Terms.




     (i) “Award” means a stock option granted pursuant to the Plan,
including Prior Grants. Stock options granted under the Plan are not intended to
qualify as “incentive stock options” meeting the requirements of Section 422 of the
Code.




     (ii) “Award Agreement” means the written document by which each Award
is evidenced.




     (iii) “Board” means the Board of Directors of Allied World.




     (iv) “Code” means the Internal Revenue Code of 1986, as amended from
time to time, and the applicable rulings and regulations thereunder.




     (v) “Committee” has the meaning set forth in Section 3.a.




     (vi) “Covered Person” has the meaning set forth in Section 3.c.




     (vii) “Fair Market Value” means, with respect to a Registered Share on
any day, the fair market value as determined in accordance with a valuation
methodology approved by the Committee and consistent with the requirements of
Section 409A of the Code, or if there is a public market for the shares on such
date, the closing price of the Registered Shares on such stock exchange on which the
            shares are principally trading on the date in question, or, if there were no sales
on such date, on the closest preceding date on which there were sales of shares.




     (viii) “Key Persons” means officers, directors, employees (including
prospective employees), consultants and others who may perform services for the
Company. For purposes of the Plan, if a Key Person provides services to the Company
in a non-employee capacity, references herein to “employee” shall



 









 







instead refer to “service provider” and references herein to “employment” or
similar terms shall instead refer to “service” or similar terms.




     (ix) “Prior Grants” means stock options and warrants granted prior to
the Third Amendment and Restatement Effective Date under previous versions of the
Plan.




     (x) “Registered Shares” means the registered shares of Allied World.



     3. Administration.



     a. Except as otherwise provided herein, the Plan shall be administered by a committee
(the “Committee”) of the Board to be drawn solely from members of the Board who are not and
have not been officers of the Company. The Committee is authorized, subject to the
provisions of the Plan, to establish such rules and regulations as it deems necessary for
the proper administration of the Plan and to make such determinations and interpretations
and to take such action in connection with the Plan and any Award granted hereunder as it
deems necessary or advisable. All determinations and interpretations made by the Committee
shall be final, binding and conclusive on all grantees and on their legal representatives
and beneficiaries. The Committee shall have the authority, in its absolute discretion, to
determine which Key Persons shall receive Awards, the time when Awards shall be issued, the
terms of such Awards and the number of shares for which Awards shall be issued; provided,
however, that the Board shall have the sole authority to make such determinations with
respect to Awards, if any, to be issued to the members of the Committee. Unless otherwise
expressly provided in the Plan or an Award Agreement, the Committee shall have the
authority, in its absolute discretion, to (i) amend any outstanding Award Agreement in any
respect, subject to the consent of any grantee where the rights of the grantee of such Award
are adversely affected, including, without limitation, to accelerate the time or times at
which the Award becomes vested, unrestricted or may be exercised, waive or amend any
restrictions or conditions set forth in such Award Agreement, or impose new restrictions and
conditions, or reflect a change in the grantee’s circumstances; and (ii) determine whether,
to what extent and under what circumstances and method or methods (A) Awards may be (1)
settled in cash, Registered Shares, other securities, other Awards or other property or (2)
canceled, forfeited or suspended, (B) Registered Shares, other securities, other Awards or
other property, and other amounts payable with respect to an Award may be deferred either
automatically or at the election of the grantee thereof or of the Committee and (C) Awards
may be settled by the Company or any of its designees. Notwithstanding anything to the
contrary contained herein, the Board may, in its sole discretion, at any time and from time
to time, grant Awards (including grants to members of the Board who are not employees of the
Company) or administer the Plan, in which case the Board shall have all of the authority and
responsibility granted to the Committee herein.



     b. Actions of the Committee may be taken by the vote of a majority of its members. The
Committee may allocate among its members and delegate to any person who is not a member of
the Committee any of its powers, responsibilities or duties in accordance with applicable
law.



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     c. No member of the Board or the Committee or any employee of the Company (each such
person a “Covered Person”) shall have any liability to any person (including any grantee)
for any action taken or omitted to be taken or any determination made in good faith with
respect to the Plan or any Award. Each Covered Person shall be indemnified and held
harmless by Allied World against and from any loss, cost, liability or expense (including
attorneys’ fees) that may be imposed upon or incurred by such Covered Person in connection
with or resulting from any action, suit or proceeding to which such Covered Person may be a
party or in which such Covered Person may be involved by reason of any action taken or
omitted to be taken under the Plan or any Award Agreement and against and from any and all
amounts paid by such Covered Person, with Allied World’s approval, in settlement thereof, or
paid by such Covered Person in satisfaction of any judgment in any such action, suit or
proceeding against such Covered Person, provided that Allied World shall have the right, at
its own expense, to assume and defend any such action, suit or proceeding and, once Allied
World gives notice of its intent to assume the defense, Allied World shall have sole control
over such defense with counsel of Allied World’s choice. The foregoing right of
indemnification shall not be available to a Covered Person to the extent that a court of
competent jurisdiction in a final judgment or other final adjudication, in either case, not
subject to further appeal, determines that the acts or omissions of such Covered Person
giving rise to the indemnification claim resulted from such Covered Person’s fraud or
dishonesty. The foregoing right of indemnification shall not be exclusive of any other
rights of indemnification to which Covered Persons may be entitled under Allied World’s
Articles of Association or Organizational Regulations, as a matter of law, or otherwise, or
any other power that Allied World may have to indemnify such persons or hold them harmless.



     4. Registered Shares Available for Awards; Adjustments.



     a. Registered Shares Available for Awards. The total number of Registered
Shares that may be issued pursuant to Awards granted under the Plan shall not exceed four
million (4,000,000) Registered Shares as adjusted pursuant to the provisions of Section 4.b.
Registered Shares issued upon exercise of Prior Grants shall count against the Maximum
Number. Awards may be granted to Key Persons in such number and at such times during the
term of this Plan as the Committee or the Board shall determine; provided, however, that
during any time that the Company is subject to Section 162(m) of the Code, the maximum
number of Registered Shares with respect to which Awards may be granted to any individual in
any one year shall not exceed the maximum number of Registered Stock available for issue
hereunder, as such number may change from time to time. Shares granted pursuant to this
Plan may be authorized but unissued Registered Shares or authorized and issued Registered
Shares held by the Company or acquired by the Company for the purposes of the Plan. If any
Award granted under this Plan or any Prior Grant is forfeited or otherwise terminates or is
canceled without the delivery of Registered Shares, then the Registered Shares covered by
such forfeited, terminated or canceled Award or Prior Grant shall again become available for
transfer pursuant to Awards granted or to be granted under this Plan. Without affecting the
number of Registered Shares reserved or available hereunder, the Committee may authorize
under the Plan the issuance of Awards or the assumption of awards granted under plans of
other entities in connection with any amalgamation, merger, consolidation, acquisition of
property or stock, or reorganization



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upon such terms and conditions as it may deem appropriate, and any other applicable
laws or stock exchange rules.



     b. Capitalization Adjustments. The aggregate number of Registered Shares which
may be granted or purchased pursuant to Awards granted hereunder, the number of Registered
Shares covered by each outstanding Award, and the price per share thereof in each such Award
shall be equitably and proportionally adjusted or substituted, as determined by the
Committee in good faith and in its sole discretion, as to the number, price or kind of
Registered Shares or other consideration subject to such Awards or as otherwise determined
by the Committee in good faith to be fair and equitable (i) in the event of changes in the
outstanding Registered Shares or in the capital structure of the Company by reason of stock
dividends, stock splits, reverse stock splits, recapitalizations, reorganizations, mergers,
consolidations, combinations, exchanges or other relevant changes in capitalization
occurring after the date of grant of any such Award; (ii) in the event of any change in
applicable laws or any change in circumstances which results in or would result in any
substantial dilution or enlargement of the rights granted to, or available for, participants
in the Plan; or (iii) for any other reason which the Committee determines, in its sole
discretion and acting in good faith, to otherwise warrant equitable adjustment.



     c. Corporate Events. Notwithstanding subsection (b) above, in the event of (i)
a merger, amalgamation or consolidation involving the Company in which the Company is not
the surviving corporation; (ii) a merger, amalgamation or consolidation involving the
Company in which the Company is the surviving corporation but the holders of Registered
Shares receive securities of another corporation and/or other property, including cash;
(iii) the sale of greater than fifty percent (50%) of the securities of the Company entitled
to vote in the election of directors to the Board; or (iv) the reorganization or liquidation
of the Company (each, a “Corporate Event”), in lieu of providing the adjustment set forth in
subsection (b) above, the Committee may, in its discretion, provide that all outstanding
Awards shall terminate as of the consummation of such Corporate Event, and either (x)
accelerate the exercisability of, and cause all vesting restrictions to lapse on, all
outstanding Awards to a date at least ten days prior to the date of such Corporate Event,
such that holders may exercise all such Awards prior to the Corporate Event, or (y) provide
that holders of Awards will receive a payment in respect of cancellation of their Awards
based on the amount of the per share consideration being paid for the Registered Shares in
connection with such Corporate Event less the applicable exercise price. Payments to
holders pursuant to the preceding sentence shall be made in cash, or, in the sole discretion
of the Committee, in such other consideration necessary for a holder of an Award to receive
property, cash or securities as such holder would have been entitled to receive upon the
occurrence of the transaction if the holder had been, immediately prior to such transaction,
the holder of the number of Registered Shares covered by the Award at such time.



     d. Fractional Shares. Any such adjustment may provide for the elimination of
any fractional share which might otherwise become subject to an Award.



     5. Eligibility. Awards under the Plan may be made to such Key Persons as the
Committee may select in its discretion.



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     6. Grant of Awards. The Committee is authorized to grant Awards only in the
form of stock options to purchase Registered Shares from the Company, to such Key Persons,
in such amounts and subject to such terms and conditions, as the Committee shall determine
in its discretion.



     7. Terms and Conditions of Award Agreements. Each Award granted under the Plan
shall be evidenced by a written document which shall contain such provisions and conditions
as the Committee deems appropriate. By accepting an Award pursuant to the Plan, a grantee
thereby agrees that the Award shall be subject to all of the terms and provisions of the
Plan and the applicable Award Agreement. All Awards granted under the Plan shall be subject
to the following terms and conditions:



     a. Exercise Price. The exercise price per share with respect to each Award
shall be determined by the Committee or the Board but shall not be less than 100% of the
Fair Market Value of the Registered Shares on the date the Award is granted.



     b. Term of Award. In no event shall any Award be exercisable after the
expiration of 10 years from the date on which the Award is issued.



     c. Termination of Employment. Except as otherwise provided by the Committee or
the Board, no part of any Award issued to an employee (including an officer) may be
exercised after the termination of his or her employment with the Company, except that:




     (i) if such termination of employment is on or after the date the employee
attains age sixty-five (65) or due to disability or death, any portion of an Award,
whether or not exercisable at the time of such termination, may be exercised by the
grantee (or in case of death by the person or persons to whom the grantee’s rights
under such Award are transferred by will or the laws of descent and distribution) at
any time within the term of the Award; and




     (ii) if such termination of employment is not at or after normal retirement age
or due to disability or death, any portion of an Award may be exercised by the
grantee within 90 days after such termination, but only to the extent such Award was
exercisable at the time of such termination, and any portion of such Award that
remains unvested at the time of such termination shall terminate and no longer be
exercisable at any time.



     8. Term of Plan. The Plan shall terminate on, and no Awards shall be issued
pursuant to the Plan after, May 8, 2018; provided, however, that Awards granted theretofore
may extend beyond such date and the terms and conditions of the Plan shall continue to apply
thereto.



     9. Termination or Amendment of Plan. The Board may at any time terminate the
Plan with respect to any Registered Shares of Allied World not at the time subject to an
Award, and may from time to time alter or amend the Plan or any part thereof. Unless
otherwise determined by the Board, shareholder approval of any suspension, discontinuance,
revision or amendment shall be obtained only to the extent necessary to



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comply with any applicable law or stock exchange listing requirement; provided,
however, that unless approved by the Company’s shareholders or as otherwise specifically
provided under Section 4(a) hereof, no adjustments or reduction of the exercise price of any
outstanding Awards shall be made in the event of a decline in stock price, either by
reducing the exercise price of outstanding Awards or through cancellation of outstanding
Awards in connection with a re-granting of Awards at a lower price to the same individual.



     10. Employment Status and Rights; Waiver of Claims. The granting of any Award
does not alter the at-will nature of any grantee’s employment with the Company. In
addition, prior to being granted an Award, no employee of the Company has any right to any
benefits hereunder. Accordingly, in consideration of a Key Person’s selection to receive an
Award under the Plan and by acceptance of the grant of such Award, such Key Person expressly
waives any right to contest the number of Awards issued to him or her, the terms of the Plan
or the Award Agreement, any determination, action or omission under the Plan or any Award
Agreement by Allied World, the Board or the Committee, or any amendment to the Plan or any
Award Agreement (other than an amendment to the Plan or an Award Agreement to which his or
her consent is expressly required by the express terms of an Award Agreement).



     11. Confidentiality. In consideration of the grantee’s acceptance of any
Award, the grantee hereby agrees to keep confidential the existence of, and any information
concerning, any dispute arising in connection with any Award, the Plan and any related
matters, except that the grantee may disclose information concerning such dispute to the
court that is considering such dispute or to the grantee’s legal counsel (provided that such
counsel agrees not to disclose any such information other than as necessary to the
prosecution or defense of the dispute).



     12. Tax Withholding. As a condition to the delivery of any Registered Shares
pursuant to any Award, or in connection with any other event that gives rise to a federal or
other governmental tax withholding obligation on the part of the Company relating to an
Award (including, without limitation, FICA tax), (a) the Company may deduct or withhold (or
cause to be deducted or withheld) from any payment or distribution to a grantee whether or
not pursuant to the Plan or (b) the Committee shall be entitled to require that the grantee
remit cash to the Company (through payroll deduction or otherwise), in each case in an
amount sufficient in the opinion of the Company to satisfy such withholding obligation.



     13. Required Consents and Legends.



     a. If the Committee shall at any time determine that any consent (as hereinafter
defined) is necessary or desirable as a condition of, or in connection with, the granting of
any Award, the delivery of Registered Shares or the delivery of any cash, securities or
other property under the Plan, or the taking of any other action hereunder (each such action
being hereinafter referred to as a “Plan Action”), then such Plan Action shall not be taken,
in whole or in part, unless and until such consent shall have been effected or obtained to
the full satisfaction of the Committee. The Committee may direct that any certificate
evidencing shares delivered pursuant to the Plan shall bear a legend



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setting forth such restrictions on transferability as the Committee may determine to be
necessary or desirable, and may advise the transfer agent to place a stop transfer order
against any legended shares.



     b. The term “consent” as used in this Section 13 with respect to any Plan Action
includes (i) any and all listings, registrations or qualifications in respect thereof upon
any securities exchange or under any federal, state or local law, or law, rule or regulation
of a jurisdiction outside the United States; (ii) or any other matter, which the Committee
may deem necessary or desirable to comply with the terms of any such listing, registration
or qualification or to obtain an exemption from the requirement that any such listing,
qualification or registration be made; (iii) any and all other consents, clearances and
approvals in respect of a Plan Action by any governmental or other regulatory body or any
stock exchange or self-regulatory agency; and (iv) any and all consents required by the
Committee. Nothing herein shall require Allied World to list, register or qualify the
Registered Shares on any securities exchange.



     14. Nonassignability; No Hedging. Except to the extent otherwise expressly
provided in the applicable Award Agreement or determined by the Committee, no Award (or any
rights and obligations thereunder) granted to any person under the Plan may be sold,
exchanged, transferred, assigned, pledged, hypothecated or otherwise disposed of or hedged,
in any manner (including through the use of any cash-settled instrument), whether
voluntarily or involuntarily and whether by operation of law or otherwise, other than by
will or by the laws of descent and distribution, and all such Awards (and any rights
thereunder) shall be exercisable during the life of the grantee only by the grantee or the
grantee’s legal representative. Any sale, exchange, transfer, assignment, pledge,
hypothecation or other disposition in violation of the provisions of this Section 14 shall
be null and void and any Award which is hedged in any manner shall immediately be forfeited.
All of the terms and conditions of this Plan and the Award Agreements shall be binding upon
any permitted successors and assigns.



     15. Successor Entity. Unless otherwise provided in the applicable Award
Agreement and except as otherwise determined by the Committee, in the event of a merger,
amalgamation, consolidation, mandatory share exchange or other similar business combination
of Allied World with or into any other entity or any transaction in which another person or
entity acquires all of the issued and outstanding Registered Shares of Allied World, or all
or substantially all of the assets of Allied World, outstanding Awards may be assumed or a
substantially equivalent award may be substituted by such successor entity or a parent or
subsidiary of such successor entity.



     16. Nature of Payments.



     a. Any and all grants of Awards and deliveries of Registered Shares, cash, securities
or other property under the Plan shall be in consideration of services performed or to be
performed for the Company by the grantee. Awards under the Plan may, in the discretion of
the Committee, be made in substitution in whole or in part for cash or other compensation
otherwise payable to a grantee by the Company. Only whole Registered Shares shall be
delivered under the Plan. Awards shall, to the extent reasonably practicable,



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be aggregated in order to eliminate any fractional shares. Fractional shares shall be
rounded down to the nearest whole share and any such fractional shares shall be forfeited.



     b. All such grants and deliveries shall constitute a special discretionary incentive
payment to the grantee and shall not be required to be taken into account in computing the
amount of salary or compensation of the grantee for the purpose of determining any
contributions to or any benefits under any pension, retirement, profit-sharing, bonus, life
insurance, severance or other benefit plan of the Company or under any agreement with the
grantee, unless the Company specifically provides otherwise.



     17. Non-Uniform Determinations. The Committee’s determinations under the Plan
and Award Agreements need not be uniform and may be made by it selectively among persons who
receive, or are eligible to receive, Awards under the Plan (whether or not such persons are
similarly situated). Without limiting the generality of the foregoing, the Committee shall
be entitled, among other things, to make non-uniform and selective determinations under
Award Agreements, and to enter into non-uniform and selective Award Agreements, as to (a)
the persons to receive Awards, (b) the terms and provisions of Awards and (c) whether a
grantee’s employment has been terminated for purposes of the Plan.



     18. Other Payments or Awards. Nothing contained in the Plan shall be deemed in
any way to limit or restrict the Company from making any award or payment to any person
under any other plan, arrangement or understanding, whether now existing or hereafter in
effect.



     19. Plan Headings. The headings in this Plan are for the purpose of
convenience only and are not intended to define or limit the construction of the provisions
hereof.



     20. Governing Law; Venue. THIS PLAN SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK. IN CONSIDERATION OF THE GRANTEE’S
ACCEPTANCE OF THE ISSUANCE OF ANY AWARD, THE GRANTEE HEREBY EXPRESSLY SUBMITS TO THE
EXCLUSIVE JURISDICTION OF AND VENUE IN THE COURTS OF SWITZERLAND WITH RESPECT TO ANY SUIT OR
CLAIM INSTITUTED BY THE COMPANY OR THE GRANTEE RELATING TO THIS PLAN OR THE AWARD.



     21. Severability; Entire Agreement. If any of the provisions of this Plan or
any Award Agreement is finally held to be invalid, illegal or unenforceable (whether in
whole or in part), such provision shall be deemed modified to the extent, but only to the
extent, of such invalidity, illegality or unenforceability and the remaining provisions
shall not be affected thereby; provided, that if any of such provisions is finally held to
be invalid, illegal, or unenforceable because it exceeds the maximum scope determined to be
acceptable to permit such provision to be enforceable, such provision shall be deemed to be
modified to the minimum extent necessary to modify such scope in order to make such
provision



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enforceable hereunder. The Plan and any Award Agreements contain the entire agreement
of the parties with respect to the subject matter thereof and supersede all prior
agreements, promises, covenants, arrangements, communications, representations and
warranties between them, whether written or oral with respect to the subject matter thereof.



     22. No Third Party Beneficiaries. Except as expressly provided therein,
neither the Plan nor any Award Agreement shall confer on any person other than Allied World
and the grantee of any Award any rights or remedies thereunder. The exculpation and
indemnification provisions of Section 3.c shall inure to the benefit of a Covered Person’s
estate and beneficiaries and legatees.



     23. Successors and Assigns of Allied World. The terms of this Plan shall be
binding upon and inure to the benefit of Allied World and any successor entity contemplated
by Section 15.



     24. Date of Adoption. This Plan was adopted effective on February 28, 2008 by
the Board, subject to approval by the shareholders of Allied World at a General Meeting of
Shareholders on May 8, 2008.




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