Document:

EX-10.8

 

Exhibit 10.8

 

    ALLIED
    WORLD ASSURANCE COMPANY HOLDINGS, LTD

    

 

    2008
    EMPLOYEE SHARE PURCHASE PLAN

 

    Allied World Assurance Company Holdings, Ltd, hereby adopts the
    Allied World Assurance Company Holdings, Ltd 2008 Employee Share
    Purchase Plan (the “Plan”), effective as of
    February 28, 2008 (the “Effective Date”),
    subject to the approval of the shareholders of the Company.

 

    1.  Purpose.  The purposes of
    the Plan are as follows:

 

    a. To assist Eligible Employees in acquiring an ownership
    interest in the Company pursuant to a plan that is intended to
    qualify as an “employee stock purchase plan” within
    the meaning of Section 423(b) of the Code; and

 

    b. To help such Eligible Employees provide for their future
    security and to encourage them to remain in the employment of
    the Company and its Subsidiaries.

 

    2.  Definitions.

 

    (i) “Administrator” shall mean the
    Compensation Committee of the Board.

 

    (ii) “Board” shall mean the Board
    of Directors of the Company.

 

    (iii) “Code” shall mean the
    Internal Revenue Code of 1986, as amended, and the applicable
    rulings and regulations thereunder.

 

    (iv) “Common Shares” shall mean the
    common shares of the Company, $0.03 par value per share.
    “Common Shares” shall also include any other
    securities of the Company that may be substituted for Common
    Shares pursuant to Section 19 hereof.

 

    (v) “Company” shall mean Allied
    World Assurance Company Holdings, Ltd, a Bermuda exempted
    company, or any successor corporation.

 

    (vi) “Compensation” shall mean all
    base straight time gross earnings and commissions, exclusive of
    payments for overtime, shift premiums, incentive compensation,
    incentive payments, bonuses, expense reimbursements, fringe
    benefits and other compensation.

 

    (vii) “Eligible Employee” shall
    mean an Employee of the Company or a Subsidiary (i) who
    would not, immediately after an option is granted to him
    hereunder, own shares possessing 5% or more of the total
    combined voting power or value of all classes of shares of the
    Company, a Parent, or a Subsidiary (as determined under
    Section 423(b)(3) of the Code); (ii) whose customary
    employment is for more than 20 hours per week; and
    (iii) whose customary employment is for more than five
    months in any calendar year. For purposes of clause (i) of
    this subsection (g), the rules of Section 424(d) of the
    Code with regard to the attribution of share ownership shall
    apply in determining the share ownership of an individual, and
    shares which an Employee may purchase under outstanding options
    shall be treated as shares owned by the Employee.

 

    (viii) “Employee” shall mean any
    person who renders services to the Company or a Subsidiary in
    the status of an employee within the meaning of Code
    Section 3401(c). “Employee” shall not include any
    director of the Company or a Subsidiary who does not render
    services to the Company or a Subsidiary in the status of an
    employee within the meaning of Code Section 3401(c). For
    purposes of the Plan, the employment relationship shall be
    treated as continuing intact while the individual is on sick
    leave or other leave of absence approved by the Company or
    Subsidiary and meeting the requirements of Treasury
    Regulation Section 1.421-7(h)(2). Where the period of leave
    exceeds 90 days and the individual’s right to
    reemployment is not guaranteed either by statute or by contract,
    the employment relationship shall be deemed to have terminated
    on the 91st day of such leave.

 

    (ix) “Employer” shall mean, as to
    any particular Employee, the company or corporation which
    employs such Employee, whether it be the Company or a Subsidiary.

 

    (x) “Enrollment Date” shall mean
    the first Trading Day of each Offering Period.

    

    1

 

    (xi) “Exercise Date” shall mean the
    last Trading Day of each Offering Period.

 

    (xii) “Fair Market Value” shall
    mean, as of any date, the value of a Common Share determined as
    follows:

 

    (i) If the Common Shares are traded on an exchange, Fair
    Market Value shall be the closing sales price for one Common
    Share as reported in The Wall Street Journal (or such other
    source as the Administrator may deem reliable for such purposes)
    for such date, or if no sale occurred on such date, the first
    Trading Day immediately prior to such date during which a sale
    occurred;

 

    (ii) If the Common Shares are not traded on an exchange but
    are quoted on a quotation system, Fair Market Value shall be the
    mean between the closing representative bid and asked prices for
    one Common Share on such date, or if no sale occurred on such
    date, the first date immediately prior to such date on which
    sales prices or bid and asked prices, as applicable, are
    reported by such quotation system; or

 

    (iii) In the absence of an established market for the
    Common Shares, Fair Market Value shall be determined in good
    faith by the Administrator.

 

    (xiii) “Offering Period” shall mean
    each period of approximately six months commencing on each
    January 1 and July 1 and terminating on the next occurring June
    30 or December 31, as applicable. The duration and timing
    of Offering Periods may be changed pursuant to Section 4 of
    this Plan, but in no event may an Offering Period have a
    duration in excess of 27 months.

 

    (xiv) “Parent” means any
    corporation, other than the Company, in an unbroken chain of
    corporations ending with the Company if, at the time of the
    determination, each of the corporations other than the Company
    owns shares possessing 50% or more of the total combined voting
    power of all classes of shares in one of the other corporations
    in such chain.

 

    (xv) “Participant” means an
    Eligible Employee who participates in the Plan pursuant to
    Section 5 hereof.

 

    (xvi) “Purchase Price” shall mean
    85% of the Fair Market Value of one Common Share on the Exercise
    Date; provided, however, that the Purchase Price may be adjusted
    by the Administrator pursuant to Section 19 hereof;
    provided, further, that the Purchase Price shall not be less
    than the par value of one Common Share.

 

    (xvii) “Subsidiary” shall mean any
    corporation, other than the Company, in an unbroken chain of
    corporations beginning with the Company if, at the time of the
    determination, each of the corporations other than the last
    corporation in an unbroken chain owns shares possessing 50% or
    more of the total combined voting power of all classes of shares
    in one of the other corporations in such chain.

 

    (xviii) “Trading Day” shall mean a
    day on which the principal exchange on which the Common Shares
    are traded is open for trading.

 

    3.  Eligibility.

 

    a. Any Employee who is an Eligible Employee on the
    Enrollment Date for an Offering Period shall be eligible to
    participate in the Plan during such Offering Period, subject to
    the requirements of Section 5 hereof and the limitations
    imposed by Section 423(b) of the Code.

 

    b. No Eligible Employee shall be granted an option under
    the Plan to purchase Common Shares, or under any other employee
    share purchase plan to purchase shares of the Company, any
    Parent, or any Subsidiary subject to Section 423 of the
    Code, to accrue at a rate which exceeds $25,000 of the Fair
    Market Value of such shares (determined at the time the option
    is granted) for each calendar year in which the option is
    outstanding at any time. For purposes of the limitation imposed
    by this subsection, the right to purchase shares under an option
    accrues when the option (or any portion thereof) first becomes
    exercisable during the calendar year, the right to purchase
    shares under an option accrues at the rate provided in the
    option, but in no case may such rate exceed $25,000 of the Fair
    Market Value of such shares (determined at the time such option
    is granted) for any one calendar year, and a right to purchase
    shares which has accrued under an option may not be carried over
    to any other option. This limitation shall be applied in
    accordance with Section 423(b)(8) of the Code.

 

    4.  Offering Periods.  Subject
    to approval by shareholders of the Company, the Plan shall be
    implemented by consecutive Offering Periods beginning on
    July 1, 2008, and shall continue until it expires or is
    terminated in

    

    2

 

    accordance with Section 20 hereof. The Administrator shall
    have the power to change the duration of Offering Periods
    (including the commencement dates thereof) with respect to
    future offerings without shareholder approval if such change is
    announced at least five days prior to the scheduled beginning of
    the first Offering Period to be affected thereafter; provided,
    however, that no Offering Period shall expire later than the
    date on which this Plan expires or is terminated in accordance
    with Section 20 hereof.

 

    5.  Participation.

 

    a. Each Eligible Employee may become a Participant with
    respect to any Offering Period by completing a subscription
    agreement authorizing payroll deductions in a form acceptable to
    the Administrator and filing it with the Company (or its
    designated third-party share plan administrator) 15 business
    days (or a different number of days as may be determined by the
    Administrator, in its sole discretion) prior to the first day of
    such Offering Period. A Participant’s completion of a
    subscription agreement with respect to any Offering Period will
    enroll such Participant in the Plan for each subsequent Offering
    Period on the terms contained therein until the Participant
    either submits a new subscription agreement, withdraws from
    participation under the Plan as provided in Section 10
    hereof, or otherwise becomes ineligible to participate in the
    Plan.

 

    b. Payroll deductions for a Participant shall commence on
    the first payday following the Enrollment Date and shall end on
    the last payday in the Offering Period with respect to which
    such authorization is applicable, unless sooner terminated by
    the Participant as provided in Section 10 hereof.

 

    c. During a Participant’s leave of absence approved by
    his Employer and meeting the requirements of Treasury
    Regulation Section 1.421-7(h)(2),
    such Participant may continue to participate in the Plan by
    making cash payments to the Company on each payday equal to the
    amount of the Participant’s payroll deductions under the
    Plan for the payday immediately preceding the first day of such
    Participant’s leave of absence. If a leave of absence is
    unapproved or fails to meet the requirements of Treasury
    Regulation Section 1.421-7(h)(2),
    the Participant will automatically cease to participate in the
    Plan and may not make any further contributions to the Plan
    hereunder. In such event, the Company will automatically cease
    to deduct the Participant’s payroll under the Plan. The
    Company will pay to the Participant his total payroll deductions
    for the Offering Period, in cash in one lump sum (without
    interest), as soon as practicable after the Participant ceases
    to participate in the Plan.

 

    d. The subscription agreement(s) used in connection with
    the Plan shall be in a form prescribed by the Administrator, and
    the Administrator may, in its sole discretion, determine whether
    such agreement shall be submitted in written or electronic form.

 

    6.  Payroll Deductions.

 

    a.  At the time a Participant files his subscription
    agreement, he shall elect to have payroll deductions made on
    each payday (such amount to be deducted after any applicable
    deduction for tax and other withholding) during the Offering
    Period in an amount from 1% to 10% of the Compensation which he
    receives on each pay day during the Offering Period.

 

    b.  All payroll deductions made for a Participant shall be
    credited to his account under the Plan and shall be withheld in
    whole percentages only. Except as described in Section 5(c)
    hereof, a Participant may not make any additional payments into
    such account.

 

    c.  A Participant may discontinue his participation in the
    Plan as provided in Section 10 hereof, or may increase or
    decrease the rate of his payroll deductions during the Offering
    Period by completing or filing with the Company (or its
    designated third-party share plan administrator) a new
    subscription agreement authorizing a change in payroll deduction
    rate. The Administrator may, in its discretion, limit the number
    of participation rate changes per Participant during any
    Offering Period. The change in rate shall be effective with the
    first full payroll period following five business days (or a
    different number of days as may be determined by the
    Administrator, in its sole discretion) after the Company’s
    (or its designated third-party share plan administrator’s)
    receipt of the new subscription agreement.

 

    d.  Notwithstanding the foregoing, to the extent necessary
    to comply with Section 423(b)(8) of the Code and
    Section 3(b) hereof, a Participant’s payroll
    deductions may be decreased to 0% at any time during an Offering
    Period.

    

    3

 

    e. At the time an option is exercised, in whole or in part,
    or at the time some or all of the Common Shares issued under the
    Plan are disposed of, the Participant must make adequate
    provision for any federal, state or other tax obligations, if
    any, which arise upon the exercise of the option or the
    disposition of the Common Shares. At any time, the Company may,
    but shall not be obligated to, withhold from all of the
    Participant’s compensation the amount necessary for the
    Company to meet applicable withholding obligations, including
    any withholding required to make available to the Company any
    tax deductions or benefits attributable to the sale or early
    disposition of Common Shares by the Employee.

 

    7.  Grant of Option.  On the
    Enrollment Date of each Offering Period, each Participant in
    such Offering Period shall be granted an option to purchase on
    the Exercise Date with respect to such Offering Period (at the
    applicable Purchase Price) up to a number of the Common Shares
    determined by dividing such Participant’s payroll
    deductions accumulated prior to such Exercise Date and retained
    in the Participant’s account as of the Exercise Date by the
    applicable Purchase Price; provided, however, that such
    purchase shall be subject to the limitations set forth in
    Sections 3 and 13 hereof. Exercise of the option shall
    occur as provided in Section 8 hereof, unless the
    Participant has withdrawn from participation pursuant to
    Section 10 hereof or otherwise becomes ineligible to
    participate in the Plan. The option shall expire on the last day
    of the Offering Period.

 

    8.  Exercise of Option.

 

    a. Unless a Participant withdraws from the Plan as provided
    in Section 10 hereof or otherwise becomes ineligible to
    participate in the Plan, such Participant’s option for the
    purchase of Common Shares shall be exercised automatically on
    the Exercise Date, and the maximum number of full Common Shares
    subject to the option shall be purchased for such Participant at
    the applicable Purchase Price with the accumulated payroll
    deductions in his account. No fractional Common Shares shall be
    purchased, and any payroll deductions accumulated in a
    Participant’s account which are not sufficient to purchase
    a full Common Share shall be retained in such Participant’s
    account for the subsequent Offering Period. During a
    Participant’s lifetime, a Participant’s option to
    purchase Common Shares hereunder is exercisable only by him.

 

    b. If the Administrator determines that, on a given
    Exercise Date, the number of Common Shares with respect to which
    options are to be exercised may exceed either (i) the
    number of Common Shares that were available for sale under the
    Plan on the Enrollment Date of the applicable Offering Period
    (notwithstanding any authorization of additional Common Shares
    for issuance under the Plan by the Company’s shareholders
    subsequent to such Enrollment Date); or (ii) the number of
    Common Shares available for sale under the Plan on such Exercise
    Date, the Administrator shall provide that the Company (or its
    designated third-party share plan administrator) shall make a
    pro rata allocation of the Common Shares available for purchase
    on such Enrollment Date or Exercise Date, as applicable, in as
    uniform a manner as shall be practicable and as it shall
    determine in its sole discretion to be equitable among all
    Participants exercising options to purchase Common Shares on
    such Exercise Date, and shall decide, in its sole discretion, to
    either (x) continue all Offering Periods then in effect or
    (y) terminate any or all Offering Periods then in effect
    pursuant to Section 20 hereof. In the event of such a pro
    rata allocation of Common Shares pursuant to this
    Section 8(b), the balance of the amount credited to the
    account of each Participant that has not been applied to the
    purchase of Common Shares shall be paid to each such Participant
    in one lump sum in cash as soon as reasonably practicable after
    the Exercise Date, without any interest thereon.

 

    9.  Deposit of Common
    Shares.  As promptly as practicable after each
    Exercise Date on which a purchase of Common Shares occurs, the
    Company may arrange for the deposit, into each
    Participant’s account with any broker designated by the
    Company to administer this Plan, of the number of Common Shares
    purchased upon exercise of each such Participant’s option.

 

    10.  Withdrawal.

 

    a. At any time prior to the Exercise Date, a Participant,
    by giving written notice to the Company (or its designated
    third-party share plan administrator) in a form acceptable to
    the Administrator, may withdraw all but not less than all of the
    payroll deductions credited to his account and not yet used to
    exercise an option under the Plan. All of the Participant’s
    payroll deductions credited to his account during the Offering
    Period, plus any balance retained in his account from a prior
    Offering Period, if any, shall be paid to such Participant as
    soon as reasonably practicable after receipt of notice of
    withdrawal, and such Participant’s option for the Offering
    Period shall be

    

    4

 

    automatically terminated, and no further payroll deductions for
    the purchase of Common Shares shall be made for such Offering
    Period. If a Participant withdraws from an Offering Period,
    payroll deductions shall not resume at the beginning of any
    subsequent Offering Period unless the Participant delivers to
    the Company (or its designated third-party share plan
    administrator) a new subscription agreement in accordance with
    the terms of Section 5(a) hereof.

 

    b. A Participant’s withdrawal from an Offering Period
    shall not have any effect upon his eligibility to participate in
    any similar plan which may hereafter be adopted by the Company
    or in Offering Periods which commence after the termination of
    the Offering Period from which the Participant withdraws.

 

    11.  Termination of
    Employment.  Upon a Participant’s ceasing
    to be an Eligible Employee, for any reason, such Participant
    shall be deemed to have elected to withdraw from the Plan, and
    the payroll deductions credited to such Participant’s
    account during the Offering Period, plus any balance retained in
    his account from a prior Offering Period, if any, shall be paid
    to him, or in the case of his death, to the person or persons
    entitled thereto under Section 15 hereof, as soon as
    reasonably practicable, and such Participant’s option for
    the Offering Period shall be automatically terminated.

 

    12.  Interest.  No interest
    shall accrue on the payroll deductions or lump sum contributions
    of a Participant in the Plan.

 

    13.  Shares Subject to Plan.

 

    a. Subject to adjustment upon changes in capitalization of
    the Company as provided in Section 19 hereof, a maximum of
    1,000,000 Common Shares shall be made available for sale under
    the Plan. If any option granted under the Plan shall for any
    reason terminate without having been exercised, the Common
    Shares not purchased under such option shall again become
    available for issuance under the Plan. The shares subject to the
    Plan may be unissued shares or reacquired shares bought on the
    market or otherwise.

 

    b. Except as otherwise provided herein, with respect to
    Common Shares subject to an option granted under the Plan, a
    Participant shall not be deemed to be a shareholder of the
    Company, and the Participant shall not have any of the rights or
    privileges of a shareholder, until such Common Shares have been
    issued to the Participant or his nominee following exercise of
    the Participant’s option. No adjustments shall be made for
    dividends (ordinary or extraordinary, whether in cash
    securities, or other property) or distributions or other rights
    for which the record date occurs prior to the date of such
    issuance, except as otherwise expressly provided herein.

 

    14.  Administration.

 

    a. It shall be the duty of the Administrator to conduct the
    general administration of the Plan in accordance with the
    provisions of the Plan. The Administrator shall have the power
    to interpret the Plan and the terms of the options and to adopt
    such rules for the administration, interpretation and
    application of the Plan as are consistent therewith and to
    interpret, amend or revoke any such rules. The Administrator may
    adopt such procedures and sub-plans as are necessary or
    appropriate to permit participation in the Plan by employees who
    are foreign nationals or employed outside the United States. The
    Administrator at its option may utilize the services of an agent
    to assist in the administration of the Plan, including
    establishing and maintaining an individual securities account
    under the Plan for each Participant. In its absolute discretion,
    the Board may at any time and from time to time exercise any and
    all rights and duties of the Administrator under the Plan.

 

    b. The Administrator may delegate to officers or employees
    of the Company or any of its affiliates, or committees thereof,
    the authority, subject to such terms as the Administrator shall
    determine, to perform such functions, including, but not limited
    to, administrative functions, as the Administrator may determine
    appropriate. The Administrator may appoint agents to assist it
    in administering the Plan.

 

    c. The Administrator may employ attorneys, consultants,
    accountants, appraisers, brokers or other persons in connection
    with its administration of the Plan. All expenses and
    liabilities incurred by the Administrator in connection with the
    administration of the Plan shall be borne by the Company. The
    Administrator, the Company, and its officers and directors shall
    be entitled to rely upon the advice, opinions and valuations of
    any such persons. All actions taken and all interpretations and
    determinations made by the Administrator in good faith shall be
    final and binding upon all Participants, the Company and all
    other interested persons. No member of the Administrator or
    person to whom the powers of administration have been delegated
    hereunder, shall be personally liable for any

    

    5

 

    action, determination or interpretation made in good faith with
    respect to the Plan or the options, and all members of the
    Administrator, and all persons to whom the powers of
    administration have been delegated, shall be fully protected by
    the Company in respect of any such action, determination or
    interpretation.

 

    15.  Designation of Beneficiary.

 

    a. A Participant may file a written designation of a
    beneficiary who is to receive any Common Shares and cash, if
    any, from such Participant’s account under the Plan in the
    event of such Participant’s death subsequent to an Exercise
    Date on which the option is exercised but prior to delivery to
    such Participant of such Common Shares and cash. In addition, a
    Participant may file a written designation of a beneficiary who
    is to receive any cash from the Participant’s account under
    the Plan in the event of such Participant’s death prior to
    exercise of the option. To the extent required under applicable
    law, spousal consent shall be required for such designation to
    be effective if the Participant is married and the designated
    beneficiary is not the Participant’s spouse.

 

    b. Such beneficiary designation may be changed by the
    Participant at any time by written notice to the Company. In the
    event of the death of a Participant and in the absence of a
    beneficiary validly designated under the Plan who is living at
    the time of such Participant’s death, the Company shall
    deliver such Common Shares
    and/or cash
    to the executor or administrator of the estate of the
    Participant, or if no such executor or administrator has been
    appointed (to the knowledge of the Company), the Company, in its
    discretion, may deliver such Common Shares
    and/or cash
    to the spouse or to any one or more dependents or relatives of
    the Participant, or if no spouse, dependent or relative is known
    to the Company, then to such other person as the Company may
    designate.

 

    16.  Transferability.  Neither
    payroll deductions credited to a Participant’s account nor
    any rights with regard to the exercise of an option or to
    receive Common Shares under the Plan may be assigned,
    transferred, pledged or otherwise disposed of in any way by the
    Participant (other than by will, the laws of descent and
    distribution, or as provided in Section 15 hereof). Any
    such attempt at assignment, transfer, pledge or other
    disposition shall be without effect, except that the Company may
    treat such act as an election to withdraw funds from an Offering
    Period in accordance with Section 10 hereof.

 

    17.  Use of Funds.  All
    payroll deductions received or held by the Company under the
    Plan may be used by the Company for any corporate purpose, and
    the Company shall not be obligated to segregate such payroll
    deductions.

 

    18.  Reports.  Individual
    accounts shall be maintained for each Participant in the Plan.
    Statements of account shall be given to Participants following
    each Offering Period, which statements shall set forth the
    amounts of payroll deductions, the Purchase Price, the number of
    Common Shares purchased, and the remaining cash balance, if any.

 

    19.  Adjustments Upon Changes in Capitalization,
    Merger, Amalgamation, Asset Sale, Dissolution or
    Liquidation.

 

    a. Changes in Capitalization.  The
    number of Common Shares which have been authorized for issuance
    under the Plan but not yet placed under option, the maximum
    number of Common Shares each Participant may purchase in each
    Offering Period (pursuant to Section 7 hereof), as well as
    the price per Common Share and the number of Common Shares
    covered by each option under the Plan which has not yet been
    exercised shall be proportionately adjusted for any increase or
    decrease in the number of issued Common Shares resulting from a
    stock split, reverse stock split, stock dividend, combination or
    reclassification of the Common Shares, or any other increase or
    decrease in the number of Common Shares effected without receipt
    of consideration by the Company; provided, however, that
    conversion of any convertible securities of the Company shall
    not be deemed to have been “effected without receipt of
    consideration.” Such adjustment shall be made by the
    Administrator, whose determination in that respect shall be
    final, binding and conclusive on all Participants and the
    Company. Except as expressly provided herein, no issuance by the
    Company of shares of any class, or securities convertible into
    shares of any class, shall affect, and no adjustment by reason
    thereof shall be made with respect to, the number or price of
    Common Shares subject to an option.

 

    b. Merger, Amalgamation, Asset Sale, Dissolution or
    Liquidation.  In the event of a proposed
    merger or amalgamation of the Company with or into another
    corporation or a proposed sale of all or substantially all of
    the

    

    6

 

    assets of the Company, each outstanding option shall be assumed
    or an equivalent option substituted by the successor corporation
    or a parent or subsidiary of the successor corporation. In the
    event that the successor corporation or a parent or subsidiary
    of the successor corporation refuses to assume or substitute for
    the option, or in the event of the proposed dissolution or
    liquidation of the Company, the Offering Period then in progress
    shall be shortened by the Administrator by setting a new
    Exercise Date (the “New Exercise Date”), which
    shall occur no later than immediately prior to the effective
    date of such proposed merger, amalgamation, sale, dissolution or
    liquidation, as applicable. The Company shall notify each
    Participant in writing, at least ten business days prior to the
    New Exercise Date, that the Exercise Date for the
    Participant’s option has been changed to the New Exercise
    Date and that the Participant’s option shall be exercised
    automatically on the New Exercise Date, unless prior to such New
    Exercise Date the Participant has withdrawn from the Offering
    Period as provided in Section 10 hereof.

 

    20.  Amendment or Termination.

 

    a. The Board may at any time and for any reason terminate
    or amend the Plan. Except as provided in Section 19 hereof,
    no such termination shall affect options previously granted,
    provided that an Offering Period may be terminated by the Board
    if the Board determines that the termination of the Offering
    Period or the Plan is in the best interests of the Company and
    its shareholders. Except as provided in Section 19 hereof
    and this Section 20, no amendment may make any change in
    any option theretofore granted which adversely affects the
    rights of any Participant without the consent of such
    Participant. To the extent necessary to comply with
    Section 423 of the Code (or any successor rule or provision
    or any other applicable law, regulation or stock exchange rule),
    the Company shall obtain shareholder approval of any amendment
    in such a manner and to such a degree as required.

 

    b. Without shareholder consent and without regard to
    whether any Participant’s rights may be considered to have
    been “adversely affected,” the Administrator shall be
    entitled to change the Offering Periods, limit the frequency
    and/or
    number of changes in the amount withheld during an Offering
    Period, establish the exchange ratio applicable to amounts
    withheld in a currency other than U.S. dollars, permit
    payroll withholding in excess of the amount designated by a
    Participant in order to adjust for delays or mistakes in the
    Company’s processing of properly completed withholding
    elections, establish reasonable waiting and adjustment periods
    and/or
    accounting and crediting procedures to ensure that amounts
    applied toward the purchase of Common Shares for each
    Participant properly correspond with amounts withheld from the
    Participant’s Compensation, and establish such other
    limitations or procedures as the Administrator determines in its
    sole discretion advisable which are consistent with the Plan.

 

    c. In the event the Board determines that the ongoing
    operation of the Plan may result in unfavorable financial
    accounting consequences, the Board may, in its discretion and,
    to the extent necessary or desirable, modify or amend the Plan
    to reduce or eliminate such financial accounting consequences,
    including, but not limited to:

 

    (i) altering the Purchase Price for any Offering Period
    including an Offering Period underway at the time of the change
    in Purchase Price;

 

    (ii) shortening any Offering Period so that the Offering
    Period ends on a new Exercise Date, including an Offering Period
    underway at the time of the Administrator action; and

 

    (iii) allocating shares.

 

    Such modifications or amendments shall not require shareholder
    approval or the consent of any Participants.

 

    21.  Notices.  All notices or
    other communications by a Participant to the Company under or in
    connection with the Plan shall be deemed to have been duly given
    when received in the form specified by the Company at the
    location, or by the person, designated by the Company for the
    receipt thereof.

 

    22.  Conditions to Issuance of Shares.

 

    a. The Company shall not be required to issue or deliver to
    a Participant any certificate or certificates for shares
    purchased upon the exercise of options prior to fulfillment of
    all the following conditions:

 

    (i) The admission of such shares to listing on all stock
    exchanges, if any, on which the Common Shares are then listed;

    

    7

 

    (ii) The obtaining of any approval or other clearance from
    any state or federal governmental agency which the Administrator
    shall, in its absolute discretion, determine to be necessary or
    advisable;

 

    (iii) Such Participant’s payment to the Company of all
    amounts which it is required to withhold under federal, state or
    local law upon exercise of the option; and

 

    (iv) The lapse of such reasonable period of time following
    the exercise of the option as the Administrator may from time to
    time establish for reasons of administrative convenience.

 

    b. The obligation of the Company to make a payment of
    Common Shares or otherwise shall be subject to all applicable
    laws, rules and regulations, and to such approvals by
    governmental agencies as may be required. Notwithstanding any
    terms or conditions of any option to the contrary, the Company
    shall be under no obligation to offer to sell or to sell and
    shall be prohibited from offering to sell or selling any Common
    Shares pursuant to an option unless such Common Shares have been
    properly registered for sale with the Securities and Exchange
    Commission pursuant to the Securities Act of 1933 or unless the
    Company has received an opinion of counsel, satisfactory to the
    Company, that such Common Shares may be offered or sold without
    such registration pursuant to an available exemption therefrom
    and the terms and conditions of such exemption have been fully
    complied with. The Company shall be under no obligation to
    register for sale or resale under the Securities Act of 1933 any
    of the Common Shares to be offered or sold under the Plan or any
    Common Shares issued upon exercise or settlement of options. If
    the Common Shares offered for sale or sold under the Plan are
    offered or sold pursuant to an exemption from registration under
    the Securities Act of 1933, the Company may restrict the
    transfer of such Common Shares and may legend the share
    certificates representing such Common Shares in such manner as
    it deems advisable to ensure the availability of any such
    exemption.

 

    23.  Term of Plan.  The Plan
    shall become effective as of the Effective Date. The Plan shall
    be deemed to be approved by the Company’s shareholders if
    it receives the affirmative vote of the Company’s
    shareholders in accordance with the Bye-laws of the Company.
    Subject to approval by the shareholders of the Company in
    accordance with this Section 23, the Plan shall be in
    effect until the 10th anniversary of the date of the
    initial adoption of the Plan by the Board, unless sooner
    terminated under Section 20 hereof. In the event the
    Company’s shareholders do not approve this Plan pursuant to
    this Section 23, neither this Plan nor any elections made
    hereunder shall be of any force or effect, any outstanding
    option shall be cancelled for no consideration, and all amounts
    deducted from each Participant’s paycheck shall be repaid
    to such Participant as soon as practicable without interest.

 

    24.  Equal Rights and
    Privileges.  All Eligible Employees of the
    Company (or of any Subsidiary) will have equal rights and
    privileges under this Plan so that this Plan qualifies as an
    “employee stock purchase plan” within the meaning of
    Section 423 of the Code. Any provision of this Plan that is
    inconsistent with this requirement to provide equal rights and
    privileges will, without further act or amendment by the
    Company, the Board or the Administrator, be reformed to comply
    with the equal rights and privileges requirement of
    Section 423 of the Code.

 

    25.  Section 409A.  The
    options to purchase Common Shares under the Plan are not
    intended to constitute “nonqualified deferred
    compensation” within the meaning of Section 409A of
    the Code. However, if at any time the Administrator determines
    that the options may be subject to Section 409A of the
    Code, the Administrator shall have the right, in its sole
    discretion, to amend the Plan and any outstanding options as it
    may determine is necessary or desirable either to exempt the
    options from the application of Section 409A of the Code or
    to cause the options to comply with the requirements of
    Section 409A of the Code.

 

    26.  No Employment
    Rights.  Nothing in the Plan shall be
    construed to give any person (including any Eligible Employee or
    Participant) the right to remain in the employ of the Company, a
    Parent or a Subsidiary, or to affect the right of the Company,
    any Parent or any Subsidiary to terminate the employment of any
    person (including any Eligible Employee or Participant) at any
    time, with or without cause.

 

    27.  Notice of Disposition of Shares; Transfer
    Restrictions.  If required by the Company,
    each Participant shall give prompt notice to the Company (at its
    local Human Resources office), or cause a designated third-party
    share administrator to give prompt notice to the Company, of any
    disposition or other transfer of any Common Shares purchased
    upon exercise of an option hereunder if such disposition or
    transfer is made either (a) within two years from the
    Enrollment Date of the Offering Period in which the Common
    Shares were purchased or (b) within

    

    8

 

    one year after the Exercise Date on which such Common Shares
    were purchased. Such notice shall specify the date of such
    disposition or other transfer and the amount realized, in cash,
    other property, assumption of indebtedness, or other
    consideration, by the Participant in such disposition or other
    transfer. Notwithstanding anything herein to the contrary, no
    Participant shall be permitted to dispose of or transfer any
    Common Shares purchased pursuant to an option hereunder prior to
    the date that is 12 months following the date upon which
    such Common Shares were so purchased. The Administrator may
    provide, in its sole discretion, that the Common Shares
    purchased pursuant to an option hereunder shall be held in book
    entry form, rather than delivered to the Participant, through
    the expiration of such
    12-month
    period. If certificates representing the Common Shares are
    registered in the name of the Participant, the Administrator may
    require that such certificates bear an appropriate legend
    referring to the terms, conditions and restrictions applicable
    to such Common Shares and that the Company retain physical
    possession of the certificates.

 

    28.  Governing Law.  Subject
    to any applicable provisions of United States federal law
    (including, without limitation, Section 423(b) of the
    Code), the validity and enforceability of this Plan shall be
    governed by and construed in accordance with the laws of the
    State of New York, without regard to otherwise governing
    principles of conflicts of law.

    

    9EX-10.2

 

Exhibit 10.2

AMENDMENT NO. 1 TO

AMENDED AND RESTATED

LIMITED LIABILITY COMPANY AGREEMENT

OF

MORGANS GROUP LLC

     THIS AMENDMENT NO. 1 TO THE AMENDED AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT OF
MORGANS GROUP LLC (this “Amendment”), dated as of April 4, 2008, is entered into by Morgans
Hotel Group Co., a Delaware corporation, as managing member (the “Managing Member”) of
Morgans Group LLC (the “Company”).

     WHEREAS, the Company was formed by the filing of a certificate of formation with the Secretary
of State of the State of Delaware on October 25, 2005 by an authorized person of the Company;

     WHEREAS, on October 25, 2005, Morgans Hotel Group LLC, a Delaware limited liability company,
as the sole initial member of the Company, entered into the initial Limited Liability Company
Agreement of the Company (the “Original Operating Agreement”);

     WHEREAS, the Original Operating Agreement was amended and restated as of February 17, 2006, by
an Amended and Restated Limited Liability Company Agreement of Morgans Group LLC, entered into by
and among the Managing Member and the Persons named as Non-Managing Members on the signature pages
thereto (the “A&R LLC Agreement”); and

     WHEREAS, Section 14.1(b)(4) of the A&R LLC Agreement authorizes the Managing Member to amend
the A&R LLC Agreement;

     WHEREAS, pursuant to the authority granted to the Managing Member under Section 14.1(b)(4) of
the A&R LLC Agreement, the Managing Member desires to amend Section 11.5 of the A&R LLC Agreement
to provide that Assignees of Membership Units shall have the Redemption Right afforded under
Section 4.2(e) of the A&R LLC Agreement.

     NOW, THEREFORE, in consideration of the premises and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the Managing Member
hereby amends the A&R LLC Agreement, as follows:

     1. Amendment to Section 11.5. The second sentence of Section 11.5 of the A&R LLC
Agreement is hereby amended to read in its entirety as follows:

  “An Assignee shall be entitled to all the rights of an assignee of a Non-Managing
Membership Interest under the Act, including the right to receive distributions from the
Company and the share of Net Income, Net Losses, gain, loss and Recapture Income
attributable to the Company Units assigned to such transferee, and shall be entitled to
exercise the Redemption Right on the same terms and conditions as a Non-Managing Member
could exercise such right under Section 4.2(e), but shall not be
deemed to be a holder of Membership Units for any other purpose under
this Agreement, and shall not be entitled to vote such Membership Units in any matter presented to the
Non-Managing Members for a vote (such Membership Units being deemed to have been voted
on such matter in the same proportion as all Membership Units held by Non-Managing
Members are voted).”

 

 

     2. Certain Capitalized Terms. All capitalized terms used in this Amendment and not
otherwise defined shall have the meanings assigned in the A&R LLC Agreement.

     3. Severability. If any term or other provision of this Amendment is held by a court
of competent jurisdiction or other authority to be invalid, void or unenforceable, the remainder of
the terms and provisions of this Amendment shall remain in full force and effect and shall in no
way be effectively impaired or invalidated.

     4. Full Force and Effect. Except as expressly amended hereby, the A&R LLC Agreement
shall remain in full force and effect.

[SIGNATURES APPEAR ON FOLLOWING PAGE]

2

 

     IN WITNESS WHEREOF, the undersigned has executed this Amendment No. 1 as of the date first set
forth above.

	 	 	 	 	 
	 	MORGANS HOTEL GROUP CO., as Managing Member of Morgans Group LLC

 	 
	 	By:  	                        /s/ RICHARD SZYMANSKI
 	 
	 	 	Name:  	Richard Szymanski 	 
	 	 	Title:  	Chief Financial Officer and Secretary 	 

 

 

	 	 	 	 	 

CONSENT

     The undersigned, in its capacity as a Non-Managing Member of Morgans Group LLC, hereby
consents to the foregoing Amendment No. 1 to the Amended and Restating Limited Liability Company
Agreement of Morgans Group LLC.

	 	 	 	 	 
	 	RESIDUAL HOTEL INTEREST LLC, a Delaware limited liability company

 	 
	 	By:  	                                           /s/ STEVEN B. KAUFF
 	 
	 	 	Name:  	Steven B. Kauff 	 
	 	 	Title:  	Treasurer and Assistant Secretary

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