AMTRUST FINANCIAL SERVICES, INC. - Corporate Solutions

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Table of Contents 2015, provided that Mr. Zyskind remains employed with or in service of the Company through each of these dates, respectively. The Compensation Committee believes this will create additional retention incentives for Mr. Zyskind. If Mr. Zyskind’s service terminates prior to the settlement date by reason of death, disability, by us without cause, or by Mr. Zyskind for good reason, then on the settlement date, Mr. Zyskind will receive the restricted stock that he would have received if he had remained in service on the settlement date, based on the actual level of achievement of the performance metric, and 50% of such shares of restricted stock will vest, while any remaining unvested restricted stock will be forfeited. The Compensation Committee believes that the award of Performance Shares creates an important additional incentive for Mr. Zyskind to continue to create shareholder value in the long run, without creating additional compensation-based risk, and that the award promotes retention of Mr. Zyskind. The Compensation Committee also believes that using a two-year performance period helps to diversify our current compensation scheme where the large majority of Mr. Zyskind’s compensation is based on single year results. Amendments to 2010 Omnibus Incentive Plan Although the Plan permitted the Compensation Committee to make cash-denominated performance awards of up to $6 million, it did not allow the Compensation Committee to make a performance award denominated in shares in excess of the restricted stock award made in February 2012. For this reason, we asked our shareholders to approve amendments to the Plan at our 2012 Annual Meeting of Shareholders. The amendments, as approved by our shareholders, allow us to achieve the objectives of our compensation strategy, as well as significant tax benefits. Stock and Stock-Based Grants Stock-based awards are a critical component of our executive compensation policy as equity ownership helps closely align our named executive officers’ interests to those of our shareholders. We established the Plan to award our employees and named executive officers with proprietary interests in the Company and to provide an additional incentive to promote our success and to remain in our service. The Plan authorizes us to grant incentive stock options, non-qualified stock options, performance shares, restricted stock and restricted stock unit awards to our employees, officers, directors and consultants. All of our full-time employees are eligible to participate in the Plan at the discretion of our Compensation Committee, which oversees the administration of the Plan. Restricted Stock. The Compensation Committee has made, and may in the future elect to make, grants of restricted stock to our named executive officers. Under the Plan, unless otherwise determined by the Board of Directors and provided in the award agreement, 25% of the restricted stock vests on the each of the first four anniversaries of the grant date, based on continued employment. In addition, unvested restricted stock has both dividend and voting rights. As discussed above under “2012 Equity Award to CEO,” on February 15, 2012, the Compensation Committee granted 275,000 shares of restricted stock to Mr. Zyskind as a special, discretionary bonus. Restricted Stock Units. The Compensation Committee has made, and may in the future elect to make, grants of restricted stock units to our named executive officers. Under the Plan, unless otherwise determined by the Board of Directors and provided in the award agreement, 25% of the restricted stock units vest on each of the first four anniversaries of the grant date, based upon continued employment. As discussed above under “Bonus,” on March 5, 2013, the Compensation Committee granted 20,532 restricted stock units to Mr. Caviet, 17,272 restricted stock units to Mr. Saxon, 16,312 restricted stock units to Mr. Pipoly, and 15,832 restricted stock units to Mr. Longo, which in each case represents one-third of each officer’s annual profit bonus and discretionary bonus for 2012. Retirement Plan. We do not provide a qualified or non-qualified pension plan for our named executive officers. All of our U.S.-based employees who have been employed for at least six months, however, are eligible 25
Table of Contents to participate in a defined contribution plan under Section 401(k) of the Internal Revenue Code. The plan allows eligible employees to defer up to 75% of their compensation to the plan on a pre-tax basis, subject to the applicable dollar limit set by the Internal Revenue Service. We make a Company contribution of up to 50% of an employee’s contribution to the plan, up to 6% of eligible compensation. We may also make discretionary profit sharing contributions to all participants in the Plan. No discretionary profit sharing contributions were made in 2012. Change of Control and Severance Arrangements. The employment agreements in effect for each of our named executive officers do not contain change of control provisions, nor do we maintain change of control agreements with any of our named executive officers. However, our form of award agreements for stock options, restricted stock, restricted stock units and performance shares allow the Compensation Committee, in its discretion, to accelerate the vesting of unvested awards upon a change of control. Mr. Zyskind’s and Mr. Caviet’s employment agreements, which are discussed in more detail below, provide certain severance benefits should they be terminated without cause and, with respect to Mr. Zyskind, should he terminate his employment agreement for good reason. Mr. Caviet’s severance benefits are tied to non-solicitation provisions. We do not provide any other severance benefits. Perquisites and Other Benefits. As a general matter, we limit the use of perquisites in compensating our senior management. We do, however, cover the full cost of health insurance premiums for Mr. Zyskind and his family and Mr. Caviet, and provide Mr. Caviet with individual life insurance and permanent health insurance coverage should he become disabled. We also reimburse Mr. Zyskind and Mr. Caviet for use of an automobile and related expenses. The amount of Mr. Zyskind’s and Mr. Caviet’s health and automobile benefits are shown below in the “Summary Compensation Table for Fiscal Year 2012.” We also maintain a number of health and welfare programs to provide life, health and disability benefits to our employees. Other than with respect to the benefits we provide to Mr. Zyskind discussed above, our named executive officers in the U.S. participate in these plans on the same terms as other U.S. employees. In addition to the benefits discussed above, Mr. Caviet participates in the employee benefits offered for employees of our U.K. affiliates. Other Compensation. The employment agreements entered into with our named executive officers will remain in their current form until such time as the Board of Directors determines, in its discretion, that revisions are appropriate. In addition, we intend to continue to maintain our current benefits and perquisites for our named executive officers; however, the Board of Directors, in its discretion, may modify, amend or add to a named executive officer’s executive benefits or perquisites. Tax Deductibility of Executive Compensation Limitations on deductibility of compensation may occur under Section 162(m) of the Internal Revenue Code, which generally limits to $1 million the tax deductibility of compensation paid by a public company to its chief executive officer and to any of the other four most highly compensated executive officers. Section 162(m) provides an exception to this deduction limit for performance-based compensation that meets certain requirements. Two types of compensation can qualify as performance-based compensation under Section 162(m): (i) annual bonuses and other incentive awards, if they are payable or vest based on achievement of objective performance goals under a plan that meets the Section 162(m) requirements, and (ii) stock options and stock appreciation rights, if they are granted under a shareholder approved plan that meets certain criteria. To the extent our compensation policy can be implemented in a manner that maximizes the deductibility of compensation we pay, the Compensation Committee seeks to do so, subject to the contractual obligations to executives in particular cases. However, the Compensation Committee reserves the right to provide compensation that would not qualify as performance-based if, in its sole discretion, doing so advances our business objectives. 26
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Page 3 and 4: Table of Contents NOTICE OF ANNUAL
Page 5 and 6: Table of Contents AMTRUST FINANCIAL
Page 7 and 8: Table of Contents determining the a
Page 9 and 10: Table of Contents Abraham Gulkowitz
Page 11 and 12: Table of Contents CORPORATE GOVERNA
Page 13 and 14: Table of Contents Our Compensation
Page 15 and 16: Table of Contents Code of Business
Page 17 and 18: Table of Contents SECURITY OWNERSHI
Page 19 and 20: Table of Contents PROPOSAL 2: RATIF
Page 21 and 22: Table of Contents REPORT OF THE AUD
Page 23 and 24: Table of Contents the earnings per
Page 25 and 26: Table of Contents Harry C. Schlacht
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Page 42 and 43: Table of Contents Outstanding Equit
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Page 46 and 47: Table of Contents CERTAIN RELATIONS
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Page 54 and 55: Table of Contents APPENDIX A The te
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