41583354 validus complaint

8/6/2019 41583354 Validus Complaint

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IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE

VALIDUS HOLDINGS, LTD.,

Plaintiff,

v.

TRANSATLANTIC HOLDINGS, INC.,STEPHEN P. BRADLEY, IAN H.CHIPPENDALE, JOHN G. FOOS, JOHN L.MCCARTHY, ROBERT F. ORLICH,RICHARD S. PRESS, MICHAEL C.SAPNAR, ALLIED WORLD ASSURANCECOMPANY HOLDINGS, AG and

GO SUB, LLC,

Defendants.

::

:::::::::::

:::

C.A. No. _____-___

VERIFIED COMPLAINT FOR DECLARATORY AND INJUNCTIVE RELIEF

Plaintiff Validus Holdings, Ltd. (Validus), by and through its

undersigned attorneys, as and for its complaint against Transatlantic Holdings, Inc.

(Transatlantic), Stephen P. Bradley, Ian H. Chippendale, John G. Foos, John L.

McCarthy, Robert F. Orlich, Richard S. Press, Michael C. Sapnar, Allied World

Assurance Company Holdings, AG (Allied World), and GO Sub, LLC (Merger Sub)

(defendants other than Transatlantic, Allied World and Merger Sub are collectively

referred to herein as the Individual Defendants), upon knowledge as to matters relating

to itself and upon information and belief as to all other matters, alleges as follows:


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NATURE OF THE ACTION

1. This is an action for declaratory, injunctive, and other relief to prevent the

Individual Defendants who comprise the board of directors of Transatlantic (the

Transatlantic Board) from continuing to breach their fiduciary duties to the detriment

of Transatlantic and its stockholders. Aided and abetted by Allied World, the Individual

Defendants are pursuing an ill-conceived scheme to consummate the proposed

acquisition of Transatlantic by Allied World (the Proposed Allied World Takeover)

pursuant to an Agreement and Plan of Merger by and among Transatlantic, Allied World

and Merger Sub (the Merger Agreement) and are thwarting the ability of the

Transatlantic stockholders to take advantage of the proposed cash and stock offer of

Validus.

2. On June 12, 2011, with no prior effort to explore alternatives, the

Individual Defendants caused Transatlantic to enter into the Merger Agreement. Since

then, in flagrant breach of their fiduciary duties, the Individual Defendants have rejected

the offer from Validus, a Bermuda exempted company offering a broad spectrum of

reinsurance and insurance products, refused to change their recommendation to

Transatlantic stockholders, refused to enter into discussions with Validus and adopted a

poison pill and amended Transatlantics by-laws in an apparent effort to more easily

manipulate Transatlantic stockholder meetings. The offer from Validus has had a greater

market value than the Proposed Allied World Takeover since its public announcement by

Validus.


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3. On July 12, 2011, Validus delivered to Transatlantic a proposal letter for,

and publicly announced, a merger transaction that would deliver to the Transatlantic

stockholders a price as of the announcement of the offer of $55.95 per share, consisting

of 1.5564 Validus voting common shares in the merger and $8.00 in cash per share

pursuant to a one-time special dividend from Transatlantic immediately prior to closing

of the merger (the Validus Merger Offer).

4. On July 19, 2011, the Individual Defendants rejected the Validus Merger

Offer. Although the Validus Merger Offer represented a $6.04 or 12.1% premium, as of

July 12, 2011 (and a $2.82 or 5.8% premium, as of July 19, 2011), over the market value

of the Proposed Allied World Takeover, the Individual Defendants claimed it does not

constitute a superior proposal.

5. However, also on July 19, 2011, the Individual Defendants determined

that the Validus proposal is reasonably likely to lead to a Superior Proposal [as defined

under the Merger Agreement] and that the failure to enter into discussions regarding the

Validus proposal would result in a breach of [their] fiduciary duties under applicable

law. As a result, the Board has determined to offer to engage in discussions and

exchange information with Validus. (emphasis added)

6. Despite admitting that entering into discussions with Validus would likely

lead to a superior deal for the Transatlantic stockholders, and that a failure to do so would

be a breach of their fiduciary duties, the Individual Defendants are still arbitrarily

refusing to enter into discussions with Validus.


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7. As a pretext for this refusal, Transatlantic and the Individual Defendants

have asserted that the Merger Agreement requires Validus to enter into a confidentiality

agreement with a two-year standstill provision before they may even discuss a potential

transaction with Validus. While the Merger Agreement may require Transatlantic to

enter into a confidentiality agreement with Validus, it does not require Transatlantic and

the Individual Defendants to insist that Validus (or any other third party) enter into a

standstillagreement, let alone enforce a standstill against Validus (or any other third

party). In fact, Section 5.5(e) of the Merger Agreement clearly provides that the terms of

any confidentiality agreement with a third party must simply be determined in good

faith by [the Transatlantic Board] to be substantially similar to and not less favorable to

[Transatlantic], in the aggregate, than those contained in the Allied World

confidentiality agreement (emphasis added). Moreover, it is clear that the Transatlantic

Board is able to make such a determination based on the fact that Allied World is

currently not bound by an effective standstill provision. Validus remains ready and

willing to enter into a confidentiality agreement without a standstill. Not surprisingly,

however, Validus has refused to sign a standstill agreement that would preclude it from

taking its offer directly to Transatlantic stockholders or opposing the Proposed Allied

World Takeover.

8. In light of the Individual Defendants wrongful refusal to enter into

discussions with Validus, on July 25, 2011, Validus commenced a non-coercive, non-

discriminatory, cash and stock exchange offer for all of the outstanding shares of

Transatlantic common stock (the Validus Exchange Offer and, together with the


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Validus Merger Offer, the Validus Offer) on terms consistent with the Validus Merger

Offer.

9. The Individual Defendants' immediate reaction to the Validus Exchange

Offer was, once again, to seek to block the Transatlantic stockholders from considering

the Validus Offer. On July 26, 2011, the Individual Defendants (i) caused Transatlantic

to put in place a poison pill shareholder rights plan (the Poison Pill) that will

effectively block Validus ability to complete the Validus Exchange Offer unless and

until the Individual Defendants agree to exempt Validus exchange offer from the Poison

Pill and (ii) amended Transatlantics by-laws in an apparent effort to more easily

manipulate Transatlantic stockholder meetings.

10. Moreover, in an attempt to convince the Transatlantic stockholders that

the superior Validus Offer be spurned in favor of the objectively inferior Proposed Allied

World Takeover, the Individual Defendants have breached on multiple occasions their

duty of candor by making numerous material misrepresentations and omissions regarding

the Validus Offer and the Proposed Allied World Takeover.

11. Among other things, Transatlantic and the Individual Defendants have

stated in multiple filings with the Securities and Exchange Commission (the SEC) that

the reason the Individual Defendants are refusing to enter into discussions with Validus is

that Validus has refused to enter into a confidentiality agreement. This assertion is highly

misleading. In truth, Validus and its advisors have communicated to Transatlantic and its

advisors on multiple occasions that Validus is ready and willing to enter into a standard


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confidentiality agreement so long as it does not preclude Validus from taking its offer

directly to Transatlantic stockholders or opposing the Proposed Allied World Takeover.

12. Individual Defendants have consistently misrepresented the restrictive

nature of the proposed confidentiality agreement, which would grant the Transatlantic

Board a veto right over Validus ability to even present a proposal to Transatlantics

stockholders. Individual Defendants further misrepresented that a restrictive standstill

agreement is required by the Merger Agreement, only belatedly disclosed that the

confidentiality agreement not accepted by Validus contained a standstill agreement, and

failed to disclose that the standstill agreement was interposed to block Validus from

being able to compete fairly for Transatlantic.

13. Individual Defendants have also made material misrepresentations to the

effect that Allied World is bound by a standstill agreement and have failed to disclose

that any standstill that existed between Transatlantic and Allied World was expressly or

effectively waived when Allied World was permitted to enter into the Merger Agreement,

to solicit Transatlantic stockholders in connection with the Proposed Allied World

Takeover, and to take other actions in connection with the Proposed Allied World

Takeover.

14. Moreover, Individual Defendants have failed to disclose that a standstill

agreement would be entirely superfluous in light of the Individual Defendants adoption

of the Poison Pill, which effectively achieves the same result of blocking the

Transatlantic stockholders from considering any offer not blessed by the Individual


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Defendants. Further, Individual Defendants have failed to fully disclose that

Transatlantic is permitting Allied World to dictate the confidentiality agreement

negotiations process, and thus outsourcing to Allied World the Transatlantic Boards

fiduciary duties to Transatlantic stockholders.

15. Finally, Individual Defendants have misrepresented the character of their

meetings with Validus and its advisors regarding a confidentiality agreement by implying

that Transatlantic is actively seeking to enter into a confidentiality agreement, and thus

discussions, with Validus. Transatlantics misstatements are all the more troublesome

because, in its August 9, 2011 amendment to its Solicitation/Recommendation Statement

on Schedule 14D-9 (the Schedule 14D-9 Amendment), Transatlantic seeks to justify

multiple unfounded negative assertions regarding the Validus Offer based on the fact that

Transatlantic has been unable (of its own doing) to engage in diligence regarding

Validus operations.

16. Transatlantics July 28, 2011 Solicitation/Recommendation Statement on

Schedule 14D-9 (the Schedule 14D-9) demonstrates that Allied World is aiding and

abetting the Individual Defendants breaches of fiduciary duty. In particular, the

Schedule 14D-9 discloses that, on July 25, 2011, Allied World, through its outside legal

advisor, informed Transatlantic that Allied World was taking the position that

Transatlantic entering into a confidentiality agreement with Validus that did not contain a

standstill would not comply with the terms of the Merger Agreement, and that Allied


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World reserved all of its rights i.e., threatened to sue if Transatlantic proceeded to

enter into discussions with Validus.

17. Moreover, in their SEC filings, as set forth in detail below, Defendants

have made a series of additional misleading misrepresentations, including:

Allied Worlds stating in a filing on July 25, 2011 that Allied Worlds bid forTransatlantic was superior in all respects to the Validus Merger Offer andthe best possible combination, when, in fact, the Validus Merger Offerrepresented a 3.7% premium to the consideration proposed by Allied World asof July 22, 2011, and when, in fact, it is difficult to identify any respect inwhich the Allied World bid is, in fact, superior.

Transatlantics failure on multiple occasions, including in the Schedule 14D-9Amendment, to state that the Validus Offer has represented a market valuepremium to the Proposed Allied World Takeover as of the dates referenced byTransatlantic therein.

Allied Worlds and Transatlantics portraying the Proposed Allied WorldTakeover as a merger of equals, when, in fact, Allied Worlds subsidiarywould acquire Transatlantic, Transatlantics non-executive chairman and chiefexecutive officer would cease to serve a role in the combined company(TransAllied), and TransAllied would have its headquarters in Switzerland,

at the current headquarters of Allied World.

Transatlantics characterizing the Validus Exchange Offer as highlyconditional, and thereby falsely implying that the Validus Exchange Offer ismore conditional than the Proposed Allied World Takeover when the level ofconditionality is, in fact, substantially similar.

18. On August 7, 2011, Transatlantic announced that it had received a

proposal from National Indemnity Company (National Indemnity) to acquire all of the

outstanding shares of Transatlantic common stock for $52.00 per share (the National

Indemnity Proposal). On August 8, 2011, Transatlantic announced that the National

Indemnity Proposal does not constitute a Superior Proposal under the terms of the Merger

Agreement, but is reasonably likely to lead to a Superior Proposal, and that the failure to


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enter into discussions regarding the National Indemnity Proposal would result in a breach

of the Transatlantic Boards fiduciary duties under applicable law. Transatlantic has

stated that it must . . . obtain from National Indemnity an executed confidentiality

agreement containing terms that are substantially similar, and not less favorable, to

Transatlantic, in the aggregate, than those contained in the confidentiality agreement

between Transatlantic and Allied World . . . .

19. Validus brings this action for declaratory and injunctive relief (i) to

compel the Individual Defendants to fulfill their fiduciary duties to Transatlantics

stockholders and stop burying their heads in the sand, (ii) to stop their effort to block the

Transatlantic stockholders from considering the Validus Merger Offer and Validus

Exchange Offer, (iii) to clarify that Section 5.5(e) of the Merger Agreement does not

preclude the Transatlantic Board from determining ingood faith that a confidentiality

agreement entered into with Validus (or any other third party) is substantially similar to

and not less favorable to Transatlantic, in the aggregate, than Transatlantics

confidentiality agreement with Allied World, even if such third-party confidentiality

agreement does not contain a standstill, and (iv) to stop Allied World from aiding and

abetting the Individual Defendants breaches of fiduciary duty. Validus seeks, among

other things, declaratory and injunctive relief enjoining Transatlantic and the Individual

Defendants from demanding that Validus agree to subject itself to a standstill, continuing

to refuse to enter into discussions with Validus, misleadingly recommending that

stockholders vote in favor of the inferior Proposed Allied World Takeover, and engaging


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in any action or inaction that has the effect of improperly impeding, thwarting, frustrating

or interfering with the Validus Offer.

THE PARTIES

20. Plaintiff Validus is a Bermuda-based provider of reinsurance and

insurance, with its executive offices located at 29 Richmond Road, Pembroke, Bermuda

HM 08. Validus conducts its operations worldwide through two wholly-owned

subsidiaries, Validus Reinsurance, Ltd. (Validus Re) and Talbot Holdings Ltd.

(Talbot). Validus Re is a Bermuda-based reinsurer focused on short-tail lines of

reinsurance. Talbot is the Bermuda parent of the specialty insurance group primarily

operating within the Lloyds insurance market through Syndicate 1183. Validus owns

200 shares of Transatlantic common stock acquired on July 11, 2011. Validus is the

offeror in the Validus Exchange Offer. Validus common shares publicly trade on the

New York Stock Exchange (NYSE) under the symbol VR and, as of August 3, 2011,

it had 99,032,232 common shares outstanding.

21. Defendant Transatlantic is a Delaware corporation headquartered in New

York. Through its subsidiaries, Transatlantic offers reinsurance capacity for a range of

property and casualty products, directly and through brokers, to reinsurance and

insurance companies, in domestic and international markets. Transatlantic common stock

publicly trades on the NYSE under the symbol TRH and, as of June 30, 2011, it had

62,483,787 shares of common stock outstanding.


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22. Individual Defendant Stephen P. Bradley has been a member of the

Transatlantic Board since 2010. Individual Defendant Bradley is the Chairperson of the

Nominating and Corporate Governance Committee and also serves on the Audit, Finance

and Investment, and Risk Management Committees. Individual Defendant Bradley

receives payments from Transatlantic in the amount of $37,000 as an annual Board

Member Retainer Fee and $5,000 as Chairperson of the Nominating and Corporate

Governance Committee. During 2010, Individual Defendant Bradley received a grant of

2,200 restricted stock units with a grant date fair value of $98,648. Individual Defendant

Bradley will become a member of the board of directors of TransAllied (the TransAllied

Board) following the closing of the Proposed Allied World Takeover. Current members

of the Allied Worlds board of directors receive $75,000 annually for serving as a

director and $1,500 per meeting attended, and are entitled to additional fees for

committee service (the Allied World Director Fees). Based upon information and

belief, Individual Defendant Bradley will receive the Allied World Director Fees as a

member of the TransAllied Board following the closing of the Proposed Allied World

Takeover.

23. Individual Defendant Ian H. Chippendale has been a member of the

Transatlantic Board since 2007. Individual Defendant Chippendale is the Chairperson of

the Compensation Committee and also serves on the Nominating and Corporate

Governance, Risk Management, and Underwriting Committees. Individual Defendant

Chippendale receives payments from Transatlantic in the amount of $37,000 as an annual

Board Member Retainer Fee and $5,000 as Chairperson of the Compensation Committee.


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During 2010, Individual Defendant Chippendale received a grant of 2,200 restricted stock

units with a grant date fair value of $98,648. Individual Defendant Chippendale will

become a member of the TransAllied Board following the closing of the Proposed Allied

World Takeover. Based upon information and belief, Individual Defendant Chippendale

will receive the Allied World Director Fees as a member of the TransAllied Board

following the closing of the Proposed Allied World Takeover.

24. Individual Defendant John G. Foos has been a member of the

Transatlantic Board since 2007. Individual Defendant Foos is the Chairperson of the

Audit Committee and also serves on the Executive, Finance and Investment, Nominating

and Corporate Governance, and Risk Management Committees. Individual Defendant

Foos receives payments from Transatlantic in the amount of $37,000 as an annual Board

Member Retainer Fee and $10,000 as Chairperson of the Audit Committee. During 2010,

Individual Defendant Foos received a grant of 2,200 restricted stock units with a grant

date fair value of $98,648. Individual Defendant Foos will become a member of the

TransAllied Board following the closing of the Proposed Allied World Takeover. Based

upon information and belief, Individual Defendant Foos will receive the Allied World

Director Fees as a member of the TransAllied Board following the closing of the

Proposed Allied World Takeover.

25. Individual Defendant John L. McCarthy has been a member of the

Transatlantic Board since 2008. Individual Defendant McCarthy is the Chairperson of

the Risk Management Committee and also serves on the Compensation, Nominating and


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Corporate Governance, and Underwriting Committees. Individual Defendant McCarthy

receives payments from Transatlantic in the amount of $37,000 as an annual Board

Member Retainer Fee and $5,000 as Chairperson of the Risk Management Committee.

During 2010, Individual Defendant McCarthy received a grant of 2,200 restricted stock

units with a grant date fair value of $98,648. Individual Defendant McCarthy will

become a member of the TransAllied Board following the closing of the Proposed Allied

World Takeover. Based upon information and belief, Individual Defendant McCarthy

will receive the Allied World Director Fees as a member of the TransAllied Board

following the closing of the Proposed Allied World Takeover.

26. Individual Defendant Robert F. Orlich (Orlich) is and was at all relevant

times the President and Chief Executive Officer of Transatlantic. Individual Defendant

Orlich has been a member of the Transatlantic Board since 1994. Individual Defendant

Orlich is also the Chairperson of the Underwriting and Executive Committees and serves

on the Risk Management Committee. Individual Defendant Orlich served as Chairman

of the Transatlantic Board from July 2008 through July 2009. Individual Defendant

Orlich also currently serves as Chairman, President and Chief Executive Officer of

Transatlantic Reinsurance Company (Transatlantic Re) and Putnam Reinsurance

Company (Putnam Re) and has been a director of Transatlantic Re and Putnam Re

since 1992. In 2010, Individual Defendant Orlich received nearly $10 million in total

compensation from Transatlantic.


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27. Individual Defendant Richard S. Press (Press) is Chairman of the

Transatlantic Board, and has been a member of the Transatlantic Board since 2006.

Individual Defendant Press was appointed Chairman of the Transatlantic Board in July

2009. Individual Defendant Press is the Chairperson of the Finance and Investment

Committee and also serves on the Audit, Compensation, Executive, and Nominating and

Corporate Governance Committees. Individual Defendant Press receives payments from

Transatlantic in the amount of $37,000 as an annual Board Member Retainer Fee,

$127,000 as Chairman of the Transatlantic Board, and $5,000 as the Chairperson of the

Finance and Investment Committee. During 2010, Individual Defendant Press received a

grant of 2,200 restricted stock units with a grant date fair value of $98,648. Under the

terms of the Merger Agreement, Individual Defendant Press will become the Chairman of

the TransAllied Board and receive the Allied World Director Fees following the closing

of the Proposed Allied World Takeover.

28. Individual Defendant Michael C. Sapnar (Sapnar) has been Executive

Vice President, Chief Operating Officer, and a member of the Transatlantic Board since

May 2011. Individual Defendant Sapnar also serves on the Risk Management and

Underwriting Committees. Individual Defendant Sapnar has been employed by

Transatlantic since 1995, serving as Executive Vice President and Chief Underwriting

Officer, Domestic Operations of Transatlantic, since 2006 and Senior Vice President and

Chief Underwriting Officer of Transatlantic Re and Putnam Re from 2002 through 2006.

In 2010, Individual Defendant Sapnar received nearly $4 million in total compensation

from Transatlantic. Under the terms of the Merger Agreement, Individual Defendant


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Sapnar will become a member of the TransAllied Board and receive the Allied World

Director Fees and will serve as President and Chief Executive Officer of TransAllieds

Global Reinsurance division following the closing of the Proposed Allied World

Takeover.

29. Defendant Allied World, a Switzerland corporation, operates as a specialty

insurance and reinsurance company in the United States and certain other jurisdictions.

Allied World common stock publicly trades on the NYSE under the symbol AWH and,

as of May 2, 2011, it had 37,919,865 shares of common stock outstanding.

30. Defendant GO Sub, LLC, a Delaware limited liability company and

wholly-owned subsidiary of Allied World, was formed to effectuate the merger between

Transatlantic and Allied World. Where appropriate from the context of the allegations,

Merger Sub and Allied World are sometimes referred to herein collectively as Allied

World.

31. The Individual Defendants, as directors and/or officers of Transatlantic,

have a fiduciary responsibility to Validus and the other public stockholders of

Transatlantic, and owe them the highest obligations of good faith, loyalty, fair dealing, due

care and candor.

32. The Individual Defendants, together with Transatlantic and Allied World,

are referred to herein collectively as Defendants.


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STATEMENT OF FACTS

I. TRANSATLANTICS DIRECTORS HAVE KNOWN FOR YEARS THAT

VALIDUS IS INTERESTED IN A BUSINESS COMBINATION.

33. Validus is a multi-billion-dollar, publicly-traded company specializing in

property and casualty reinsurance and insurance products.

34. Validus regularly considers a variety of strategic transactions to enhance

its business, including through acquisitions of companies, businesses, intellectual

properties and other assets. Validus has been interested in pursuing a business

combination with Transatlantic since September 2008. In September 2008 and March

2009, Validus informed Transatlantic that it was interested in a business combination.

Validus and Transatlantic also discussed a business combination in 2010.

II. THE INDIVIDUAL DEFENDANTS DISMISS VALIDUS JUNE 7TH

WRITTEN INQUIRY WITHOUT ANY INVESTIGATION AND SIGN UP

AN INADEQUATE DEAL DESIGNED TO KEEP THEM EMPLOYED.

35. On June 3, 2011, Edward J. Noonan (Noonan), Chairman and Chief

Executive Officer of Validus, spoke with Orlich about the merits of a strategic merger

between Validus and Transatlantic. On June 7, 2011, Noonan followed up their

conversation by sending a letter to Orlich demonstrating Validus interest in a transaction

with Transatlantic (the June 7th Letter). This letter highlighted some of the reasons

that a Validus and Transatlantic merger would make a terrific complimentary fit and

requested a meeting to discuss what a combined company could look like.

36. Validus has completed similar transactions before. In 2009, Validus

successfully superseded a previous agreement and purchased IPC Holdings Ltd. (IPC)


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while providing IPC stockholders an additional 14% premium. Even when faced with

Validus initial superior proposal, IPCs board would not terminate a previously struck

deal with Max Capital Group Ltd., which provided for the continued employment of

IPCs chairman, independent directors and senior management structure. Only when

faced with court proceedings, a negative RiskMetrics recommendation, and finally, the

failure to obtain the necessary stockholder vote, did IPC finally begin to negotiate with

Validus. Validus did not retain any of IPCs executives or directors. The Individual

Defendants likely knew of these actions at the time they received the June 7th Letter.

37. Transatlantic never responded to the June 7th Letter. In fact, the next

news Validus heard regarding Transatlantics future was via a press release five days

later, announcing the Merger Agreement. Thus, the Individual Defendants had no way of

knowing that Validus intended to keep senior Transatlantic management intact, as

reflected in Validus public statements regarding the Validus Merger Offer. Instead, the

Individual Defendants jumped the gun and signed up the inferior Proposed Allied World

Takeover designed to ensure that they remained entrenched and employed.

38. The Merger Agreement provides that Transatlantic stockholders will

receive 0.88 of a share of Allied World stock for each share of Transatlantic common

stock that they own. Also, each outstanding Transatlantic stock option will be converted

into an option to purchase 0.88 of a share of Allied World stock at an exercise price per

share equal to the quotient of the exercise price of the Transatlantic option divided by

0.88. Even though the proposed consideration in the Proposed Allied World Takeover is


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all stock, it will be a taxable transaction. U.S. federal income tax law generally does not

permit an acquisition of a U.S. corporation by a non-U.S. corporation to be tax-free if the

stockholders of the U.S. corporation receive stock in the acquisition constituting more

than 50% (by vote or value) of the combined company. For that reason, among others,

any gain recognized by a Transatlantic stockholder in the Proposed Allied World

Takeover generally will be taxable for U.S. federal income tax purposes. In contrast, the

Validus Merger Offer is expected to be tax-free to Transatlantic stockholders for U.S.

federal income tax purposes to the extent of the stock component of the consideration

(though it may be taxable to the extent of the proposed dividend).

39. In the Merger Agreement, the Individual Defendants specifically

negotiated to preserve their directorships. Thus, at the close of the Proposed Allied

World Takeover, the TransAllied Board will consist of eleven members, composed of: (i)

four purportedly independent Transatlantic directors selected by Transatlantic; (ii)

Defendant Press (who will serve as non-executive chairman for a one-year term); (iii)

Defendant Sapnar; (iv) four purportedly independent Allied World directors selected by

Allied World; and (v) Scott A. Carmilani (current Chairman, President and Chief

Executive Officer of Allied World). Additionally, Defendant Sapnar will serve as

President and Chief Executive Officer, Global Reinsurance, of TransAllied.

40. Thus, the Merger Agreement provides that six out of seven Individual

Defendants will sit on the TransAllied Board, while one of those six Defendant Sapnar

will also occupy a high-level executive position. In contrast to these personal benefits


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that nearly all of the members of the Transatlantic Board will receive, however,

Transatlantic stockholders will receive consideration in the Proposed Allied World

Takeover that does not fully value Transatlantic.

41. The Individual Defendants lack any real economic interest in

Transatlantic, resulting in the situation where their sole interest in the Proposed Allied

World Takeover is to preserve their lucrative and prestigious roles as directors and

officers in a public company by continuing as members of the TransAllied Board (and, in

the case of Defendant Sapnar, as an executive officer of TransAllied) following

consummation of the Proposed Allied World Takeover. The joint proxy statement /

prospectus of Transatlantic and Allied World filed as part of Allied Worlds Form S-4 on

July 7, 2011 (as amended on August 5, 2011, the Joint Proxy Statement / Prospectus)

discloses that the officers and directors of Transatlantic beneficially own approximately

0.35% of the shares of Transatlantic common stock outstanding on [July 22, 2011].

Moreover, the bulk of this ownership comes from restricted stock grants and options

rather than purchases using personal funds. In short, the Individual Defendants are not

economically aligned with Transatlantic stockholders and were not acting in Transatlantic

stockholders best interests when they approved the Proposed Allied World Takeover.

42. The Proposed Allied World Takeover price represents only 79% of

Transatlantics book value as of June 10, 2011 (and 68% as of August 5, 2011). Indeed,

the Proposed Allied World Takeover price as of June 10, 2011 was so low that, even

before Validus made the Validus Merger Offer public, Barclays Analyst Jay Gelb


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predicted that it could result in a bidding war, with other P&C insurers and reinsurers

competing for [Transatlantic].

43. Indeed, Transatlantics own stockholders have not been shy about voicing

their frustration with the price of the Proposed Allied World Takeover. For example,

Davis Selected Advisers, L.P. (Davis Advisers), a holder of approximately 23.8% of

Transatlantic common stock as of June 13, 2011, has expressed dissatisfaction with the

Proposed Allied World Takeover. In a June 13, 2011 Schedule 13D filing (and again in a

July 6, 2011 Schedule 13D filing), Davis Advisers indicated that it had serious concerns

about and may oppose the Proposed Allied World Takeover; may encourage

Transatlantic management to explore other strategic options to maximize shareholder

value; and may have discussions with [Transatlantic] and/or third parties regarding

opportunities to maximize [Transatlantics] value. . . .

44. Likewise, Tweedy Browne Co. (Tweedy Browne), a holder of more

than 2% of Transatlantics common stock as of March 31, 2011, has also voiced

opposition to the Proposed Allied World Takeover. According to a June 15, 2011,

Bloomberg article, entitled Transatlantic Shareholder Tweedy Browne Opposes $3.2

Billion Allied Merger, Tom Shrager, one of four managing directors at Tweedy Browne,

reasoned as follows: It is really puzzling to us why they would want to sell the company

at a 20 percent discount from book value. . . . Simply doing it for size is not a good

enough reason to sell at this big discount.


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III. THE INDIVIDUAL DEFENDANTS APPROVE DEAL PROTECTION

MEASURES IN THE MERGER AGREEMENT WITHOUT ANY PROPER

BASIS.

45. When the Individual Defendants received the June 7th Letter, they likely

thought that a transaction with Validus meant the end of their directorships and

management positions. So, instead of running a full and fair process to determine the

best deal for Transatlantics stockholders, they quickly took an offer received from

someone willing to continue their lucrative and prestigious roles as directors and officers

in a public company by continuing as members of the TransAllied Board (and, in the case

of Defendant Sapnar, as an executive officer of TransAllied) following consummation of

the Proposed Allied World Takeover.

46. Not only did the Individual Defendants fail to enter into discussions with

Validus, they did not even respond to the June 7th Letter.

47. In their rush to lock in an undervalued deal that preserved their lucrative

board seats and executive officer positions, the Individual Defendants approved several

provisions in the Merger Agreement designed to thwart competing bids.

48. In particular, Section 5.5(e) of the Merger Agreement contains a No-

Talk clause which provides that Transatlantic:

may furnish or cause to be furnished information to, and enter or

cause to be entered into discussions with, and only with, a[competing bidder]. . ., if the [Transatlantic Board] has (i)determined in good faith (after consultation with its outside legalcounsel and financial advisor or advisors) that (A) suchAcquisition Proposal constitutes or is reasonably likely to lead to aSuperior Proposal and (B) the failure to enter into discussions


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regarding the Acquisition Proposal would result in a breach of itsfiduciary duties under applicable Law, (ii) provided at least threeBusiness Days notice to [Allied World] of its intent to furnishinformation to or enter into discussions with such Person in

accordance with this Section 5.5(e), and (iii) obtained from suchPerson an executed confidentiality agreement containing terms thatare determined in good faith by [Transatlantic] to be substantially similar to and not less favorable to [Transatlantic], in theaggregate, than those contained in the [Allied WorldConfidentiality Agreement] (emphasis added).

49. The No-Talk provision requires the Transatlantic Board to consult[]

with its outside legal counsel and financial advisor or advisors. The Joint Proxy

Statement / Prospectus discloses that Transatlantics financial advisors will receive fees

of approximately $25 million in the aggregate in connection with the Proposed Allied

World Takeover.

50. In breach of their fiduciary duty, at Allied Worlds urging and under

Allied Worlds coercion, the Individual Defendants have taken the incorrect position that

the Merger Agreement, notwithstanding its language that a determination of substantial

similarity rests solely on thegood faith determination of the Transatlantic Board,

prohibits Transatlantic and its advisors from entering into discussions with Validus unless

Validus enters into a confidentiality agreement containing a restrictive standstill that

would prohibit Validus from pursuing the Validus Offer or from opposing the Proposed

Allied World Takeover, without the written permission of the Individual Defendants.

While at the same time, Transatlantic and the Individual Defendants have failed to

disclose that Allied World is permitted, among other things, to (i) maintain its current

Merger Agreement with Transatlantic, (ii) make public statements in favor of, and solicit


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Transatlantic stockholders with respect to, the Proposed Allied World Takeover which

it has been doing on a regular basis, (iii) make counteroffers to the Transatlantic Board,

as contemplated by Section 5.5 of the Merger Agreement, without the Transatlantic

Boards consent, (iv) solicit in opposition to the Transatlantic Board, if it were to change

its recommendation with respect to the Proposed Allied World Takeover, and (v)

purchase 45,000 shares of Transatlantic common stock, as required by Section 6.11 of the

Merger Agreement, notwithstanding, in each case, the purported existence of a standstill

agreement in Transatlantics confidentiality agreement with Allied World that would

prevent Allied World from taking any of these actions. In light of the fact that Allied

World has already taken the actions described in (i) and (ii) above, and is contractually

obligated to take the action described in (v) above, Transatlantics statement that Allied

World continues to be bound by the standstill provisions of the confidentiality agreement

represents nothing less than an intentional misstatement of a material fact.

51. Moreover, the actions that Allied World is permitted to take make it clear

that any standstill to which Allied World may have been subject has been effectively or

expressly waived. Therefore, the Individual Defendants imposition of a standstill

agreement on Validus cannot be credibly considered as being required pursuant to the

terms of Section 5.5(e) of the Merger Agreement in order to comply with the covenant

that Transatlantic obtain a confidentiality agreement determined in good faith by

[Transatlantic] to be substantially similar to and not less favorable to [Transatlantic], in

the aggregate, than those contained in the [Allied World] Confidentiality Agreement


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(emphasis added). Rather, the Individual Defendants, and Allied World, are using this

provision as a pretext for Transatlantics refusal to enter into discussions with Validus.

52. The Merger Agreement also obligates Transatlantic to pay Allied World

$115 million (a greater than 4.2% break-up fee, based on the market value of the Allied

World shares that would have been payable to Transatlantic stockholders had the

Proposed Allied World Takeover been consummated on June 10, 2011 and representing

a significantly higher percentage based on the current market value of Allied World

shares) if, in certain circumstances, the Individual Defendants terminate the Merger

Agreement or withdraw or modify their recommendation of the Proposed Allied World

Takeover. Indeed, so eager were the Individual Defendants to try to lock up the

undervalued Proposed Allied World Takeover and coerce their own stockholders into

voting for it, they agreed to pay a fee of up to $70 million merely upon a naked no

vote.

53. Pursuant to Section 5.5(d) of the Merger Agreement, upon receipt of an

acquisition proposal, Transatlantic must:

(i) keep [Allied World] fully informed, on a current basis, of any materialchanges in the status of, and any material changes or modifications in theterms of, any such Acquisition Proposal, inquiry or request and, ifrequested by [Allied World], counsel for [Transatlantic] shall consult withcounsel for [Allied World] once per day, at mutually agreeable times,regarding such status and any such changes or modifications, and (ii)provide to [Allied World] as soon as practicable after receipt or deliverythereof with copies of all correspondence and other written material sentor provided to [Transatlantic] from any third party in connection with anyAcquisition Proposal or sent or provided by [Transatlantic] to any third party in connection with any Acquisition Proposal; provided, however,that any material written material or material correspondence shall be sent


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or provided . . . within 24 hours after receipt or delivery thereof (emphasisadded).

This provision gives Allied World a de facto third seat at the bargaining table, for, by

agreeing to it, Transatlantic effectively ceded away its negotiating position.

54. Next, the Merger Agreement requires Transatlantic to set a stockholder

meeting date and Force the Vote on Transatlantics stockholders even if the Individual

Defendants make an Adverse Recommendation Change between now and the stockholder

meeting date. This allows Allied World to hold Transatlantic and its stockholders

hostage, unable to terminate the Merger Agreement in order to accept a Superior

Proposal.

55. The Individual Defendants and Allied World could agree to permit a

potentially indefinite extension of time to complete the Proposed Allied World Takeover

therefore keeping the No-Talk and Force the Vote provisions in place for an

unreasonably long period.

56. Allied World and Merger Sub wrongfully induced the Individual

Defendants to enter into the Merger Agreement with these offending provisions by

offering the Individual Defendants the lucrative and prestigious right to continue as

members of the TransAllied Board (and, in the case of Defendant Sapnar, as an executive

officer of TransAllied) following consummation of the Proposed Allied World Takeover.

Far from negotiating at arms length, Allied World and Merger Sub offered the Individual

Defendants extensive personal benefits to get the Individual Defendants to breach their


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fiduciary duties. To this day, Allied World and Merger Sub continue to aid and abet the

Individual Defendants breaches of fiduciary duty by refusing and preventing

Transatlantic from terminating the Proposed Allied World Takeover and by enforcing the

illegal provisions in the Merger Agreement.

IV. THE INDIVIDUAL DEFENDANTS REFUSE TO ACKNOWLEDGE THE

VALIDUS OFFER AS A SUPERIOR PROPOSAL, BUT ADMIT THAT

THEY HAVE A FIDUCIARY OBLIGATION TO ENTER INTO

DISCUSSIONS WITH VALIDUS.

57. On July 12, 2011, Validus sent a proposal letter detailing the terms of the

Validus Merger Offer to the Individual Defendants (the Superior Proposal Letter). It

provided the material financial terms of the Validus Merger Offer and explained that the

stock component of the Validus Merger Offer unlike the stock to be received in the

Proposed Allied World Takeover was intended to be tax-free for U.S. federal income

tax purposes to the Transatlantic stockholders. The Superior Proposal Letter stated that

the only contingencies to the Validus Merger Offer were regulatory approvals, final

approval of a definitive merger agreement by the Validus board of directors and approval

by the Validus stockholders of the necessary share issuance. There are no financing or

due diligence requirements. It also included a draft merger agreement and a commitment

to enter into a mutually acceptable confidentiality agreement.

58. Based on July 12, 2011 closing prices for Allied World and Transatlantic

stock, the Proposed Allied World Takeover represented for Transatlantic stockholders

only a 1.8% premium to the market value of Transatlantics common stock. In contrast,


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based on July 12, 2011 closing prices for Validus and Transatlantic stock, the Validus

Offer represented a 14.1% premium to the market value of Transatlantics common stock.

59. On July 17, 2011, Validus provided supplemental information to the

Individual Defendants (which Validus subsequently made public), including regarding

the proposed management of the combined company and potential synergies expected by

Validus in connection with the Validus Merger Offer and Validus views regarding

potential capital management for the combined company. Validus noted in this

information that it expected that the Validus Merger Offer would generate substantially

more synergies than the $80 million forecasted by Allied World in connection with the


60. On July 19, 2011, Transatlantic issued a press release stating the Validus

Merger Offer does not constitute a Superior Proposal and Transatlantic remains

committed to the terms of the Allied World Merger Agreement. However, the

Individual Defendants also determined that the Validus proposal is reasonably likely to

lead to a Superior Proposal and that the failure to enter into discussions regarding the

Validus proposal would result in a breach of [their] fiduciary duties under applicable

law. As a result, the Board has determined to offer to engage in discussions and

exchange information with Validus (emphasis added).

61. Before deciding to reject the Validus Merger Offer, the Individual

Defendants failed to obtain an opinion from either of Transatlantics financial advisors in


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order to ascertain whether or not the consideration being offered by Validus in the

Validus Merger Offer was fair to Transatlantic stockholders.

62. On July 23, 2011, Transatlantic sent a letter to Validus attaching a

confidentiality agreement (the Confidentiality Agreement) stating:

Pursuant to Section 5.5(e) of the [Merger Agreement] prior toengaging in discussions or exchanging information with Validus,Transatlantic is required to provide Allied World with three business days prior notice (which we have done) and to obtainfrom Validus an executed confidentiality agreement containingterms that are substantially similar, and not less favorable to

Transatlantic, in the aggregate, than those contained in theconfidentiality agreement between Transatlantic and Allied World.We have attached a confidentiality agreement betweenTransatlantic and Validus for your signature, so that we cancommence the process of entering into discussions and exchanginginformation.

Transatlantic included Allied World and Allied Worlds outside legal advisor as direct

copies on this letter, deliberately and improperly interposing Allied World and its outside

legal advisor directly into the Individual Defendants negotiation of the Confidentiality

Agreement with Validus.

63. The Confidentiality Agreement includes provisions regarding

confidentiality of information exchanged, but it also includes an onerous standstill

provision providing:

For a period of two years after the date of this Agreement, neitherCompany nor any of its subsidiaries or representatives will, unlessit shall have been specifically invited in writing by the board ofdirectors of the other Company, in any manner, directly orindirectly, (a) effect or seek, offer or propose (whether publicly orotherwise) to effect, or announce any intention to effect or cause or


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participate in or in any way assist or encourage any other person toeffect or seek, offer or propose (whether publicly or otherwise) toeffect or participate in, (i) any acquisition of any securities (or beneficial ownership thereof) or material assets of the other

Company, including rights or options to acquire such ownership;(ii) any tender or exchange offer, merger or other businesscombination involving such other Company; (iii) anyrecapitalization, restructuring, liquidation, dissolution or otherextraordinary transaction with respect to such other Company; or(iv) any solicitation of proxies (as such terms are defined inRule 14a-l of Regulation 14A under the Securities Exchange Actof 1934, as amended (the Exchange Act), disregarding clause(iv) of Rule 14a-1(l)(2) and including any otherwise exemptsolicitation pursuant to Rule 14a-2(b)) or consents to vote anyvoting securities of such other Company; (b) form, join or in any

way participate in a group (as such term is used in Rule 13d-5under the Exchange Act) with respect to any voting securities ofsuch other Company or otherwise act in concert with any person inrespect of any such securities; (c) otherwise act, alone or in concertwith others, to seek to control, control, advise, change or influencethe management, Board of Directors, governing instruments,shareholders, policies or affairs of such other Company; (d) enterinto any discussions or arrangements with any third party withrespect to any of the foregoing; or (e) make any public disclosure,or take any action which might force such other party to make any public disclosure, with respect to the matters set forth in this

Agreement; provided, that each Company may make confidentialrequests to the other Company to amend or waive any of thelimitations set forth in this paragraph, which the other Companymay accept or reject in its sole discretion, so long as any suchrequest is not knowingly made by the Company in a manner thatwould require the public disclosure thereof by either Company.

64. Following receipt of a revised Confidentiality Agreement from Validus

outside legal advisor on July 23, 2011, Transatlantic and its advisors did not substantively

engage Validus or its advisors regarding the Confidentiality Agreement. Instead,

Transatlantic provided a copy of the revised Confidentiality Agreement to Allied World

and its advisors. Consequently, on July 25, 2011, Allied World, through its outside legal


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advisor, informed Transatlantic that Allied World was taking the position that

Transatlantic entering into a confidentiality agreement with Validus that did not contain a

standstill would not comply with the terms of the Merger Agreement, and that Allied

World reserved all of its rights i.e., threatened to sue if Transatlantic proceeded to

enter into discussions with Validus.

65. The actions of Transatlantic and the Individual Defendants regarding the

Confidentiality Agreement were a deliberate effort on the part of the Individual

Defendants to avoid entering into discussions with Validus, and thus to hide their heads

in the sand regarding the superiority of the Validus Merger Offer. The Individual

Defendants have expressly or effectively waived whatever standstill to which Allied

World may originally have been a party. Among other things, Allied World was

permitted to enter into the Merger Agreement, and is permitted under the Merger

Agreement to make counterproposals to Transatlantic in the event of a superior proposal

from a third party, to speak publicly about its bid and to solicit Transatlantic

stockholders. Thus, the Merger Agreements requirement that the terms of a

confidentiality agreement be substantially similar to the terms of the Allied World

confidentiality agreement cannot, under a good-faith reading, prevent Transatlantic from

entering into a confidentiality agreement that would still permit Validus to pursue its own

proposal and oppose the Proposed Allied World Takeover. This is particularly so given

that Transatlantic has now put in place the Poison Pill. Given that the Individual

Defendants have now blocked the ability of Validus and every other bidder for

Transatlantic from pursuing an acquisition the Individual Defendants do not approve,


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originally locking up the Proposed Allied World Takeover to maintain their directorships

and management positions, and because a change of recommendation now would amount

to an admission that they made a foolish and very costly mistake by agreeing to a $115

million termination fee without first exploring reasonably available alternatives.

V. THE INDIVIDUAL DEFENDANTS SET A RECORD DATE THAT

VIOLATES FEDERAL SECURITIES LAW AND NEW YORK STOCK

EXCHANGE RULES IN AN ATTEMPT TO MANIPULATE THE VOTE.

68. On the morning of July 13, 2011, approximately 12 hours after Validus

announcement of the Validus Merger Offer, both Allied World and Transatlantic issued

press releases that they had each set July 22, 2011 as the record date for their respective

special meetings of stockholders to be held in connection with the Proposed Allied World

Takeover.

69. The Individual Defendants precipitous decision to set July 22, 2011 as the

record date was in blatant violation of federal law, NYSE requirements, and their

fiduciary duty. Rule 14a-13 promulgated under the Securities Exchange Act of 1934, as

amended, requires that a registrant distribute broker search cards in connection with a

stockholder meeting at least 20 business days prior to the record date, unless inquiry at

such time is impracticable. Because the July 22, 2011 record dates were set on July 13,

2011, broker search cards could have been distributed only nine calendar days, or seven

business days, prior to the record dates for the special meetings. The Individual

Defendants action also violates NYSE Rule 402.05, which requires NYSE-listed

companies, including Allied World and Transatlantic, to make inquiry of brokers at least

10 days in advance of the record date.


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70. Since Allied World filed the Joint Proxy Statement / Prospectus on July 7,

2011, neither Allied World nor Transatlantic could have had a reasonable expectation of

completing the SEC review and comment process relating to the Form S-4 prior to early-

to mid-August, and therefore, would not be reasonably likely to be in a position to mail

the Joint Proxy Statement / Prospectus to their stockholders prior to some date in August.

71. Even if Allied World and Transatlantic had determined that it was

necessary to set a record date following the announcement of the Validus Merger Offer,

they could have complied with Rule 14a-13 and NYSE Rule 402.05 by setting a record

date of August 10, 2011 a date that was reasonably likely to be in advance of the date

on which the SECs review and comment process would be completed.

72. Furthermore, as of August 5, 2011, neither Allied World nor Transatlantic

had set a date for their respective special meetings of shareholders, so there was no

legitimate need on July 13, 2011 to set a July 22, 2011 record date.

73. It is apparent that the sole purpose of establishing a July 22, 2011 record

date was to manipulate the corporate machinery in an effort to inappropriately influence

the stockholder franchise. Indeed, Transatlantics and Allied Worlds violation of Rule

14a-13 represents a blatant and self-serving attempt to prevent stockholders (and

potential stockholders that would like to acquire shares of Transatlantic subsequent to the

announcement of the Validus Merger Offer and Transatlantics position with respect

thereto) from being able to effectively exercise their voting rights with respect to the



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VI. TRANSATLANTIC VIOLATES ITS DUTY OF CANDOR BY FILING

FALSE AND MISLEADING SCHEDULE 14D-9 AND SCHEDULE 14D-9

AMENDMENT.

74. On July 28, 2011, Transatlantic filed with the SEC the Schedule 14D-9 in

which Transatlantic advised its stockholders that the Individual Defendants had

determined to stand by their recommendation that the stockholders approve the inferior

Proposed Allied World Takeover and reject the Validus Exchange Offer. On August 7,

2011, Transatlantic filed with the SEC the Schedule 14D-9 Amendment. The Schedule

14D-9 and Schedule 14D-9 Amendment include a host of material misstatements and

omissions, some rehashed and some new.

75. In addition, the Schedule 14D-9 discloses that the Transatlantic Board

held a meeting and determined to recommend that stockholders reject the Validus

Exchange Offer on July 26, 2011, just one day after Validus filed its exchange offer

documents with the SEC. Notwithstanding the timing of this meeting, Transatlantic did

not publicly announce such determination until July 28, 2011, thereby delaying two days

and allowing Transatlantic stock to trade during this period without disclosure in the

marketplace of the significant decision by the Transatlantic Board.

A. The Schedule 14D-9 and Schedule 14D-9 Amendment Contain False

and Misleading Statements Regarding the Confidentiality Agreement.

76. On page 30 of the Schedule 14D-9, Transatlantic states that Transatlantic

and Validus have not been able to complete mutual due diligence [a]s a result of

Validus refusal to sign a standard confidentiality agreement. However, Validus has

stood ready and willing to sign a standard confidentiality agreement for the particular


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circumstances in which the companies find themselves involving a target that has agreed

to a transaction and an intervening bidder that has already commenced an exchange offer

at a higher price and a solicitation in opposition to the inferior transaction, i.e., without a

standstill, and it is Transatlantic that has refused to negotiate a standard confidentiality

agreement with representatives of Transatlantic refusing to negotiate Validus proposed

confidentiality agreement or to engage in substantive discussions with Validus and its

advisors regarding other alternatives that would not include an effective standstill.

77. The Schedule 14D-9 and Schedule 14D-9 Amendment are materially false

and misleading because they contain disclosure that omits key provisions of Section

5.5(e) of the Merger Agreement regarding the requirement that Transatlantic seek a

confidentiality agreement with terms substantially similar, and not less favorable to

Transatlantic, in the aggregate, than those contained in Transatlantics confidentiality

agreement with Allied World. Specifically, Transatlantics disclosure on pages 18 and 34

of the Schedule 14D-9 fails to clarify that this determination need only be made solely by

the Transatlantic Board in good faith. Transatlantic repeats this misleading omission on

page 4 of the Schedule 14D-9 Amendment when discussing the National Indemnity

Proposal. It is extremely false and misleading for Transatlantic to fail to disclose to

Transatlantic stockholders that Transatlantics insistence on a standstill is a self-imposed

one.

78. The Schedule 14D-9 and Schedule 14D-9 Amendment are false and

misleading because they fail to disclose that, in light of Allied Worlds recent conduct


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and disclosures, either Allied World is in violation of its standstill with Transatlantic or

Transatlantic has expressly waived (or done so on an effective basis) the standstills

material restrictions. Indeed, if Allied were still bound by a standstill comparable to the

one that Transatlantic proposed to Validus, then Allied World would be unable to (i)

maintain its current Merger Agreement with Transatlantic, (ii) make public statements in

favor of, and solicit Transatlantic stockholders with respect to, the Proposed Allied World

Takeover which it has been doing on a regular basis, (iii) make counteroffers to the

Transatlantic Board, as contemplated by Section 5.5 of the Merger Agreement, without

the Transatlantic Boards consent, (iv) solicit in opposition to the Transatlantic Board, if

it were to change its recommendation with respect to the Proposed Allied World

Takeover, or (v) purchase 45,000 shares of Transatlantic common stock, as required by

Section 6.11 of the Merger Agreement. In light of the fact that Allied World has already

taken the actions described in (i) and (ii) above, and is contractually obligated to take the

action described in (v) above, Transatlantics statements that Allied World continues to

be bound by the standstill provisions of the confidentiality agreement are false and

misleading and contain material omissions.

79. The Schedule 14D-9 is materially false and misleading because Validus is

ready and willing to enter into a standard confidentiality agreement that does not impair

Validus ability to pursue the Validus Offer and oppose the Proposed Allied World

Takeover. Contrary to Transatlantics assertions, Validus refusal to enter into a

confidentiality agreement is not the cause for the failure of Transatlantic and Validus to

complete mutual due diligence.


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80. The Amended Schedule 14D-9 is materially false and misleading because

it justifies false and misleading assertions made by Transatlantic regarding the Validus

Offer and Validus operations on the basis that Transatlantic is unable to complete due

diligence on Validus as a result of Validus refusal to enter into a confidentiality

agreement.1

B. The Schedule 14D-9 and Schedule 14D-9 Amendment Contain False

and Misleading Statements Regarding the Consideration Provided by

the Competing Transactions.

81. On the last bullet on page 5 of the Schedule 14D-9 Amendment,

Transatlantic lists among its reasons for recommending that Transatlantics stockholders

reject the Validus Exchange Offer the fact that the market value of the Validus Exchange

Offer represented a 2.9% discount to the closing price of Transatlantic stock on July 25,

2011. In comparison, Transatlantic includes a comparison of the market value of the

Proposed Allied World Takeover both as of June 10, 2011 and July 25, 2011. Moreover,

even though Transatlantic seeks to compare the market value of the consideration

represented by the Validus Offer and the Proposed Allied World Takeover, at no time

does Transatlantic state clearly the percentage premium to market value that the Validus

Offer represents over the Proposed Allied World Takeover as of such dates.

Compounding this material omission, both the Schedule 14D-9 (on page 24) and

1On August 10, 2011, Validus delivered a one-way confidentiality agreement toTransatlantic that would permit Transatlantic to receive and review non-publicinformation regarding Validus and the Validus Offer (and, if required by law, todisclose this information publicly), and does not require Transatlantic to be boundby a standstill.


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Schedule 14D-9 Amendment (on page 6) contain the statement that The Exchange Offer

Economically Disadvantages Transatlantic Stockholders.

82. The Schedule 14D-9 Amendment discloses that the Transatlantic Board

has made the determination that the all-cash National Indemnity Proposal is reasonably

likely to lead to a Superior Proposal under the Merger Agreement. It is materially

misleading for Transatlantic to disclose the Transatlantic Boards views regarding long-

term value and the importance of book value per share without explaining its views as to

the potential long-term value creation potential of the National Indemnity Proposal or, if

the Transatlantic Board has no view, why the Transatlantic Board believes that such

factors are not relevant to a determination that the National Indemnity Proposal is

reasonably likely to lead to a Superior Proposal.

C. The Schedule 14D-9 and Schedule 14D-9 Amendment Contain False

and Misleading Statements Regarding the Conditionality of the

Validus Exchange Offer.

83. On page 21 of the Schedule 14D-9 (restated on page 4 of the Schedule

14D-9 Amendment), Transatlantic states that the Validus Exchange Offer is highly

conditional, resulting in substantial uncertainty. However, this statement is false and

misleading to stockholders because the passage implies that the Validus Exchange Offer

has an unusual level of conditionality and that it is more conditional than the Proposed

Allied World Takeover. In fact, the Proposed Allied World Takeover contains a number

of conditions that are not conditions to the Validus Exchange Offer (or the Validus

Merger Offer).


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84. The terms of the Validus Exchange Offer are standard for transactions of

that structure, and, in fact, its conditionality is comparable to, if not less conditional than,

the Proposed Allied World Takeover. For example, the Proposed Allied World Takeover

contains the following additional conditions:

the Proposed Allied World Takeover requires stockholder consent to theexpansion of the board, a corporate name change and an increase in sharecapital, while the Validus Exchange Offer has no equivalent condition;

the Proposed Allied World Takeover requires that Allied World purchase45,000 shares of Transatlantic common stock following receipt of requiredshareholder approvals, while the Validus Exchange Offer has no equivalent

condition; and

the Proposed Allied World Takeover requires each partys chief executiveofficer to execute a certificate as to the satisfactions of the conditions relatingto representations, warranties and covenants, while the Validus ExchangeOffer has no equivalent condition.

Conversely, the additional conditions to the Validus Exchange Offer primarily relate to

either the termination of the Proposed Allied World Takeover or actions that can be

controlled by the Transatlantic Board such as the redemption of the Poison Pill.

Further, Validus has fulfilled or is well on its way to fulfilling certain other additional

conditions to the Validus Exchange Offer e.g., Validus has obtained all required credit

agreement consents and has taken affirmative steps to obtain the required approval of its

shareholders by filing a preliminary proxy statement on August 1, 2011. Thus, the

statement that the Validus Exchange Offer is highly conditional, and resulting implication

that it is more conditional than the Proposed Allied World Takeover, is a material

misstatement.


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85. Page 24 of the Schedule 14D-9 refers to the likelihood that the necessary

regulatory approvals for the Proposed Allied World Takeover will be received in a timely

manner. However, the Schedule 14D-9 fails to explain why Transatlantic does not

believe that regulatory approvals in connection with the Validus Offer would be received

in a timely manner or, given the current state of such approvals, why Transatlantic

believes that obtaining such approvals in connection with the Validus Offer would take

significantly more time than obtaining such approvals in connection with the Proposed

Allied World Takeover, particularly in light of disclosures on page B-7 of the Schedule

14D-9 Amendment that suggest that Transatlantic and Allied World have not yet made

the filings necessary to obtain many of the approvals required in connection with the


D. The Schedule 14D-9 and Schedule 14D-9 Amendment Contain False

and Misleading Comparisons of Share Values for the Allied World

and Validus Transactions.

86. On page 22 of the Schedule 14D-9, Transatlantic states that the Individual

Defendants believe that the Transatlantic-Allied World Merger would provide greater

value to Transatlantics stockholders within a shorter timeframe than other potential

strategic alternatives. This statement is materially false and misleading because the

Individual Defendants do not have a reasonable basis for such a belief. In addition, the

Schedule 14D-9 Amendment does not disclose how the National Indemnity Proposal has

impacted the Transatlantic Boards view of the factors disclosed in the Schedule 14D-9.

87. On page 25 of the Schedule 14D-9, there is a graph that purports to

portray the book value per Transatlantic share as reported by Transatlantic, pro forma for


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the Proposed Allied World Takeover and pro forma for the Validus Exchange Offer.

However, the comparison between the pro forma numbers is materially false and

misleading as Validus pro forma book value per share includes a reserve charge while

Allied Worlds pro forma book value per share does not include a reserve charge, a fact

which is not noted in the Schedule 14D-9. The failure to include any disclosure about the

differences between the two pro forma book values renders the current disclosure

extremely misleading to Transatlantic stockholders.

88. On pages 25 and 26, the Schedule 14D-9 references Allied Worlds and

Validus stockholder returns over the period from the third quarter of 2006 to the first

quarter of 2011. However, these comparisons are false and misleading because Validus

did not complete its initial public offering until July of 2007. It is false and misleading

for the Individual Defendants to use comparisons for periods for which there is data for

Allied World but not Validus. This is especially true because the differences between the

periods make the relative returns of Allied World appear to be superior to Validus

returns. In fact, since Validus initial public offering through the date of public

announcement of the Proposed Allied World Takeover, Validus has delivered to its

shareholders a total return of 55%, compared with a 24% return for Allied World

shareholders during this same period.

89. On page 27, the Schedule 14D-9 cites the potential for greater multiple

expansion if there were to be an Allied World/Transatlantic merger than there would be if

there were a Validus/Transatlantic merger, which apparently is based on historical price


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to book value per share ratios of the two companies. Transatlantic repeats these

statements regarding multiple expansion on page 7 of the Schedule 14D-9 Amendment.

However, these disclosures are false and misleading because the two companies have

different periods for which historical data is available, which influences the two

companies historical ratios. In addition, these disclosures are false and misleading

because Transatlantic does not explain the reasons that Allied Worlds shares have traded

at a discount to Validus historical price to book value per share ratio including the

possibility that the market may believe that Allied World now has less likelihood for

growth than Validus (rather than imply room for future multiple expansion).

90. The graph on page 29 of the Schedule 14D-9 is false and misleading

because it depicts Validus probable maximum loss/equity ratio as of March 31, 2011,

even though, as noted in footnote 3 to the graph, Transatlantic had available more recent

information regarding Validus ratio. Transatlantics decision to display the 32% ratio

based on the March 31, 2011 data when it was aware that Validus current probable

maximum loss/equity ratio is only 27% is another flagrant attempt to mislead

stockholders into supporting Allied Worlds offer for Transatlantic.

91. The graph on page 30 of the Schedule 14D-9 fails to indicate that Validus

debt includes its hybrid notes, even though such hybrid notes are considered to be equity

by ratings agencies. The Schedule 14D-9 is misleading because it does not disclose the

equity treatment of the hybrid notes or exclude the hybrid notes from the calculation of

Validus debt/capital ratio.


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E. The Schedule 14D-9 and Schedule 14D-9 Amendment Contain False

and Misleading Statements Regarding the Structure of the Validus

Exchange Offer.

92. On page 31 of the Schedule 14D-9, the Individual Defendants state, as a

consideration purportedly weighing against the Validus Exchange Offer, that

Transatlantic stockholders would not have majority control over a Validus/Transatlantic

combined company, but would have majority control over TransAllied. However, this

disclosure is false and misleading because the terms of the Merger Agreement require

that, in order for a proposal to qualify as a Superior Proposal pursuant to the fiduciary

out provisions of the Merger Agreement, Transatlantic stockholders cannotcontrol more

than fifty percent of the combined company. In order for Validus to structure an offer

that could have been recommended by the Transatlantic Board, Validus was required to

structure the Validus Merger Offer such that it constituted a Superior Proposal. The

stock and cash consideration of the Validus Exchange Offer is based on the amounts of

stock and cash offered to Transatlantic stockholders in the Validus Merger Offer. It is

false and misleading for Transatlantic to criticize the Validus Exchange Offer (and, by

implication, the Validus Merger Offer) because it does not provide Transatlantic

stockholders with control of the combined company when Transatlantic has effectively

required that Validus (or any other third party) structure its offer in this manner.

93. Page 7 of the Schedule 14D-9 Amendment notes the definition of Superior

Proposal. However, Transatlantics disclosure regarding the definition of Superior

Proposal is materially misleading because it does not attempt to reconcile this definition


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with the Transatlantic Boards previously stated views of the structure of the Validus

Exchange Offer.

F. The Schedule 14D-9 and Schedule 14D-9 Amendment OmitTransatlantics Failure to Obtain an Expert Opinion Regarding the

Fairness of the Validus Exchange Offer.

94. The Schedule 14D-9 fails to disclose that the Individual Defendants did

not obtain an outside expert opinion regarding the Validus Exchange Offer, or the

Individual Defendants reasons for failing to do so. It appears that no expert opinions

were sought by the Individual Defendants as to whether the consideration offered by

Validus in the Validus Exchange Offer is fair to Transatlantic stockholders. The

Individual Defendants failed to seek these opinions despite the fact that Transatlantics

financial advisors were able to deliver an opinion that the lower market value

consideration offered by the Proposed Allied World Takeover was fair to Transatlantic

stockholders. Likewise, although the Transatlantic Board discussed the National

Indemnity Proposal with its financial advisors on August 8, 2011, the Schedule 14D-9

does not disclose whether or not the Transatlantic Board sought to obtain a fairness

opinion from its advisors as of such date with respect to either the Validus Exchange

Offer or the National Indemnity Proposal, or an updated fairness opinion in respect of the

Proposed Allied World Takeover (in light of the then-current valuation of Allied World

stock as of such date). These material omissions render the Schedule 14D-9 false and

misleading because they create the implication that the consideration offered by the

Proposed Allied World Takeover is fair to Transatlantic stockholders, but that the

consideration offered in the Validus Exchange Offer is not.


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VII. TRANSATLANTIC CONTINUES TO MISREPRESENT THE

STANDSTILL AGREEMENT AND MISREPRESENTS ITS POISON PILL

IN AN AUGUST 1, 2011 PRESENTATION.

95. On August 1, 2011, Transatlantic filed a presentation with the SEC.

Through this presentation, Transatlantic continues to misrepresent its demand for a

standstill agreement from Validus, and makes new misrepresentations regarding its

amendment of Transatlantics by-laws and its adoption of the Poison Pill.

A. Transatlantics Representations Regarding Its Demand for a

Standstill Agreement Are False and Misleading.

96. The continuing misrepresentations regarding the demand for a standstill

agreement, together with Transatlantics insistence on a standstill that is not contractually

required, make clear that Transatlantic is using the demand for a standstill agreement as a

pretext for refusing to enter into discussions with Validus in connection with the Validus

Offer.

97. On page 3 of the August 1, 2011 presentation, which is subtitled The

Facts, Transatlantic claims that Allied World entered a confidentiality agreement with a

standstill and continues to be bound by it. As noted in the paragraphs above, in light of

Allied Worlds recent conduct and disclosures, either Allied World is in violation of the

standstill or Transatlantic has expressly waived (or done so on an effective basis) the

standstills material restrictions. Transatlantics statements to the contrary constitute

material misstatements and omissions.

98. Transatlantic further asserts on page 3 that the Merger Agreement requires

Validus to enter into a confidentiality agreement, and that Validus summarily refused to


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sign this confidentiality agreement. Transatlantic further claims on page 3 that Validus

sent Transatlantic a draft confidentiality agreement without a standstill and which would

expressly enable Validus to use Transatlantics confidential information in any manner

(including making it public). These statements are false and misleading. While the

Merger Agreement may require Validus to enter into a confidentiality agreement, the

Merger Agreement does not require the Individual Defendants to insist that Validus (or

any other third party) enter into a standstill agreement. The revisions proposed by

Validus would not expressly enable Validus to have carte blanche in disclosing

Transatlantics confidential information, but rather were intended to permit Validus to

comply with applicable law in light of the then-pending Validus Exchange Offer and

solicitation against the Proposed Allied World Takeover.

B. Transatlantics Representations Regarding the By-law Amendments

and Poison Pill Are Incomplete and Misleading.

99. Transatlantic claims on page 4 of the August 1, 2011 presentation that the

amendments to Transatlantics by-laws are customary and consistent with the bylaws of

many other Delaware public companies, yet fails to provide any substantiation for the

assertion that they are customary and consistent.

100. Furthermore, Transatlantics description of the amendments as enabl[ing]

the Board to postpone a stockholder meeting to give stockholders sufficient time to

consider new information released immediately prior to a meeting is grossly misleading.

Transatlantic fails to disclose that the Transatlantic Board may use this newly-minted

postponement power not only to postpone a meeting if new information becomes


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available, but also to give them more time to solicit proxies, including once the meeting

commences, if stockholder sentiment turns against the Proposed Allied World Takeover.

Transatlantic does not disclose the conflict of these amended by-law provisions with the

proposal to be voted on by Transatlantic stockholders at Transatlantics special meeting

that purports to give Transatlantic stockholders control over an adjournment of such

meeting.

101. Likewise, in describing the Poison Pill it has adopted, Transatlantic does

not clearly explain that the Transatlantic Board chose to exempt Allied World from the

Poison Pill, even though Allied World has not paid a control premium for

Transatlantic. In addition, Transatlantic does not explain why it is in the stockholders

best interests to exempt Allied World from the Poison Pill.

VIII. TRANSATLANTICS AND ALLIED WORLDS FALSE AND

MISLEADING JOINT PROXY STATEMENT / PROSPECTUS.

102. On July 7, 2011, Allied World filed a preliminary Joint Proxy Statement /

Prospectus. The preliminary Joint Proxy Statement / Prospectus was amended on August

5, 2011. Transatlantic intends to distribute the Joint Proxy Statement / Prospectus to its

stockholders in an attempt to convince them to approve the Proposed Allied World

Takeover.

103. The Joint Proxy Statement / Prospectus includes a number of materially

false and misleading statements, and material omissions, which include, but are not

limited to, the following:


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A. The Joint Proxy Statement / Prospectus Inaccurately Portrays the

Proposed Allied World Takeover as a Merger of Equals.

104. In the Joint Proxy Statement / Prospectus, Allied World and Transatlantic

refer to Allied Worlds proposed acquisition of Transatlantic as a merger of equals.

This description of the nature of the Proposed Allied World Takeover is materially false

and misleading because Allied World is actually acquiring Transatlantic. This

misrepresentation is evidently intended to divert attention from the Individual

Defendants failure to negotiate a sufficient premium for the Transatlantic stockholders.

105. The Proposed Allied World Takeover is structured as a merger of

Transatlantic into Merger Sub, resulting in Transatlantic becoming a wholly-owned

subsidiary of Allied World. The nature of the Proposed Allied World Takeover as an

acquisition of Transatlantic by Allied World, rather than an equal combination of two

public companies, is also indicated by the fact that (i) Richard S. Press (the current non-

executive chairman of the Transatlantic Board) will cease to serve as the non-executive

chairman of the TransAllied Board one year following the close of the Proposed Allied

World Takeover, (ii) the fact that the headquarters of TransAllied will be located in

Switzerland (the current headquarters of Allied World), (iii) the fact that Scott A.

Carmilani, Allied Worlds current Chairman, President and Chief Executive Officer, will

continue as President and Chief Executive Officer of TransAllied, and (iv) the fact that

Robert F. Orlich, Transatlantics current Chief Executive Officer, will play no role with

TransAllied.


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106. In addition, in connection with the selected transaction analysis conducted

by one of Transatlantics financial advisors, three of the four transactions considered as

part of this analysis were acquisitions, not mergers of equals. Therefore, even one of

Transatlantics own financial advisors did not view the Proposed Allied World Takeover

as a merger of equals.

107. The failure to clearly disclose the true nature of the Proposed Allied World

Takeover is materially misleading and is an omission of material information that is

necessary for Transatlantic stockholders to make informed voting and investment

decisions.

B. The Joint Proxy Statement / Prospectus Fails To Make Adequate

Disclosure Regarding Projections for Both Allied World and

Transatlantic.

108. The Joint Proxy Statement / Prospectus contains material omissions

because it does not contain

41583354 validus complaint

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